David and Goliath – Bring It On in 2015

Friday January 16, 2015

Well, that’s another Christmas behind us and our call-out teams have dealt with the thankfully minor dramas encountered by our tenants over the festive period. Onward into 2015 to embrace new challenges and opportunities.

Last year I spent so long on the Newcastle to London train I am on first name terms with many of the staff. The reason for my long haul commute was to keep myself up to date with what I consider are arcane laws and regulations surrounding block management, where a block of leasehold flats is managed on behalf of the freeholder. We believe the block should be managed on behalf of the tenants and our block management division was setup to do precisely that.

Although the Commonhold and Leasehold Reform Act 2002 paved the way for investors and tenants to determine the way their block is managed, take-up has been low. Many freeholders are London based corporations with deep pockets and expensive lawyers so taking them on appears a David vs Goliath challenge which many people want no part of. Our view is different. David won the fight with Goliath after all.

It is a little known fact that if fifty percent of leaseholders agree, they may appoint their own block management company. The terms of the lease must be adhered to, but with transparency and an open business model, the leaseholders know exactly what they are paying for with no hidden charges, commission or nasty surprises.

London based freeholders often appoint a block management company based in the south. These companies charge London prices. Since the average London property is twice the cost of a similar property in the north east, management company fees reflect this difference. We believe in appointing local contractors, keeping work in the region and offering reasonable costs to our owners and leaseholders.

We also believe in a reasonable business model. One of the most unfair sanctions in English leasehold law is ‘Forfeiture’. If the tenant is in debt to the freeholder in the sum of £350 for three years, the freeholder has the right to repossess the flat or house. So for the sake of an overlooked £350 debt, the ‘owner’ could in theory lose a property! This sanction is used to bully leaseholders or their mortgage company to pay the charges without question. All quite legal, but in our view unreasonable.

Another potential horror is a leaseholder deciding to do a loft conversion. This is particularly relevant to Council owned flats where the loft space is not included in the lease. The freeholder will charge up to £600 simply to consider the alteration, then charge say £15,000 for the use of the loft space. We recently dealt with a landlord who had a loft conversion carried out at a cost of £65,000 without the necessary consent. The freeholder demanded a further £60,000 for the loft space lease. The total cost of the conversion far exceeded the added value and in sixty years time the refurbished property will revert to the freeholder. Professional advice could have saved a lot of grief in this case.

It is a legal minefield which can often appear to deliberately trap the unwary. But having spent years taking expert advice and assembling a team of specialists we are in a position to walk out into the field and teach Goliath not to underestimate the little guy.