How Freeholders and Managing Agents Can Abuse Leaseholders Legally

In this piece LettingFocus.com looks at how freeholders and their managing agents can abuse leaseholders and LettingFocus founder, David Lawrenson,  explains why he tends to avoid leasehold properties.

I contributed to an article for “The Times” the other week, which looked at the various ways leaseholders can get “turned over” by unscrupulous freeholders and their managing agents.

Here, based on what landlords and other home owners have told me, is my personal list of the six top abuses carried out by rogue freeholders and their agents:

1. Making leaseholders pay the freeholders’ own legal costs used in fighting other leaseholders or even for themselves in court! Yes, they can really do this, providing it’s allowed for by the terms of the lease.

2. Overcharging for arranging insurance or for replying to routine administration enquiries from conveyancers or mortgage lenders. Home owners need to be particularly careful to check what’s covered by the insurance policy and what the level of excess (deductible) is. I have seen one policy which had a £5,000 excess for any claim – which makes it about as much use as a proverbial chocolate teapot for most claims.

3. Not repairing a building properly on purpose in order to ensure more expensive repairs result later. See also “4” below.

4. Doing unnecessary work on the building to profit from extra management fees. The discovery, in the 1970s, of the dangers posed by asbestos was a particular godsend for bad freeholders – allowing them to arrange for the carrying out of “urgent,” unnecessary and / or over-priced asbestos removal from a block.

5. Abusing or “ringing” tendering processes for repair work with builders – i.e. backhanders for inflated costs for works. For most works of any size, a freeholder will need three builders to quote for work, so a crooked freeholder with a number of properties could share the work out between each of three friendly builders and ensure each job costs more than is necessary. Of course, that assumes the three builders are in any sense “real” rather than being sham legal company constructs existing solely for the purpose of quoting for inflated work.

6. Overcharging landlords for “consent to let.” In my experience many leases do not require a leasehold-landlord to notify the freeholder, let alone to pay costs for this. That does not prevent lots of them from trying it on, though and, with more property than ever being let, this is a popular money spinner for the abusive freeholder. I have a freeholder who tries this on every few years and when I point out to them their error, they claim it was an honest mistake. Clearly it’s a mistake they are not learning from. This freeholder is big in the capital and now has a considerable “history” on line as regards this form of abuse.

Why I Avoid Leasehold

Personally, as an investor, I only buy leasehold if the block is low rise and if there is already a management company owned and run by active leaseholders (who ideally also live in the block or development) and who have the power to hire and fire the management company.

If the above requirements are not in place but the block is low rise with no lifts and the freeholder is a local authority, I might consider buying a leasehold property but only if more than 50% was now in owner occupation (i.e. occupants had previously exercised right to buy.)

Other reasons I tend to steer clear of leasehold properties are:

1. They are more time consuming than freehold with regards to what one needs to do to enforce one’s rights and to stand up to abusive freeholders and their agents.

2. I don’t like not being fully in charge of my investments.

3. Noise and other antisocial issues are more common with flats and soak up too much of my time.

Lots of freeholders and their agents are good. To avoid ending up with a “freeholder from hell”, ask other leaseholders before you buy and check what it says about the agent and the freeholder on line.

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