Written evidence submitted by Mr Ivan Cross [LHR 067]
I have four issues which I would like to highlight for the Commons Select Committee. These issues have all affected me personally since buying a flat at the above address in September 2015.
1. Leasehold flat-owners living in multiple blocks on a single estate must be allowed to unite as one larger group to pursue the Right To Manage process, due to the flats in some blocks being owned largely by absent Buy-To-Letters who do not support the Leaseholder-Occupants in pursuing RTM, and/or due to the flats in some blocks being owned by people who are not able enough to pursue the challenging RTM process by themselves and who therefore need the support of more able Leaseholder-Occupants who own properties in other blocks on the same estate. (The present RTM legislation requires every block on a multiple-block estate to pursue the RTM process independently, resulting in each block running its own Residents Management Company and possibly therefore each block having a different Managing Agent.)
2. At least one Investor-Freeholder has in recent months re-allocated his many blocks of flats on one estate to different Freehold companies (which all belong to the one Investor-Freeholder), so the government must ensure that amendments to the current RTM legislation will allow the RTM procedure to be pursued by all of the Leasehold flat-owners on an estate (as one united group) even if the different blocks on the estate are owned by different "Freeholders" (or by different companies).
3. Some Developers use legal loopholes to deprive Leasehold flat-owners of their "Right of First Refusal" to purchase the Freehold of their blocks of flats. One such loophole involves the purchaser of the Freeholds of blocks of flats subsequently giving the Developer a "Head-Lease" over the blocks so that the Developer can then sell the individual flats within them via "Under-Leases", and as long as there is "An Agreement to Surrender" in place prior to 50% of the "Under-Leases" having been sold, then there is no legal obligation on the part of the Developer to inform "Under-Lease" Leaseholders that an interest is being surrendered. In other words, the Developer then has no obligation to advise Leaseholders of "the surrender" and of the transformation of their "Under-Leases" into "Head-Leases". So by Developers artfully using the "Agreement to Surrender", plus observation of the percentage of flats sold and the time deadline, Developers can legally avoid offering Leasehold flat-owners the Right of First Refusal, the chance to purchase the Freehold of their blocks. 110 Leasehold flat-owners at The Old Meadow estate in Shrewsbury were deprived of their Right of First Refusal by Barratt David Wilson Homes having used this method long before most of the blocks on the estate had even been built. The loophole only came to light at a residents meeting held in February 2016 when BDW's solicitor, from the legal firm Gateley, was forced by one Leaseholder (a retired lawyer) to describe why the 110 Leaseholders on the estate had not been offered the Right of First Refusal.
4. Developers urge buyers to use the Developers' own "recommended solicitor", who often subsequently fails to alert buyers to issues which significantly impact their rights and obligations. Some Developers also subtly incentivise the use of their recommended solicitor at the time when buyers express a wish to purchase. So the government should legislate so that Developers may not set up any arrangement with a solicitor for the purposes of selling the Developers' homes to buyers, and so that it will be illegal for Developers to point buyers towards specific Solicitors. Even if there is no financial arrangement between the Developer and the Solicitor, the Solicitor develops a conflict of interest due to being offered the chance to benefit financially from conveyancing the sales of scores, if not hundreds, of new homes on a single estate.
The developer for my site is Barratt David Wilson (BWD) who I now consider to have used smoke and mirrors during my whole purchase process with regards all of the above points raised.
The freeholder for my block is Adriatic, who have sought to complicate Right To Manage and freehold by dispersing their own multiple ownership among different companies which sit under the same overall umbrella company.
I was heavily advised by BDW to use their preferred solicitors, Thorntons, Shrewsbury, who ultimately I do not feel highlighted all the potential pitfalls or watch outs on the site.
Thank you. I look forward to seeing progress on the leaseholder reforms over the coming months/year.