A new lease of life: - CentreForum

A New Lease of Lifescale and internal efficiencies, there is not currently a sufficientsystem of protection for leaseholders when violations do occur - thetribunal system has too a high barrier to access and does not havethe power to prevent deficient managing agents from trading.Recent tribunals, such as Case Study 1, have exposed exampleswhere connected companies traded on favourable terms with eachother and dramatically increased service charges for leaseholders.Other hearings have revealed companies connected to thefreeholder of a development signing service contracts more thana decade long, tying leaseholders into paying for the service ofconnected companies for years. In these cases, a tribunal can orderrepayment of unfair elements of service charges, but can neithercompensate leaseholders further nor prevent managing agentsfrom trading.Case study 1: Connected companiesIn March 2011 the residents of Charter Quay in Kingstonupon-Thamestook their freeholder, Charter Quay Ltd, toan LVT. 46 They lodged 13 separate complaints, includingthat management fees, insurance costs and interphonecontracts were unreasonable. In total, more than £150,000was disallowed retrospectively from service charges.The tribunal found that the connection between thefreeholder and managing agent was at the heart of theproblems. It found a “family tree” of companies whichincluded Charter Quay Ltd (the freeholder), CountryEstate Management (the managing agent) and InterphoneSecurity Ltd. The tribunal itself described a “trunk of [other]companies also descending in Biblical fashion”.Long-term contracts were agreed with a connectedcompany to supply interphones before leases were signed,thus circumventing Section 20 requirements. And evenafter leases were signed, new 14 year contracts wereagreed with onerous break clauses. These contracts wereseen as unreasonable by the LVT, which described it as“astonishing” that the management company’s employeeswere not made aware that they were dealing with connectedcompanies nor ensured that contracts were reasonable.The tribunal also found that, of annual insurance costing£83,000, the management company had received a46 London Leasehold Valuation Tribunal: www.lease-advice.org/decisions/8587pdf/7001-8000/7361.pdf.29