Nick Hargrave is a former special adviser to David Cameron and Theresa May. He writes here in a personal capacity.
One of my regrets from my time in Downing Street is that I didn’t do more to agitate on the subject of leasehold. It’s a big country, a big government and there are a lot of things to fix.
Once you buy a leasehold flat though, you understand the potential dividend for politicians who embrace reform. Buying your first home is an emotional experience and one that millions aspire to. Very few people though, before purchasing a leasehold flat, understand the acute lack of ownership that they will feel after making the purchase.
The clue is in the name, you are actually buying the ‘lease’ to a property from a freeholder for a significant period of time. If you live in a block of flats, the freeholder is responsible for maintaining your surroundings. The freeholder will typically instruct a ‘managing agent’ to do this for them.
This is where the problem starts. Managing agents in England and Wales do not have a statutory regulator. They have to comply with the law like all of us, but the law on leasehold is outdated and there is no statutory code of ethics or practice. This is a recipe for bad behaviour.
My story is very modest in comparison to hundreds of thousands of leaseholders in this country – many of whom have the heartache of cladding to contend with also.
Our managing agent, a Richard Davidoff of ABC Block Management, was appointed by our freeholder to become the sole director of our residents’ management company – intended in our lease to be controlled by residents. When residents started exploring this subject in detail, he changed the company’s Articles of Association in a way that would make it more difficult for us to remove him. All the while, he commissioned his firm to provide services to the block at a standard which we did not think acceptable.
As the Director of the residents’ management company he then unsuccessfully opposed in the courts attempts by residents to manage their own block. More detail about this complicated case can be found here.
At another block, Davidoff and ABC’s behaviour was much more concerning. He was found by a tribunal to have breached his fiduciary duty to tenants, his firm “dissembled” over their relationship with contractors, and residents were levied extortionate life changing sums which were not justifiable. As a consequence last week his firm was expelled by trade body ARMA. More detail about this case can be found here.
In a regulated system, Davidoff and ABC would likely face wider sanctions. But because there is no statutory regulator, they continue to manage many other blocks in the London area. Each individual block would have to go through the property tribunal system to dispute service changes and/or apply for the right to manage their own block. This is very time consuming and beyond the discretionary capabilities of many leaseholders.
This lack of protection for leaseholders – many of whom do not have a platform or contacts – cannot be right.
The above are merely symptoms of a system badly in need of reform. The issue of leasehold is moving up the agenda in Parliament, with many Conservative MPs receiving much worse complaints than the above from their constituents. Here are some pointers from me as to what might be done.
Rather than aiming for perfection immediately, there are some granular reforms that might be included in a future Leasehold Bill:
- The creation of a statutory regulator with teeth to investigate and punish bad behaviour from managing agents – the property tribunal system should be able to refer patterns of behaviour from any one managing agent to this regulator.
- An end to the ‘pay now, contest later’ system of service charges where leaseholders have to pay sums they believe unreasonable before challenging them in the courts. This acts as a significant disincentive to challenge unfair service charges. There would of course need to be balance applied to this reform to prevent blocks falling into disrepair.
- New mechanisms to hold freeholders liable for the behaviour of the managing agents they instruct – it is too easy for deep pocketed freeholders at the moment to hide behind a mixture of silence and expensive legal representation.
- Reform of the Section 20B Notice of the 1985 Landlord & Tenant Act, which allows managing agents to postpone publishing service charge accounts for a block by up to 18 months without any real challenge. Again, this prevents appropriate scrutiny from leaseholders
- The Right To Manage process could be significantly shortened – ours took the best part of a year because of immaterial objections being raised by the other side. One route would be a presumption of a Right To Manage unless proven otherwise – at the moment the onus to prove the right is on leaseholders .
All of the above would lead to significant improvements in the lives of leaseholders – and none are ‘too difficult to fix’. I am by no means an expert in this subject; there are many experts in this area who I am sure would be able to improve on the suggestions I have made. Often in politics though, getting heard above the noise is a good start.