A series of amendments were made to the act in October 2003, designed to go further in meeting these objectives. However, almost four years later the issue of whether section 20 is having the desired effect is still a bone of contention among legal experts, with many complaining the consultation process remains too confusing, bureaucratic, and costly to operate.

“It is meant to increase transparency in the way in which tenant money is being spent, because obviously the landlord is spending money that has been given to him by the tenants and they have no control over how the landlord spends it, apart from the controls that are in section 20,” said Kerry Glanville.
“It also gives tenants the opportunity to comment on and be consulted about the way in which those contributions are spent,” she added.

However, the general consensus among those in the know is that although the system is working, it is unnecessarily awkward to operate. The machinery is considered cumbersome and bureaucratic, and it is also incredibly costly because it currently provides a system of three notices to lessees. It therefore becomes an onerous burden for those living in, and managing blocks with a large number of units. The fact that there are three different notices coming out at three different times often leads to widespread confusion on a number of crucial levels.

“It’s not just a question of being difficult and burdensome for managing agents – although even professional managing agents find the system to be difficult and somewhat confusing. But the leaseholders who are in receipt of the information are similarly confused by getting all this paperwork,” commented Kerry Glanville.

“The general feeling is that the system could and should be streamlined and that it is not achieving the objective of being transparent because it is so cumbersome. The leaseholders themselves are not clear about what they are being asked to do.”

The LVT

Another reason why many feel the system is failing those it is meant to be supporting is the dispensation option provided by the Leasehold Valuation Tribunal (LVT) is not operating effectively. Although there is an opportunity to apply for dispensation to the LVT, that procedure itself can be ponderous and unpredictable.

“I can’t help but feel that if the LVT could speed up the process for obtaining dispensation it is likely to increase the number of people who make the application to dispense, where that is what they should, rather than pressing on without having complied with the procedure and then waiting for somebody to challenge what they’ve done and apply for dispensation at that stage when the damage, if there is any, has already been done,” added Kerry Glanville.

The problem seems to be that because the tribunals procedure rules that at least 21 days notice must be given of a hearing, it is highly unlikely a hearing, let alone a decision will be granted within a month. The rules do provide that this time can be abridged in exceptional circumstances where there is a need for urgency, but the willingness of the LVT to abridge time varies from panel to panel and obviously according to differing circumstances and the LVT seem unable to agree on what is urgent and what isn’t. The main body of criticism seems to lie not with LVT, which has already had its jurisdiction expanded and its resources stretched, but with the system itself.

Streamlined system

The solution, according to Kerry Glanville, is to have a more streamlined system in place in which fewer notices going to lessees, greater clarity and brevity about what is required from the managing agent or landlord, and what is required of the leaseholder should they be minded to participate in the process. She also believes the LVT has a significant role to play in improving the situation, she said: “More consistency is needed on the part of the LVT to get these issues resolved quickly. In its current state the length it takes to process dispensation claims can vary enormously and that is one of the main problems with the system.”

It’s important to consider that the issue raised by Kerry Glanville is not just a complaint from the prospective of the landlord or landlord’s managing agent. According to ARMA there are 60,000 resident management companies and an ever-increasing number of Right to Manage Companies (currently around 1,000) registered at Companies House. These are leaseholders’ companies and they also have to grapple with this as much as the professional freeholder, investor and managing agent.

“If people don’t comply with the system and the procedure and they don’t apply for dispensation then the LVT really isn’t in a position to allow them to get away with it. They are left having to impose a statutory cap and a lessees management company that has no assets other than the service charge monies it receives from leaseholders, are in severe financial difficulties.”

If you have any comments on the issues covered please write to: jamie@newsontheblock.com