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Feature – Exploitation of vulnerable leaseholders to be investigated

The Office of Fair Trading (OFT) announced in December that it would be launching an investigation into the residential property services market after it found that Cirrus, part of the property management group Peverel, was guilty of breaching competition law by price fixing and overcharging leaseholders of retirement properties.

The OFT move follows years of campaigning from various groups to protect against this type of exploitation and is positive news for those living in the estimated 105,000 leasehold retirement homes in the UK as this currently unregulated market comes under scrutiny for the first time.

As more people downsize in retirement to leasehold managed properties, it is important for leaseholders to know their rights if they believe that they may have been subjected to unfair overcharging by their landlord or management company.

Ahead of commencing its investigation, which the OFT states will start in ‘early 2014’, the UKs consumer and competition authority is asking for interested parties to write in to help it formulate the scope of the investigation and to enable it to prioritise the key issues.

It is particularly interested in hearing leaseholders’ views on the following:

  • Whether they have been sufficiently involved in the decisions made regarding the appointment of managing agents
  • Whether their management company is providing sufficient transparency and effective competition between tendering parties in order to deliver both value for money and service levels
  • Whether the property managers and freeholders share the same interest in keeping costs down as the leaseholders
  • How easy it is to make a complaint, change a service provider or seek redress

In the meantime, leaseholders who have any disputes in relation to any of the following matters, namely service charge, the right to buy the freehold, extending their lease or insuring the building, can appeal to the independent Residential Property Tribunal. This has various powers including deciding on whether any charges are too high or unreasonable. There is of course strength in numbers if leaseholders agree to jointly take this approach.

Leaseholders also have the right to make a court claim for any money they believe they are owed by their management company although a court fee applies for each individual claim.

One further option in relation to flats, if there is sufficient support amongst leaseholders within the same block, is to set up a Right to Manage Company and take over the day-to-day management. Developments comprising houses however, are excluded from these rights.

Neither the landlord’s consent nor a court order is required in order to do this and leaseholders do not have to provide any reasons as to why they want to take this responsibility away from their existing management company.

Setting up an RTM Company requires at least two thirds of leaseholders in the block to be ‘qualifying tenants’ which means leaseholders whose lease was originally granted for a term of more than 21 years. There are other detailed qualification requirements and appropriate legal advice should be sought.

Once the RTM Company has been formed, all qualifying leaseholders and the landlord must be invited to become members. The application to acquire the right to manage can only proceed if membership of the company comprises the qualifying leaseholders of at least half the flats in the development.

The reality of managing property can be very time consuming, the Right to Manage Company however, has the option of appointing agents of its choice to take this role on and can replace them if things don’t work out.

Indeed, for all but the smaller developments, the RTM Company is well advised to appoint specialist managing agents to ensure that they receive both value for money and a quality service.


Find out more about our Residential Conveyancing department Find out more about our Commercial Property department
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