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David And Goliath – Bring It On!

Monday April 7, 2014

Leasehold Law
Leasehold Law

Last month I spent so long on the London train I am on first name terms with many of the staff. The reason for my long haul commute was the need to update myself  on the arcane laws and ever changing 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 as well and our block management division does 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. Most 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 London based block management company. 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 investors and tenants.

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 or for three years, the freeholder has a right to take back the flat or house. So for the sake of an overlooked £350 debt, the ‘owner’ can lose a property overnight with no recourse. This sanction is used to bully leaseholders or their mortgage company to pay the charges without question.

Another potential horror is a leaseholder deciding to do a loft conversion. This is particularly relevant to Council owned ‘Tyneside 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 taken expert advice and assembled a team of specialists we are well placed to walk out into the field and teach Goliath not to underestimate the little guy!


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