Category Archives: Leasehold industry information

Information relating to changes in the law or industry

Recognised Tenants’ Associations

Leaseholders who want a greater voice in the management of their building may want to think about forming a Tenants’ Association.

A Tenants’ Association can be set up by a group of leaseholders who own leases from the same landlord / freeholder on similar terms.

Forming an Association is a good way for the flat owners to express their collective views to the freeholder and / or their managing agent.

The association could be a company, but does not need to be. It can be a loose collective of people that want to work together to be recognised in consultation on service charge and management issues.

However, in order to be most effective the association needs to be officially “recognised.”

If the association achieves recognised status then the freeholder/landlord must then consult with the association on any plans for major works and notices (such as section 20 notices) must be copied to it. The association can then use its collective voice in any consultations on future works, or major cost items for the building.

There are two ways of obtaining recognition:

1.     Agreement with the landlord

The association approaches the landlord and the landlord agrees to recognise the association. The landlord then confirms this formally in writing. The association is then ‘recognised.’

Any written notification or ‘certificate’ from the landlord recognising the association will continue to be valid unless the landlord/ freeholder gives the association is given six months’ notice withdrawing recognition.

2.     Application to the tribunal

The other way is if a certificate is obtained from the First-Tier Tribunal of the Property Chamber (formerly the ‘LVT’ or ‘Leasehold Valuation Tribunal’). This is much more likely if the freeholder is unlikely to be a willing participant in the recognition of the association.

A certificate is usually granted for a specified period of time (normally four years), but it may be renewed at the end of this time. The tribunal can also cancel the certificate at the end of this period if it considers that there is no advantage for the Association to be recognised.

Who can become a Member of the Tenants’ Association?

Any long leasehold flat owners in the building who are paying variable service charges to their landlord are entitled to be members.

How many flat owners are needed?

As a general rule, the Association will need at least 60% of those flat owners who are entitled to join, to have become members. In other words, if there are 100 flats in the block and all of these are let out on long leases with a service charge, then at least 60 of the flats must join in.

How does the process work?

The formal request for recognition, whether made to the landlord directly or to the tribunal, must include copies of the rules of association or constitution, which should be fair and democratic.

The leaseholders will also have to submit the names and addresses of all of the elected members of the proposed Association with their application.

Can the landlord join?

The landlord and the managing agent are not entitled to become members of the Tenants’ Association. If there are any leasehold owners who do not pay variable service charges, then they can become members of the association, but they are not allowed to vote.

How do we go about forming a Recognised Tenants’ Association?

If you want to form a recognised Association, or to make an application to become one, then the first step is to investigate with your neighbours whether there is sufficient interest to set up an association. You will then need to consider whether to use an incorporated or unincorporated model.

For further information on forming an association, you may need to seek specialist advice. There are some good guides produced by the Federation of Private Residents Associations (FoPRA), or you may be able to get help from LEASE the government advisory body.

Mark Chick 

November 2017

Mark Chick is a solicitor specialising in leasehold issues. To make contact email leasehold@bishopandsewell.co.uk

Insurance premiums

A lot of leaseholders often ask me what can be done if they want to challenge their insurance premiums.

The position is of course that service charges are the subject of the FTT’s jurisdiction under s.19 of the Landlord and Tenant Act 1985.

However, the tribual is generally reluctant to look to far into the cost of cover. The received wisdom has been that the landlord places the cover and the tenant reimburses the cost.

However, the case of Cos Services Limited (mentioned below) shows that perhaps the tide is turning. The case concerns block policies and the failure to have competitive cover in the face of evidence to the contrary.

I know from speaking to leaseholders that this is often an issue and I think for those looking to place cover at lower cost, or to promote a discussion about whether costs are reasonable or not this case is good news.

The same will apply to managers who want to help leaseholders find competitive cover.

Mark Chick

Insurance premiums and service charges – good news for tenants looking to challenge

Cos Services Limited v Nicholson and Williams [2017] UK UT389 (LC)nsurance Premiums and Service Charges – when does an insurance premium become ‘unreasonable’?

A recent case, Cos Services Limited v Nicholson and Williams [2017] UK UT389 (LC) has looks at the question of insurance premiums and whether these are ‘reasonably incurred’ within the meaning of the service charge legislation.

A link to the full report appears below:

http://www.bailii.org/cgi-bin/format.cgi?doc=/uk/cases/UKUT/LC/2017/382.html&query=(Cos)+AND+(services)

The case is potentially good news for those looking to challenge their insurance premiums.

Generally, the FTT will not look in too much detail at the amount been charged in respect of an insurance premium provided that the Lease allows the Landlord to insure.

It is certainly not the case that the Landlord is generally bound to choose the cheapest insurer that is available.

The case is accordingly interesting as it shows a willingness to widen the scope of interpretation of Section 19 (1) of the Landlord and Tenant Act 1985 to include the amount paid by way of a premium for an insurance policy, particularly when as in the particular case the tenant was able to produce evidence of comparable premiums that were some £10,000.00 cheaper.

Where properties are in multiple ownership, it is not uncommon for the Landlord to place a block policy and to allocate the costs of obtaining such cover to the particular blocks under management.  The case shows that the Landlord needs to consider the level of premium that is going to be charged against other equivalent quotes obtained in the market.

Although in each case the facts will need to bear out the argument, this does show a willing on the part of the Upper Tribunal to encourage the First Tier Tribunal to look more closely at whether insurance costs have been reasonably incurred.

Clearly, if the discrepancy is not as extreme as was shown on the facts in this case then the scope for redress will be reduced.

However, this may cause flat owners to consider having an independent review of the likely cost of obtaining cover and putting this to the landlord and in appropriate cases, bringing a challenge in the First Tier Tribunal.

Mark Chick
14 November

Regulation of managing agents

Breaking news … Sajid Javid announces the regulation of managing agents at the ARMA conference …

Some excerpts and a summary of the key points from his speech appear below:

The Grenfell disaster is something 'without parallel' .. the sector of property management is under scrutiny

Moving on from the White Paper (Fixing our Broken Housing Market), the government is looking at the issue of management and property like never before.

The ARMA code is a positive and the ARMA members are the 'good guys' .. unfortunately there are also 'the bad guys'

Some rogue agents over-charge, there are instances of excessive insurance commission. Evidence of items has not assisted – such as a fire escape being charged at three times the right price, and under a contract handed to the manger's brother.

These sorts of examples are ripe for some intervention. Estimated over charging could be in the order of £1.4 BN per year.

Anyone can be a managing agent. No checks whatsoever. This is not what the public expect.

The system is stacked against tenants, and there needs to be redress.

The Right to Manage process should be simplified. There are too many chances for a challenge from the landlord.

There are issues for management on shared estates. House owners on such developments have no easy right of redress against the deficiencies in their service charges.

This is supposed to be the age of the 'educated consumer' – the current situation does not promote consumer choice.

Regulation has been announced for letting agents and there will redress for the problems of leasehold houses and ground rents, particularly in relation to new build property.

Publishing today a call for evidence on the question of property management.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/652691/Property_agents_call_for_evidence.pdf

How to ensure fairness and openness?

Arma Q has done a lot, but has this gone far enough?

The paper that has been published will set out proposals for the regulation of property management. Details are going to be on the departmental website.

The government wants to remove 'petty restrictions' but wants to avoid cowboy operators.

The current situation penalises the good guys. We need to see regulation. Appropriate regulation will force the poor operators out of the market.

The private rented sector and justices use of leasehold does a lot of good, but further regulation is required.

Mark Chick
18.10.2017