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Carryon Regardless

Flats Freehold Bought By Compton

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I've a feeling I'll be seeking advice for a while on this one.

Letter of 23rd Dec, received early Jan from Compton Insurance, states they are dealing for Tapestart Ltd "a company of the Compton Group".

already I feel a trail designed to make dealings awkward, on the principle that much time and effort is needed with any dealings, obstructive possibly.

I am familiar with the principle of these unscrupulous companies that buy the freeholds at a price that seems to be not good business for the peppercorn rents they receive, £25 pa for each flat in this case, 5 flats of mine.

The tactic then seems to be to pile on charges for what ever they can to squeeze from the unsuspecting.

A little research shows they enforce, as far as possible, insurance with LV. They have stated that they have taken insurance with LV, on my behalf and of course reclaimable from me, from 4th December. No opportunity given for me to assess cover, compare costs, sort of thing. How am I to know if this will be suitable for rental properties?

The previous freeholder took insurance annually, on my behalf, as far as I am aware on October 25th, I was certainly invoiced for this in September.

It seems reasonable that I should at least be furnished with policy documentation.

What sort of charges might Compton get away with for supplying such?

I really need to ensure that the insurance paid for last year is in place.

Would any freeholder be able to cancel this without reference to me?

Compton, for who ever, is claiming the bi annual ground rent of £12.50 due 23rd January. Already threats of legals for late payment and penalties yah de yah. Varying charges for different payment methods applicable of course, knees broken for not licking backsides.

Fortunately I have 4 of 5 leases agreements that all detail bi annual payments for ground due 25 March and 29 September, but at least they have the amount right.

My obvious questions are many.

What responsibility do I have to educate Compton?

I assume that by the time the true due dates arrive they will be jumping up and down on my broken body to attempt to get the developing penalties from me. I expect there will be admin charges applied along the way.

Do I have reasonable right to apply the same charges for my efforts where needed ?

Is it reasonable to ignore, and allow them to progress to court and hit them with the counter claim?

I would aim to pay as is detailed in the lease and if their insurance isn't demonstrated take my own out come October, assuming I have evidence that this is as I believe.

Things have been running on an even keel since 2000. Compton now creating new terms and conditions, I'm not thinking of the lease here as those terms are set in stone, but their terms of business are new and questionable.

Are they able to create new terms and conditions to an existing set up?

As i believe they just step into the shoes of the original freeholder i would expect that to be a no, but stranger things have happened.

This bit could be awkward. I would aim to gain documentation from the original freeholder that shows Compton has this authority. They have provided a signed document but these days it seems intelligent to treat such things cautiously.

Awkward as the original freeholder is most likely happy to be shut of these freeholds and may prefer to ignore my request.

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Compton ( check them out at Companies House) cannot change the conditions of your original leases - end of.

Ask original freeholder if he has sold and if so to whom and how much for. Double check with land registry. Ask Compton for details of the sale/purchase.

When in doubt do nowt about payment. Check with LV on insurance - I do a lot of buildings insurance with LV (they are local to me) and they are cheap so don't fall for fancy prices.

I smell a bag of rats.

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Basically COR check and check again, Information & knowledge is power!

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Cor how many units in the block?

You only need 50% of the total unit leaseholders to excise you legal right to buy the freehold yourself or as a group. Even if you get agreement from some leaseholders who cant afford to you can still do it, it just means you or the group pay their share and they don't get a share of the FH.

The same rules apply for the right to manage. You wont own the FH with this but you will have the right to manage the block yourselves or appoint your own agent.

If you have a lease that needs extending sometime in the near future the cost on blocks that I have dealings with was similar to the costs involved in buying the freeholder and then you extend the lease for a few hundred quid at a later date each and not thousands.

Regarding the insurance, if they are selling the policy they are likely to be getting 20% of the policy fee back in commission,

Try this site which is just for leaseholders questions:

http://www.landlordzone.co.uk/forums/forumdisplay.php?11-Long-Leasehold-Questions

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Things have been running on an even keel since 2000. Compton now creating new terms and conditions, I'm not thinking of the lease here as those terms are set in stone, but their terms of business are new and questionable.

Are they able to create new terms and conditions to an existing set up?

As i believe they just step into the shoes of the original freeholder i would expect that to be a no, but stranger things have happened

The way the freeholder must operate is usually specified..... 1) in the lease 2) by legislation.

What 'new terms & conditions' are you referring to ?

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Thanks for the responses, I'll certainly be looking at the idea of buying as I own 5 of 6.

Well another little game I can play here is that I own 4 of 6, but my Ltd company own the 5th. As Compton mail to me and not the Ltd Co the Ltd Co hasn't been informed.

RL the new terms are penalties that haven't previously applied for varying payment methods are now a Compton standard term of business.

Another 'trick' employed by such as Compton, I've been here before, is to charge for permissions for already installed double glazing, central heating and the like. Then of course imagine the cost should they wish to charge to grant each new tenancy, and back date 6 years.

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My understanding is as follows:

They HAVE to follow the stipulations contained in the lease and within the law.

If the lease says that permission is required, then permission is required. If permission hasn't been obtained, then when you sell the property you will be required to obtain retrospective permission. This is nearly always much more expensive. The charges that the freeholder can make for giving permission should be clearly outlined in the lease. Sometimes the lease will not state a specific fee but will say the freeholder can charge for this & other services.

You may not have been charged in the past but that doesn't mean you have got away with it because the previous freeholder didn't ask leaseholders to pay.

The freeholder is also entitled to charge reasonable fees for processing credit card payments and the like. They are in business to make a profit and they are entitled to charge for anything that the lease says they can charge for. People/ company's buy freeholds because they can make a good return on their investment.

I would suggest either you read thru the lease or get someone to do it for you so that you understand what can be charged for what. Virtually all leaseholders are subject to these kinds of charges.

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It's been a while on I know.

Compton have continued to send significant mail. All to me as COR, none to my Ltd Co (same address but should be different addressee).

They actually only 'finalised' the insurance valuation recently but some how wish to back date the cost for the policy to Dec 14. I consider that insurance wouldn't be in place for the interim period.

They now have a management team. Works have been carried out, but not all effective so I put right an over flowing gutter. In truth I could only see their attempt at repair when I got up the ladder.

They have raised charges,

£500 Maintenance & repair.

£500 Rubbish removal.

£132 Accountants fees.

£500 Management fees.

£500 Reserve fund. Divided by 6.

I accept that some charges may be reasonable but they certainly like the round figure of £500. The lease is prettty generous to the T and doesn't detail any cost other than a bi annual ground rent of £12.50 (£25pa). Previous to Compton no other charges were ever raised (aside from insurance).

I fear this will be the start of evil tactics so feel a need to be less than a push over.

No surprise they are now threatening legal action.

Anyway as suggested by Grampa I have done some research on the Right to Manage. The research regarding Right To Buy show the freehold valuation to be beyond cash flow / economic advantage.

I did ask the previous owners to furnish details of the sale, as suggested. They promised but failed to fulfill. It seems I can make the request to Compton / Tapestart. But it may be they don't have to comply if a notice need not have been served (see below) ??

If my understanding is ok I can effectively take over the management as I own enough of a controlling interest.

As I have been reluctant to acknowledge Compton have legal rights here I have neither paid or communicated with them. For advice from a solicitor I do trust to talk as I can understand and not just enjoy a chance of litigation I called him, the lucky sods retired.

As I read today it is a criminal offence for the previous LL to sell without serving notice on,

at least 90% of T's,

T's with ownership of more than 3 flats are exempt from requiring notice,

where there are less than 10 T's notice can be served on all but 1 of them.

Now, I own 4 of 6 (as COR),

my Ltd Co owns 1,

Mr Angry - Violent "I hate the world" owns the last.

It may be that notice was served on Mr Angry, he wouldn't know what it was and certaily wouldn't be credible enough to become involved anyway.

Me as COR have no rights to the notice, it would seem ??

The Ltd Co could only claim that legalities haven't been followed if the Co (me) could demonstrate that Mr Angry hadn't recieved a notice.

Unless I am missing something, very possible, it feels like I'm going to have to sumit somewhat.

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Let me balance the discussion. Buying these freeholds can be good business that provides a reasonable return on the money invested. All details of what the freeholder (or their managing agents) can charge will be contained in the lease. Sometimes, usually the lease is not specific and just refers to their ability to claim reasonable costs. The lease will also clearly show the leaseholders responsibility (to pay) the charges and the freeholders responsibility of what they must provide / arrange (e.g. buildings insurance, maintenance etc ).

Either go through your lease with a fine toothed comb, read it a few times OR get a solicitor to check if the new freeloaders actions are permitted.

Larger organisations have many professional members, solicitors and chartered surveyors who will be experienced. Your development may not be the only one they own. Everyone makes mistakes but the larger the business the less likelihood that will happen.

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Leasehold/freehold law is not simple and certain things need/have to done in certain ways with correct timescales.

The value of a freehold is generally a calculation formula based on of the ground rent plus years left on the lease. So the higher the GR and lower the years left on a lease the higher the value of the freehold. That is why when a lease extension is being requested (for which there is a cost) the freeholder will prefer leaseholder to take what can be the cheaper option (to the L/H) of an "extension by agreement" which will be an extension back to 99 years and an increased GR. Which means the freehold value increases due to a higher GR (plus high future increases built in) and there is likely to be another extension to be requested (by the L/H) before it gets to 80 years. (as the formula for extensions increases below 80 years)

The other option is an statutory lease extension via the serving of a section 42 notice which may cost a little bit more but sometimes the same but will give you 90 years added to the existing years left plus a peppercorn (£0, zero) ground rent.

If you are planning to sell the property soon it can be best to go for the cheaper extension option because it is likely to make any difference to any valuation/sale price.

The reason why a lot of companies buy up freehold which on the face of it appears not to generate much income is because they (or an affiliated company) go on to manage it and may get anything from £100-£500 per unit pa plus approx. 20% of any insurance premium plus 10% of any major works. Then there is the premium for any lease extensions as they come up.

The one bit of advise that is a must with freehold and leasehold issues is to use a specialised solicitor for any legals. (see search web site below)

Here are two websites that you may find helpful

http://rtmf.org.uk/rtm-services-private.php

http://directory.lease-advice.org/

I apologise if I have digressed from the question.

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No apologies for any digression needed, as RL reading a few times gives me chance to get my head around these things.

Reading up on the legislation 'again' teaches me that the freeholder only need serve on 90% of T's where a T may be difficult to trace. It does not give permission to omit service from choice. So my Ltd Co still has cause for complaint.

As long as they can't claim they (or the previous freeholder (same anyway)) were not informed of the change of ownership. This raises the question of who has liability for providing or clarifying this so the correct owner is given notice.

And as long as the same address but wrong addressee is not just seen as petty and imaterial.

The lease, and I shall read again with these specifics in mind 'again', only details the bi annual ground rents. As I sit here there is no provision for insurance or maintenance.

It does follow though that even if not detailed some charges would be deemed as reasonable, that assumes that responsibility for the action is reasonable in the 1st place. That is that the freeholder 'should' carry out maintenace, and that maintenance was required for general upkeep.

My issue here is that although insurance has been charged and paid annually, maintenance when occassionally carried out has not been charged for. In the last 5 years maintenance that has been informed to the freeholder (by me) has been ignored. Now they wish to become pro active and carry out 'maintenance' to ill effect and then create a willy nilly charge is worthy of a challenge. I believe this would go to a tribunal for decision. The problem in my mind is that if this is held in the South the market they are familiar with would make this case look like I should be grateful for such a low expectation by Compton.

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Whilst I share some of your concerns in general about freeholders and overcharging I also try to look at this from a different perspective.

One of my son's has recently sold his leasehold flat and bought a freehold house. It's come as a shock to him that although he no longer pays a service charge HE is now responsible for, buildings insurance, maintaining the gardens, outside maintenance, exterior redecorating etc etc. He no longer pays £700 a year in service charges but is likely to spend at least double that having someone sort all that stuff out for him on his house.

Personally I think the leasehold system works very well. Sometimes charges can seem a little high but there are other charges that are very reasonable. Most of my rental properties are leasehold and I pay between £650 - £1300 per year in service charges. That means that I don't need to do anything on them externally, the costs are tax deductible and I can go spend my time doing other things.

I understand freeholders need to make a return on their investment and it can work so that all parties benefit from that business arrangement.

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Regarding the charges....of £500 for maintenace, £500 for rubbish removal etc. With my leaseholds the freeholder estimates the costs at the start of the year and shareholders pay their share. At the end of the year accounts are produced showing actual expenditure and leaseholders either receive a credit or have to pay more....usually, in my case, I get a small credit. Perhaps yours will be operated along these lines ?

When the invoices are issued, there is always a sheet detailing the leaseholders rights and obligations of both the service charges AND administration charges.

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An update.

Compton, well one of their many agents, in this case Compton Litigation Solicitors, took out 4 CC claims against me. 3 claims against me and 1 against my Ltd Co that owns 1 flat.

The claims were incorrect in their detail, so of course I defended. A detailed claim received a detailed defence x 4. All claims sought monies in advance, all leases state monies in arrear. Claims for insurance for the 1st period that Compton failed to demonstrate when asked (required by lease) and claims for the 2nd period that had been demonstrated but not yet due (as in due in arrear).

Claims for 8% over base interest, lease states 4%.

Well over doubling of monies (not yet due) for charges by the Solicitor and the insurance arm of Compton.

Original claim states preferred Court to be in Defendants home location, very nice so I agreed in the defence questionaire.

Today I received detailed response(s) to my defence(s). Citing my abuse of court process. My complicating beyond recognition in attempt to confuse, and requesting the defence be struck out (a new one on naive me) due to the defence having no reasonable grounds.

Oh, he now wishes the Court to be in Swansea.

This afternoon Mr James Mc Carry LL B (Hons) returned to email as a preferred communication tool.

"I write further to my earlier message to confirm in relation to the insurance claim that I have decided to discontinue this part of the claim in the court, and also requested that CIS send you a new invoice post 25th March, and a copy of the Insurance Certificate. Once again I have to apologise for the error that has been made with the insurance claim, and for the inconvenience caused.

In relation to ground rent the record shows that no payments have been received and that there remains outstanding the half yearly payments for 25th March and 25th September last year of £12.50 each amounting to £25. Again I have to say that confusion existed with the question of payment in advance when payments is in arrear as explained in my earlier e mail.

 

I request that you please make payment of this £25 whereupon I shall discontinue this part of the claim, otherwise the case will have to remain as a dispute. Upon payment it will mean that all of the claim will be discontinued. I prefer to write to the court to discontinue the whole of the claim rather than have to write to the court separately in relation to each, and hope to do so next Monday so as to inform the court either way.

 

I think you will agree that it is in both our interest for this matter to be dealt with as swiftly as possible, and I look forward to hearing from you.

 

I await hearing from you."

 

He still can't get it right. The payment of the 25th March this year is the only outstanding payment(s). Tother payment is actually 29th September of any year.

I owe £12.5 x 4 (£100), plus £117.06 x 4 for insurance. All other due payments have been made, apart from that due by my Ltd Co as the Co hasn't been informed of the change of Freeholder

I feel I deserve compensation for my efforts required to defend very clumsy claim(s) so replied

"I thank you for your email.
 
Realising that I have disadvantage in this arena of litigation I have sought further legal guidance on the matter.
To have reasonable opportunity to recover my losses due to the efforts involved it would seem that referral to the High Court would be required. The costs would clearly soon escalate so I been considering the matter more carefully.
 
I do hope and look forward to reaching an understanding regarding finances that should correctly exist between us so that the future shall be less troublesome.
 
Regards,"
 
I do feel he would look very silly in a court room.

 

 

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.... and today I received notices that all claims have been cancelled.

Shall I now invoice Comptons for my efforts to defend?

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Comptons are on the offensive again.

3 CC claims for my 4 flats, for charges that I will defend as should be offset by my costs of defending the 1st lot of claims that they dropped.

They are also citing, again, that some charges are applicable in advance. The lease, as clearly as these things are, states that all charges are in arrear. They have cited HA2002. I intend to state all charges are due in arrear, but just in case I've missed anything, is anyone aware of any case history or legislation I'm unaware of that would enable the freeholder to charge in advance in contradiction to the lease?

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I dont profess to be any expert on freehold/leasehold law but I do agree with what RL previously stated in that the lease dictates what can and cannot be done and when.

But saying that and I may be wrong a lease I assume comes under common contract law and could be overruled by statute law or a ruling in from the high court.

cor have you considered going down the RIGHT TO MANAGE (RTM) route? If your block fits the criteria you can then arrange all your own insurance and maintenance etc and if you dont want the hassel you can then instruct your own management to deal with it who then work under your terms.

This company specialise in setting up RTM and I am planning to use them myself. They are also very helpful if you call them to discuss your situation.

http://www.rtmf.org.uk/index.php

One final thought, I think when a freehold is about to be sold certain notices are supposed to be served on the leaseholders were they? 

  

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Thanks, Grampa, I'll look into that company.

One issue with the RTM route is that there is 1 other owner, abusive, and wouldn't pay his share. He is a major management problem but the overall advantage could still be worth it.

Notices were served on me, but as 1 flat is owned by my limited company no notices were served on it. Compton / Tapestart have been requested to serve these but no response. My limited company will defend CC action on the basis that they have not been served and aren't due to pay until this requirement has been met. Of course the money will need paying eventually.

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7 hours ago, Carryon Regardless said:

 

One issue with the RTM route is that there is 1 other owner, abusive, and wouldn't pay his share. He is a major management problem but the overall advantage could still be worth it.

I dont see that as a major problem. Provided the wording in the lease is reasonably ok (some are badly worded) regarding the payment of service charges, admin fees and who is responsible for the legal costs of enforcing the lease you have a number of options to enforce payment such as CCJ, claiming from the lender, putting a charge against the property, debt collectors or threaten with forfeiture.

Also the rogue owner will have to settle up if they want to sell or extend the lease.

Also Cor have you considered forcing the sale of the freehold to you. The cost is generally as a rough guide the cost the combined value of a statutory lease extension of all the units. You could pay the total and be the sole freeholder and the rogue leaseholder would have to pay you for any future lease extension. 

 

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