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Sunday, August 02, 2015

Landlords can fightback against leaseholders

Landlords can be the victims of other landlords where they have to pay a management company for a service charge. 

Leaseholder being overcharged

We have highlighted before the cases of leaseholders being overcharged.

I have come across numerous cases where leaseholders that could include landlords have fought back against unreasonable  charges.  One of these featured in the Guardian involved a leaseholder who took up a case against Peveril also known as OM, Solitaire or perhaps Cirrus and now rebranded as First Port.  

Escalating service charge a threat to landlords returns

I have highlighted to landlords previously the perils to your investment returns of investing in property where a service charge increases at double the rate of inflation and potentially your rent rises thereby inexorably squeezing your net rental returns.

Leaseholders removing the managing agent or company

The cases above showing leaseholders fighting back proves landlords don't have to accept unreasonable and escalating charges indefinitely. One option open to leaseholders is to remove the management company and replace it with their own.  I owned a leasehold property in a large converted house with approximately 9 apartments in the block.  From memory the monthly charges were incredibly low at something around £27 per month.  The management company was run in a very democratic fashion with each apartment owner having 1 share in the management company.  Clearly, unlike with a commercial management company who have an interest in raising charges if their fees relate to the total costs (or more importantly they don't have an interest in keeping them to a minimum).  This means that the shareholders in terms of the leaseholders are keen for any maintenance work to be kept to the minimum whilst keeping the block looking good.  They are also dead keen on using the best and the cheapest contractors and not keen to give them a 'kick back' for appointing them.

The downside of self management

The downside and clearly there is always a downside; is that not all leaseholders are going to agree on what needs doing and when and how much they want to pay.  This can lead to tension.  Normally, just like any company you will probably appoint a company secretary and various members to the management committee who will be responsible for making the major decisions on behalf of the rest of the leaseholders.  Again this means that any successful leaseholder based management company will need people who will prepared to give up their time for nothing to run the company.  But, this if you think about it is only the same kind of thing that you would need to do if you owned your own freehold place..sorting roof repairs, painting decorating, gardening, etc.

How easy is it to take back control of your leasehold property

Are you disaffected with escalating management charges?  One of the problems is that many management companies don't keep proper accounts and that charges are not transparent in the way they should be.  A recent discussion in a Commons round table looked at the murky world of leasehold service charge accounts. 

Clearly there are considerable legal complications surrounding taking action against an errant freeholder or managing company.  Many are making disproportionate and easy money from leaseholders through a series of 'kickbacks' and scams.  They are not going to give up this 'cashcow' without a fight.  So leaseholders and landlords need to be prepared for a long but ultimately rewarding fight.

Have a look at this forum post for some interesting examples of costs and other leaseholders that have taken action against the management company.

Expert legal advice on leasehold matters

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