barcode1966

In a time of universal deceit – telling the truth is a revolutionary act

The forgotten casualties of the doubling ground rent scandal

fullsizeoutput_730It has been immensely gratifying over the last few months to see the focus firmly remain on the leasehold house scandal where many of the largest developers needlessly sold houses as leasehold.

To make matters worse they embedded excessively high ground rents with accelerating clauses which see them double every 10 years or are linked to RPI. They also inexplicably buried clauses in the leases which allowed the new freeholders to demand huge sums of money for licences and permissions to be paid to them by the unsuspecting leaseholders.

This has left tens of thousands of people in seriously financially disadvantaged positions which has caused them severe stress and upset all caused by major developers who they trusted, a real scandal.

Through the indefatigable efforts of The Leasehold Knowledge Partnership and the National Leasehold Campaign Facebook page, the continued focus on this needless scandal has started to bring real change.

There have already been statements from the Housing Minister, the Prime Minister and even in this years’ Queen’s speech all promising to end the leasehold abuses.

It has also seen Taylor Wimpey offer 130 million pounds to try to ‘rectify’ the doubling ground rent scandal. On top of that Nationwide Building Society have now altered their lending criteria on leasehold properties with many other lenders confirming that they are reviewing their current criteria too.

Arguably though, the biggest benefit achieved so far has been to raise the issues of ground rents in the consciousness of the nation.

The biggest ground rent scandal

There is however a bigger scandal on a much greater scale that involves doubling ground rents which is waiting to be uncovered. This scandal has already affected hundreds of thousands of people. This scandal is receiving virtually no media nor political focus and many leaseholders are completely unaware of the trap they are blindly falling into.

I am referring to informal lease extensions undertaken for leasehold flats.

What are informal lease extensions and what are the real issues surrounding them?

If you need to extend your lease you have a legal right to extend your lease by an additional 90 years and importantly your ground rent is reduced to zero.

Once completed this strips out any future income from ground rents and lease extensions for the freeholder and they really don’t want this to happen.

Avaricious freeholders and their oily legal advisors put in a huge amount of effort to prevent leaseholders using their legal rights to extend by constructing ‘Machiavellian’ informal offers which are quick, easy and seem to save you money but the very opposite is true.

How do freeholders push their informal lease extensions onto you?

fullsizeoutput_72d.jpegIf a leaseholder decides that they need a lease extension they will generally contact a solicitor or valuer to ask their advice. The majority of these professionals will recommend contacting the freeholder directly in the first instance to ask them how much they want for the extension. They will claim to be ‘experts’ in negotiating directly with freeholders and point out it could save you time and money.

Even if you don’t contact your freeholder directly, you will often find you receive an informal deal from your freeholder once you have Served the legal Notice to extend. Many freeholders have a process of refusing to negotiate on a legal lease extension and promise to be difficult throughout whilst presenting their informal offer which they will complete on cheaply and easily.

Once the ‘deal’ arrives from the freeholder these professionals acting for you will often intimate, with heavy caveats of course, that it is a good deal for you. If it’s a bad deal but you’re extending because you wish to sell the flat, they will often advise you to let the person who buys from you ‘deal with the consequences, why should you worry?’

These deals will usually offer to extend your lease back up to only 99 or 125 years. For example if the lease on your flat had fallen to 80 years it would only be topped up by 19 years to 99 years as opposed to having a lease length of 170 years through the statutory route)

Instead of reducing your ground rent to zero they will include new onerous ground rents which can be between £250 – £500 per year. Their coup de grâce will be to link this onerous ground rent to an aggressive accelerator, like ground rent doubling every 5 or 10 years.

This is evil genius by freeholders because not only will they make a fortune from the actual ground rent they will now collect, they know that in another 15 years or so someone will have to extend the lease again and with ground rent that high they will have to pay many tens of thousands of pounds for the extension.

They have turned a one off lease extension which may have earned them a few thousand pounds into a valuable asset which could easily earn them at least £60,000 to £70,000 over 15 years.

If you would like a full explanation of why informal lease extensions are so damaging, please click here.

What does this mean for the flat owner?

fullsizeoutput_734A leaseholder who tried to rectify their lease length and accepted one of these informal lease extensions has sold themselves into huge debt to save just a few hundred pounds on the cost of a statutory lease extension.

At best it will strip any equity that they may have built up over the years in their flat and at worse it will leave them with an unsellable flat.

If you have accepted a ‘quick and cheap’ informal deal to enable you to sell your flat, you may now find a much more cogent buyer refuses to buy your flat or they may offer a much lower price for it to take into account the dreadful deal you have signed your flat up to.

Potentially buyers will now also find it much more difficult to secure a mortgage on a flat with onerous ground rent terms as lenders tighten up their lending criteria. This could leave you with a flat that is unsellable.

There is no doubt that due to this increased focus on ground rents from buyers and lenders real care should be taken before you decide to agree to accept an informal offer.

How can informal lease extensions still be legal?

What is so astounding is the fact that these informal lease extensions are allowed to happen in their thousands every year to unsuspecting flat owners.

In a world that offers so much consumer protection, how can greedy freeholders be allowed to trick people with complex compounding financial deals that ruin lives?

How can it be illegal to sign someone up to a £10 a month mobile phone contact without spelling out every single aspect of the deal first but it is legal to trick someone into a complex deal which could cost them £50,000 with no legal recourse?

How can informal lease extensions be unregulated still?

What is the best way to keep free from the effects of these informal deals?

  • Don’t ever consider accepting an informal lease extension offer.
  • Insist that the ground rent is reduced to zero (thus stripping out any future value)
  • If you are buying a flat, ask if the lease has ever been extended.
  • If the lease has not had 90 years added or if there is still ground rent, it’s an informal.
  • If it has demand to see the ground rent and when it increases.
  • Consider carefully the real implications of the deal before buying.

This can only be answered by Government, the DCLG and LEASE who are all totally silent on this scandal.

The next leasehold ground rent scandal

fullsizeoutput_732There is no doubt that this informal lease extension scandal will soon be uncovered and written about and the scale of this scandal will be staggering. I estimate that between 40-50% of all lease extensions carried out each year are informal and this has been going on for 25 years!

When flat owners come together and realise what they have been tricked into signing by amoral freeholders and their solicitors a scandal of breathtaking proportions will be revealed and it will dwarf the current leasehold houses scandal.

There will be tens of thousands of flats that will be unsellable and thousands of normal hard working people will see that they have been tricked into giving the financial provisions they have made for their future over to greedy millionaire freeholders.

It is time for the government, trade bodies and the media to step in and rescue the forgotten casualties of the doubling ground rent scandal.

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The truth about legalese in leasehold

Why do we get more legal protection as consumers when we buy a cheap mobile phone for £10 a month than we do when we buy a flat for four million pounds?

6a016306ae679a970d016769195101970bWhy is it so difficult to read and understand the terms of a lease?

Does anyone else find it odd that the leases which lay down the details for leasehold property ownership, the terms and regulations on how we can live in the property and the very important small print that can
have significant financial implications, are all purposefully written in a way meant to obscure their meaning?

In every other area of our consumer lives the laws protecting us are tightening up, culminating in the recent Consumer Rights Act 2015, as legislation looks to legally protect the consumer from unscrupulous business practices and see that they not tricked confused mislead or ripped off when signing a contract.

One of the few types of contracts being excluded from the draconian Consumer Rights Act 2015 is the lease of a property which seems odd. The Act states that the only contracts that are legally excluded from being protected by the Act are contract that relate to ‘the creation or transferal of property’.

Why is that?

Why is the contract, that involves the biggest and most important purchases of our lives, purposefully excluded from legislation that is designed to protect us from the crooks?

Let’s look at a real example of this.

Imagine you have bought a flat and you want to look at your lease to see how much your ground is, how much it will rise to and when, which should be a pretty straightforward thing to do surely?

All these details are contained in your lease so you settle down with a cup of tea and a copy of your lease and start to read.

It may firstly take you a few seconds to establish if you are the lessor, landlord, lessee or tenant. Once that is done you can proceed.  18m9x8

(The details below come from an actual lease which I had on my desk at the time of writing, I didn’t choose it because it was overly complicated it was just one that had been printed out, I’ve seen more complex ones than this)

So remember you are looking for how much your ground rent is, what it will increase to and when. Here is what the lease says:

“Schedule Four

Rent payable hereunder by the tenant

  • “The rent shall be fixed for each of the following periods:

First period                 First 25 years

Second period            26th to 50th years

Third period                51st to 75th years

Fourth period              76th to 100th years

Fifth period                  101th to 125th years”

So that is the timing for your ground rent schedule, a little convoluted but it isn’t impossible to comprehend.

So first bit done, now much is the rent? The lease continues to explain it for us.

“For the first period the rent shall be two hundred and fifty pounds per annum”

Crystal clear! That’s not difficult to follow at all! What’s all the fuss about? This lease reading business is a doddle!

What happens after the first 25 years though?

“For each subsequent period the rent shall be the value of the ‘current rent guide’ (which is defined below) on the last day of the previous period

  1. Initially the current rent guide shall be computed by the formula

                                                             250.00 x          A

                                                                                       B

Where A is the most recently published value of the general index of retail prices complied before the 1st of June 1988

The said formula shall continue to be used notwithstanding that its name be changed or that it be published by a different department so long as the government for the time being continues to compile and publish it on substantially the same basis as the date hereof”

All you want to know is how much is your ground rent is going to increase by in the future. What is all this A over B nonsense?

It now looks a tad confusing but have no fear it looks like number 3 Is going to shed light on the whole issue.

“3. If in circumstances set out below the index used for calculating the current rent guide shall be changed it shall therefore be computed by the formula

                                                            R x       C

                                                                        D

 Where R is the most recent value of the current rent guide at the date of the change of index:

 C is the most recently published value of the new index

And

D is the value of the new index on the date of the change of that index.”

I hope that is now clear to you all, it’s as easy as RDC.

I know what you are all worrying about now though, I can worryingly hear you all asking the question collectively “What happens if Retail Prices are recalibrated?

Well don’t worry about it for a second as the lease makes it very clear what you need do!

“4. If the General Index of Retail Prices shall be recalibrated it shall be deemed to be a change of index for the purpose of foregoing paragraph”

If you are thinking that could possibly have been explained a little clearer then worry ye not, as the lease includes a rather helpful example.

“Explanatory Example

If on the last day of October 1990, when the index stands at 425, the Department of Employment resets the Index to 100, the current rent guide will be

                                                            250.00 x          100 equals 58.82

                                                                                    425

so that immediately thereafter it will become

                                                            58.82 x            C

                                                                                    100

where C is the current value of the (recalibrated) index”

Pretty clear I’m sure you will agree. You now know your ground rent timings, how much it will rise by per schedule and what will happen if the Retail Prices are changed or recalibrated.

Wait! good God man! What will we do if the Retails Price Index is cancelled? Like me, you probably wouldn’t be able to sleep tonight if we don’t find an answer to this burning question but once again the lease comes to our rescue.

“5. If the index currently being used for the purpose of computing the current rent guide shall cease, then both the Lessor and Lessee shall use the new index of the closing middle price of gold sovereigns of the weight and fineness set out in Schedule 1 of the Coinage Act 1971. The said closing middle price shall be the price quoted at, and published with the authority, the London Stock Exchange”

20150820-Legalese-is-optional-you-can-write-a-contract-400x532I can’t help feeling that the terms of the lease are a little slapdash as they do not explain how the ground rent uplift should be calculated if the London Stock Exchange is ever closed or if England were to sink into the sea or we are taken over by aliens from another planet who replace our current currency with monkey nuts but I’m afraid it’s all we have to go on.

What nonsense this all is. Why is it allowed to continue like it has? Why can’t leases and legal documents be protected by the same consumer laws that protect why we sign up for a loan? Why can’t they be written in clear understandable way that anyone can understand?

The average leaseholder would probably feel compelled to take some sort of legal and valuation advice on the above terms, and have to pay handsomely for the privilege, to feel secure in their decision to purchase the property.

A MORI poll published in May 2016 found that 21% of people paying for legal advice sought advice on issues surrounding property ownership (excluding conveyancing). That’s a good little earner for solicitors right there, how much do these obfuscated legal terms found in leases contribute to this figure?

We all seem happy to accept the fact that the lawyers we pay to write lease terms in legalese are the only people who can translate these terms back into English for us, for a fee. It’s ludicrous.

How would we all react if suddenly all mobile phone contracts were written in Klingon and we had to pay a Klingon expert £300 per hour to translate the contract into English for us? (With a small print caveat to say that “Although we have retained to translate this mobile phone contract from Klingon into English for you, we cannot be held financially accountable if in fact it turns out that our advice is in Betacrypt as we acted in good faith blah blah blah)

How much easier would it be for the leaseholder if the terms of the lease were written in a no-nonsense way designed to be understood by all? For example:

“1. The ground rent schedule for your property is as follows:

Your Ground rent is £250 per annum for the first 25 years of the lease. This increases every 25 years in line with the Retail Price Index.

If the Retail Price Index is recalibrated, then we will divide the new rate with the old rate to ensure that the ground rent increase is fair and proportional”

Imagine if all the terms of your lease were written in the same, clear manner and were written in such a way that everyone could understand their meaning and be able to make informed decisions as to property ownership and the small print that governs leasehold life.

One of those conspiracy theorists people would say that this is all done on purpose to ensure that flat owners don’t understand what they are signing up for and so get ripped off by predatory billionaire freeholders who use legalese to their financial advantage on a daily basis.

Of course, I am wearing a tin foil hat to protect my brain from these conspiracies and so I don’t subscribe to this view at all.

Complaints procedure for the article above

If the article and thesis you have perhaps promptly ponderously painstakingly pedantically perused on this digital platform or ergo a facsimile of said digital reproduction of said pertinent presentment has aggrieved disaffected exasperated or offended any members, associates or affiliates of the legal profession or you postulate that has in some way infringed any intellectual property rights or prerogatives then:
Please present a physical or electronic signature for yourself or for a person authorized to act on behalf of the owner of an exclusive right that is allegedly infringed. Identification of the copyrighted work claimed to have been infringed, or, if multiple copyrighted works at a single online site are covered by a single notification, a representative list of such works at that site.
Identification of the material that is claimed to be infringing or to be the subject of infringing activity and that is to be removed or access to which is to be disabled, and information reasonably sufficient to permit the service provider to locate the material. Providing URLs in the body of an email is the best way to help us locate content quickly. A statement that the complaining party has a good faith belief that use of the material in the manner complained of is not authorized by the copyright owner, its agent, or the law. A statement that the information in the notification is accurate, and under penalty of perjury, that the complaining party is authorized to act on behalf of the owner of an exclusive right that is allegedly infringed.
Once you have collated said materials then procure or solicit a fowl of the Columbidae varity and securely affix said documentation to its person and dispatch said Columbidae fowl to us post haste ensuring said animal has the navigational wherewithal to elicit a satisfactory completion of said delivery.

©barcode1966 – 2016

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The truth about freeholders’ dirty tricks

The following blog lists many of the ways freeholders and their oily solicitors and valuers use underhanded tricks to gain unethical, financial advantages over flat owners when extending leases.

I am Managing Director of a company that carries out the most lease extensions per year, on behalf of flat owners, in this country.

As such, I oversee the extension of thousands of leases each year and it is truly nauseating to see multi-millionaire freeholders regularly use unfair advantage and deficiencies in leasehold legislation as weapons to wring even more money from unsuspecting flat owners.

This is intended as a leasehold flat owner’s guide to some of the main tricks used and also give some tips on the best ways to counter them.

Trick #1dr-evil-freeholder

The freeholder’s counter offer will be huge!

Why is it unfair?

You must legally make an opening offer for the cost of your lease extension and your offer has to be ‘reasonable’. The freeholder does not have the same limitations when making their counter offer, it can be as big as they like! It is often a disproportionately large amount!

It is an unethical ploy.

Why do they do it?

Firstly, they hope it will be so shocking compared to the amount your valuer told you to expect to pay that you will withdraw from the transaction altogether.

If that ploy fails, their second hope is that it stretches your expectation of what the final amount is you will have to pay.

Thirdly, you may often find that an offer of an informal lease extension directly follows a high counter offer. (Click here for my full rebuttal of informal lease extension offers)

How can you counteract it?

I see many people, who are not necessarily clients of ours, become very upset and agitated when they receive the counter offer.

The way to counteract it is to expect the counter offer to be ridiculously high and completely ignore it when it arrives as it is 100% stuff and nonsense.

Also, do not take their informal offers!

Trick #2dr-evil-freeholder-6yhf0a

Freeholders completely ignore the flat owner during the six-month period of negotiation.

Why is it unfair?

During the six-month period of negotiation in the statutory time frame of a lease extension, the cost of the lease extension and the terms of the lease MUST be agreed.

If not, the flat owner has to pay to make a protective application to the FtT to extend this time frame or lose their legal right for a lease extension.

If the latter were to happen, the flat owner would have to wait 12 months before they could start the lease extension process again and they would be liable for all abortive legal and valuation fees for both sets of solicitors and valuers.

The flat owners must pay to make this application regardless of the fact that the delay may have been purposely caused by the freeholder!

Why do they do it?

To be nasty.

It is pure bloody-mindedness as freeholders know the flat owner will have to pay these additional fees and they will never be charged or brought to task for acting in such an unreasonable way.

It is a way of punishing flat owners for daring to want a lease extension and letting them know that the future negotiations will be brutal for them.

How can you counteract it?

Negotiate how much your solicitor will want for them to serve an FtT protective application on your behalf, BEFORE you agree to use that particular solicitor.

You will get the work involved in the application much cheaper by negotiating while the solicitor is quoting upfront to get your new business than as opposed to this arising once you are a client of the solicitor.

If possible, try to extend your lease at the same time as many of your neighbours as possible and negotiate group discounts with your proposed solicitor and valuer.

Trick #3dr-evil-freeholder-vg9ny1

Freeholders refuse to enter into negotiations on statutory lease extensions; instead they try to bully the flat owner into accepting their ‘easy’ informal offer.

Why is it unfair?

You have a legal right for a lease extension of an additional 90 years with zero ground rent. Freeholders try to distort this right by making the statutory route seem so difficult and fraught that the ‘informal’ route seems the easiest or only option.

Why do they do it?

If you extend your lease by way of your statutory right the freeholders lose their investment, your flat, and their chances of making even more money from you.

If you fall for their trick and accept the informal offer, they will make an absolute fortune from you in the future for decades to come.

How can you counteract it?

Don’t accept their informal lease extension offer, even if your freeholder is telling you to accept it. Do your own research, read my blog or watch my video.

Trick #4dr-evil-freeholder-iqik2b

The freeholders try to include new terms into your lease, which hugely favour their own interests.

Why is it unfair?

Your freeholder does not have a legal right to insert new clauses into a lease during a statutory lease extension. They try to sneak them in by ensuring the new lease is sent back to your solicitor very close to the statutory deadline.

This means your solicitor will have to inform you that if you do not accept the illegal terms inserted you will have to pay court fees.

Why do they do it?

For a variety of reasons. In the case of new licences they insert, they want to make more money from you.

They may try to insert new terms relating to the recoverable court fees through service charges. This could mean that if you sue them in the future (even if you win!), they can add their legal fees onto your service charges. Click here to read this horror story.

They will often include new terms that relate to breaches of lease terms and what actions they can take. Here they want more power over you, the ability to charge more fees and a better chance of getting forfeiture of your flat.

Are these new terms they are trying to unfairly insert in your lease important? You bet!

How can you counteract it?

As with Trick #1, negotiate the fees for these applications with your chosen solicitor before you agree to give them any work.

If possible, extend your lease at the same time as a neighbour or a group and negotiate a group discount before hand.

Instruct your solicitor that you will not accept onerous terms included in your lease.

If you go to the FtT to fight these inclusions you will win outright, as your freeholder is breaking the law by including them in the first place. They will never want to attend the FtT to argue their right to include new terms – they are just trying it on.

Trick #5dr-evil-freeholder-7u7l4x

The cost of the lease extension.

Why is it unfair?

The freeholder is entitled to receive the combination of ground rent, reversion and marriage value, as set down by law, as the ‘fair cost’ of a lease extension.

However, they will often add a fourth element of the valuation; that is, how much it would cost you to take them to the FtT to argue the much higher costs they have settled on, refusing to negotiate further.

This unfairly revolves around the fact that the flat owner will have to pay to challenge an unreasonable freeholder and the costs of doing this are considerable.

Why do they do it?

To make more money from you.

How can you counteract it?

Extending your lease at the same time as your neighbours is one of the few counter measures to this unreasonable action from a freeholder. Ensure that you have negotiated group discounts for multiple applications.

If you are not part of a group it is tougher but encourage your valuer to keep negotiating and keep the lines of communication open with your freeholder.

It can sometimes work to bluff the freeholder in thinking that you are happy to attend the FtT on a point of principle, as no one wants to actually attend the FtT – it is just a big bluff.

Trick #6dr-evil-freeholder-x27jzf

Absurd Section 60 costs!

Why is it unfair?

The flat owners have a legal obligation to pay the ‘reasonable’ legal and valuations fees incurred by the multi-millionaire during this process. These are the freeholder’s Section 60 costs.

Many of the professionals who work for the freeholder view this as a free hit and charge the flat owner far too much for their services.

Another shameless trick perpetrated by the valuer who works for your freeholder relates to his own fees. The valuer may only agree on the cost of the lease extension if you first agree his personal, much inflated fee for the work he has done. That way he ensures he will be paid handsomely for his couple of hours of work.

This one disgusts me to the core; not only are they being pig greedy, but they are selling out their own client for their personal gain. Nice! (To see how to get over this trick, read to the end)

Why do they do it?

Simply put it is pure greed. This is considered one of the benefits for representing the freeholder for professionals, i.e. the chance to charge what they want for their work.

Furthermore, the nastier valuers and solicitors become when they represent freeholders, the better a chance they have of getting more work from them, and hence the tricks I list in this article.

How can you counteract it?

Always challenge Section 60 costs! It is a written challenge that needs to be submitted to the FtT by your solicitor, so generally no one needs to attend the court.

Be aware that challenging Section 60 costs is not always a popular thing to do for some solicitors, as they could find themselves on the opposite side of the fence a week later.

Some solicitors are afraid that their arguments of this week could be used against them next week, to reduce their own fees.

Obviously, neither you nor I should be concerned about this. A solicitor’s duty of care is to get the best possible deal for their client – you! It may be prudent to clarify with your solicitor when you are looking to engage them that you will want them to challenge unreasonable Section 60 fees as part of the transaction.

How to deal with the solicitors and valuers of the freeholder.

imagesI can tell you, from personal experience, that many (but not all) of the professionals who represent the major freeholders are awful, amoral people. They will, however, argue until they are blue in the face that they do not do anything illegal but it is in fact the flat owners who are the problem by daring to want a lease extension in the first place.

Well here is a little-known fact. You have a legal right to complain about the freeholder’s solicitor and valuer if you have evidence that they have not acted honourably.

You may also be very glad to know that it is a very big deal when you complain about a solicitor or valuer to their professional bodies!

For valuers, click here and complain directly to the RICS about the actions of the valuer. The RICS has a code of ethics which state: ‘Members shall at all times act with integrity and avoid conflicts of interest and avoid any actions or situations that are inconsistent with their professional obligations’.

For solicitors, their code of ethics state that they must: 1 Uphold the rule of law. 2 Act with integrity. 3 Not allow their independence to be compromised. 4 Act in the best interest of each client.

If you feel you have not been treated fairly, you will firstly need to trigger an internal complaint for that solicitor. Solicitors have to take this very seriously indeed and will probably inform their PI insurers too. The PI people become a time-consuming nightmare for solicitors.

If you are unhappy with the result, you can complain directly to the SRA by clicking here.

Conclusion

Anyone with an ounce of decency will be disgusted by an industry and their ‘professional’ advisers, who gleefully use a whole raft of inequitable tricks to gain a dishonorable and immoral advantage over flat owners.

I wish I could say the above is a definitive list but, sadly, it is not! I didn’t want to write a ‘how to be a bastard freeholder’ guide here though so I focused on the most often used tricks instead.

I genuinely hope the above information will help you when you are extending your lease. To be forewarned is to be forearmed.

The above text is from a (very unpopular) speech I gave for the Leaseholder’s Valuers Forum, at the Law Society 12/11/2015.

©Barcode1966 – 2016

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Proposed increases to First-tier Tribunal fees: Making the flawed leasehold system even unfairer for flat owners.

Introduction Artists-impressions-of-Lady-Justice_statue_on_the_Old_Bailey_LondonThe Ministry of Justice (MOJ) has just released a consultation paper, which proposes to increase the cost of various court fees applicable.

Slipped into the middle of this paper are some very significant proposed increases to the fees payable for enfranchisement and lease extension cases heard at the First-tier Tribunal (FtT) Click here for the document (go to page 27).

These changes will have catastrophic consequences for the vast majority of ordinary flat owners in this country and will further damage their chances of being dealt with fairly by their rapacious freeholders. This blog will explain some of these consequences in more detail.

What are the proposed changes to the FtT fees?

The Government’s consultation paper says the following about its proposed FtT fees:

  1. We are proposing to introduce a simple fee structure with a £100 fee to issue proceedings and a £200 for a matter to be listed for a hearing, which will be applicable across the majority of case types in the Chamber.

Our modeling indicates, however, that these proposals, applied to all proceedings, would not meet the objective of 25% cost recovery.  We believe that in order to reach the target recovery rate for the Chamber there is a strong policy justification for charging higher fees in leasehold enfranchisement and leasehold valuation cases.

  1. Data obtained from the Leasehold Advisory Service suggests that for a sample of around 840 leasehold enfranchisement and leasehold valuation cases lodged between 1994 and 2006, the average value determined by the tribunal was around £142,000.

On this basis we believe that given the large amounts in dispute it is reasonable to expect those bringing these proceedings to pay a higher fee and have therefore modelled a proposal based on an issue fee of £400 and a hearing fee of £2,000.

This would have the effect of charging those cases at close to full cost and, based on current volumes, would bring the cost recovery percentage across the Chamber to around 25% after remissions.

However, an alternative to flat fees in these cases would be to consider a model where fees are charged as a percentage of the value at stake.

The figures used

Before I discuss how this affects flat owners I would make two points about the figures used in this document.

Firstly the data which was supplied by LEASE (What were you thinking LEASE?) is impossible to analyse or question. There are a few ‘pick and mix’ statistics used as supporting evidence but no real substance.

I have requested a copy of the full data supplied to the MOJ by LEASE by way of a freedom of information request, which you can see here.

Secondly I find it hard to believe that a mean average of the values disputed in the 840 FtT ‘sample’ cases quoted could be anywhere near as high as £142,000 per case! Unless it includes the £30 million arbitrary amounts for ‘development value’ the freeholders throw onto every enfranchisement case.

Leasehold Solutions is currently dealing with thousands of live lease extensions on behalf of ordinary flat owners and the vast majority of these cases have a value under £10,000.

At best these figures are Prime Central London centric and will completely price out a flat owner from Walthamstow who is trying to get justice against his gluttonous freeholder.

At worse, they are heavily skewered or just plain misrepresented.

Why does this proposed change prejudice flat owners even more? homepage-head

Many predatory freeholders already successfully use the current flawed leasehold system against flat owners.

Although flat owners do have defined legal rights, which make us feel all warm and fuzzy, in reality these rights do little to help flat owners against a cognizant freeholder.

This is because the onus to take legal action against an unreasonable or just plain bloody-minded freeholder is nearly always on the flat owner. They also have to pay for this legal action, by way of current FtT costs, which are dwarfed further by the cost of their own legal and valuation representation.

For example, many freeholders refuse to engage with the flat owner’s professionals during the statutory six-month negotiation period and they are very smug in the knowledge that the flat owner will have to pay to protect their legal position and there will be no fiscal penalties imposed against the freeholder for their unreasonable behaviour.

Imagine the increased power this strategy will be given if the flat owner has to now pay an additional £2,400 of FtT fees to force the bloody-minded freeholder to act!

What lets freeholders get away with acting so badly is the fact that the FtT feels it has little or limited power with cost jurisdiction and so rarely awards costs against a party who has acted unreasonably or vexatiously (even though on paper, it is allowed).

This gives freeholders the scope to act in an unscrupulous manner in the hope of gaining a further fiscal advantage or just to ‘punish’ a flat owner for daring to want a statutory lease extension.

This proposed additional £2,400 price tag for FtT fees just plays into the hands of freeholders at the expense of the flat owner.

The MOJ’s consultation paper ignorers that their proposed increase comes with the additional cost to the flat owner of their own legal representation, a valuer and possibly a barrister too!

The cost of an average flat owner in the suburbs, trying to get justice against an unscrupulous freeholder, has just become prohibitively high!

This flawed proposal will also add a fourth dimension to the existing three valuation principles of ground rent, reversion and marriage value which determine how a freeholder is compensated for a lease extension or enfranchisement.

This fourth element would be the ‘FtT cost’.

The freeholder could easily add an additional four or five thousand pounds to the fair cost of each lease extension based on the fact it would cost a flat owner much more than that to challenge them in the FtT!

This is a real gift to the many predatory billionaire freeholders we have in the UK but really bad news to the four million flat owners who will have to pay for it.

They will be the ones who will always pay for these increases either by way of paying the new fees to the FtT or by paying more than they should to their freeholder who has used this system against them.

Another gift for the freeholder could be the terms of the new lease.

During a statutory lease extension basically both sides have the legal right only to alter defective clauses and not include new clauses or licences in the lease.

Not so with the proposed changes to the FtT fees. Now a freeholder could insist on inserting a new license which states if you rent out your flat to a third party you must pay the freeholder £1,000 a year for ‘permission’ to do so.

The freeholder can’t legally do this but now the onus is on the flat owner to challenge this in the FtT to get this licence removed. Now the flat owner will have to pay £2,400 for FtT fees plus more than this for their solicitor to prepare the case case and represent them.

This after the fact that the flat owner has just paid over the odds for his lease extension, plus his own legal and valuation fees and the legal and valuation fees for his billionaire freeholder, chances are he will just accept it!

The list of how these proposed changes will prejudice flat owners all over the country goes on and on but it is plain to see that this proposed change designed to plug a gap in the MOJ’s books will also give more power and money to freeholders.

This is the death knell for the average person owning a flat in the suburbs who is trying to force his freeholder to act reasonably. Justice has just become too expensive.

If these proposed increases to the FtT fees are implemented then this img_0779will be a huge backwards step for leasehold reform.

The consultation paper closes on 15 September 2015, so please let your voice be heard, the more of us who make our voice know the better chance we have of stopping these ludicrous proposals.

Click on this link to see the paper and it asks three questions.

Please answer those questions and send them to the MOJ.

Also send a copy of your answers and thoughts to your local MP and:

The Rt Hon Michael Gove MP Secretary of State for Justice

102 Petty France

LONDON

SW1H 9AJ

©Barcode1966 – 2015

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