Peter Haler Interview

How do you think the leasehold sector will look in the next 10 years?
We think it will be very different. The past 10 years have seen a real decline in landlord control predominantly through collective enfranchisement, and partly through Right To Manage (RTM) and negotiated deals. That is set to continue and in 10 years time there will be fewer bad landlords and ‘ground rent grazers’. Many large institutional landlords will move out of the residential sector because the new legislation is too troublesome. There will be a major turnaround and shift towards tenant control and that can only be a good thing, so long as there is decent management too.

The interesting point is whether it will be a leasehold sector or a commonhold sector? Ideally the sector will be commonhold with everyone owning their flat freehold – but I bet it won’t be!

Why do you think there has been so little take up of commonhold?
The first problem is the lack of publicity about commonhold. There has been o aggressive publicity from government despite precious statements about leasehold being ‘an absolute disaster’ and ‘a thoroughly unsatisfactory form of tenure’. Also, commonhold does not benefit the developer, who has no incentive to change from what he knows sells. Unless there is indication that a commonhold unit is worth more than a leasehold, I can’t see any incentive for developers. Yet, until units start to be sold, the market value of commonhold is unknown. If the conversion fro leasehold to commonhold was easy, then by now we would have commonhold units on the market. The market would recognise whether they would be worth more and the developers would be able to take a commercial view. At the moment why should developers take a risk on commonhold?

We are unhappy that the legislation has made it so difficult to convert from leasehold to commonhold. LEASE wanted a very easy, one step conversion. At the consultation stage, we were disappointed by the lack of uptake of our suggestions from the Lord Chancellor’s Department. We could have had state of the art legislation. Community title is proven in the USA. Strata title is proven in Australia. The basic premise is the same: freehold ownership of the flat and joint ownership of the structure. The advantage in Australia is the codification, with everything set out in the legislation. For example, you don’t need the commonhold community statement as it’s prescribed in the legislation. Here, when you’re setting up a commonhold you’ve still got to go to a solicitor. In Australia, the legislation prescribes everything and the strata agent does the rest. It’s cheap, simple, and easy. Unfortunately, the government did not listen on a number of issues which we thought were important and as such we have got something which, to be honest, is not much better than a well run leasehold. It’s a lost opportunity. What we’ve got is workable, but it could have been perfect.

What is the most common enquiry to LEASE?
Surprisingly, it’s still collective enfranchisement. The public want to know how to buy their freehold. However, concern about the management and service charges is often underlying this question. With that being the case, it is hard to understand why there has been such a drastic decline in enquiries about RTM. When LEASE first produced its leaflet on RTM it was so popular the leaflet had to be reprinted within a month. It was also the most accessed leaflet on the website and was the biggest subject of enquiry. Now, 2 years on only 6% of enquiries to LEASE are about RTM. To us at LEASE, RTM is the answer. It does not cost anything and it gives the leaseholder the management. Most ARMA members have been trained on RTM. They understand it, and are sensitive to the specific requirements of the resident management company. I cannot understand why it has not been taken up.

What do you think that ARMA can do to improve the relationship between their members and leaseholders?
ARMA and LEASE have a common target of improving the standards of leasehold management. I believe that ARMA has done a lot in the last 10 years to improve the standards of management. The problem about the leaseholder/managing agent relationship is that everyone thinks that their managing agent is a crook/villain/incompetent/half-wit for the charges he makes. I think the key lies to a proper, realistic fee structure. I do not think that managing agents in the UK charge realistic fees. Some do – West End, City, Docklands, - but a lot of them don’t. Recently, I was involved in a case where the managing agent charges £150 per year, per flat. I don’t see what real proper management you can do for £150. I am sure that leaseholders will not thank me for saying so, but I think they will achieve a better standard of management if they pay more for it.

Do you think property managers are sufficiently well qualified?
No, absolutely not. This was identified in the consultation paper issued by the government on managing flats. At the moment, you have well-meaning amateurs. A lot of property managers are highly experienced and highly efficient but an awful lot are not, and I think it would give the public more confidence if they knew the person was trained to do the job. You would not go to a solicitor or architect who is not qualified, so why go to a managing agent who just says he is a managing agent? It is a concern which the industry has addressed. There is now the Institute of Residential Property Managers (IRPM). I think we have to applaud this, and I’d like to see it extended. We need the whole leasehold management industry to embrace the concept of the IRPM.

Do you think LVT procedures could be improved and if so, how?
I used to be their fiercest critic, but now I think the Leasehold Valuation Tribunal are doing a very good job. The LVT is an expert tribunal and an ideal forum for leasehold disputes. However, there is till room for improvement. We don’t like their new forms. We think things could still be faster, especially the ability to act in urgent situations. We still see too much delay in the issue of decisions. At the New South Wales Residential Tribunal you receive the decision on the day. In the LVT the target is 6 weeks. One more rather delicate area is whether there will be any benefit in the LVT’s working to precedents. Now, each case has to be heard on its merits and you get the situation where the LVT reach a different decision on the same facts. That is not a good service to the paying public.

Do you think there should be legal aid to be represented at the LVT?
Costs in the LVT are too high. What has always bothered us at LEASE is the £500 fee. If you are a service charge payer, you have got to be overpaying by more than £500 to make it worthwhile making a challenge. We would like to see the fees removed and much easier access to justice. The other issue of costs that worries us is the complete absence of legal aid. There has got to be a major case for availability of legal aid on serious LVT cases. When you are arguing about service charges on levels of maintenance you need a high level of professional advice. We would very much like to see some ability for legal aid.

What are the most important legislative changes which need to be made?
First, completing the 2002 Act. It is absurd that in 2005 we still have large sections of the 2002 Act not introduced. That is unacceptable, particularly since the incomplete sections are all t do with accounts, financial control, and transparency of accounting – the one thing that leaseholder need.

Next, we want the regulation of property management. If it had been introduced years ago it would have rendered most of the 2002 Act redundant. Solicitors, estate agents and financial advisors all have substantial amounts of client money moving through their books and are regulated. Why not property managers?

Finally, the proper codification and rationality of the law on landlord and tenant.

What are the 3 things that LEASE could do to improve the service it provides?
There are two things we are already doing. The first is offering a bigger service moving to better premises, expanding with more staff, and generally improving customer service. We’ve been able to do this with the aid of the extra grant from the Office of the Deputy Prime Minister.

Next, we will be starting our own mediation service. In a lot of cases the only remit for the client is to go to the LVT. We want to solve disputes before LVT stage. We’ve had 5 of our advisers properly trained and qualified as accredited mediators. We’re going to set the service up for a 12 month pilot and see how that goes. We think that will be an enormous extra service to the client.

The third thing we want to do is till find a better way of getting the leasehold message across. There is an astonishing lack of understanding of the principles of leasehold. We still want to find some way of getting to every leaseholder in the country. It is an outstanding objective from the ODPM that every leaseholder should know about LEASE as a resource. I don’t have the resources to write to every leaseholder in the country, so the only foolproof way is the media and this is where News On The Block can help. You are publishing useful articles about what it’s like being a leaseholder, the LVT and leaseholders rights. If News On The Block went to every leaseholder in London that would help enormously, more so if we could spread News On The Block across the country.

Finally, if there is one thing you would like to say to a leaseholder reading News On The Block, what would it be?
Read the lease! At least once every 30 minutes I can hear from my office one of my advisers ask, “have you read the lease?” People are not aware they are in a contractual obligation. They don’t know what they have agreed to when they buy the flat. Half our queries could be solved in advance if people had read the lease.

ABOUT LEASE
LEASE, The Leasehold Advisory Service, is funded by Government to provide free legal advice to leaseholders, landlords, professional advisers, managers and others on the law affecting residential leasehold and commonhold.
www.lease-advice.org