We support leasehold reform but not abolishing it and leaseholders are served by ground rents, says the Residential Freehold Association

The Leasehold Charity is reporting on a meeting of the APPG (All-Party Parliamentary Group) recently.

It can be seen here, and says:

Most of the problems in leasehold involve service charges and are “tenure agnostic”, the Residential Freeholders’ Association told MPs at the APPG on Monday.

And leaseholders benefit from the role of long-term investors in residential freeholds for which ground rents are a reasonable payment.

But absentee offshore ownership, with no point of contact or accountability, is not acceptable and should be the subject of regulation.

As for having an income stream in other people’s homes, half the leaseholders who own flats in freeholder controlled blocks are buy-to-let investors.

These were views aired by Jack Spearman, who heads the RFA’s leasehold reform committee, at the meeting of the All-Party Parliamentary Group on leasehold and commonhold reform on Monday.

Mr Spearman, whose day job is managing director of Homeground residential leasehold, claimed that his organisation represents “quite a significant proportion of leaseholders’ interests as well as those of freehold owners”.

He pointed our that the RFA supports regulation of managing agents and Lord Best’s RoPA report.

“The Residential Freehold Association broadly supports the leasehold reforms, although there is probably disagreement on various things,” Mr Spearman told MPs and invitees to the APPG. “But it may come as a surprise that there are quite a few things in there that we do support quite strongly.”

Mr Spearman was accompanied by Simon Millar, who chairs the RFA’s insurance committee and who is managing director of Albanwise Insurance, the inhouse broker for Wallace Estates. Mr Millar did not make a presentation at the meeting.

“Many of problems of leasehold do not stem from the tenure of the building, but difficulties in dealing with service charges. Service charges are tenure agnostic.

“There is not unanimous desire to see complex buildings managed by everyone. I do accept that in many scenarios resident management will work and it is the desire of our members to support that.

“But there are situations where we have been on the ground and where a minority of people come on to take over management ownership of these buildings. In that sense we want to promote choice and ensure that government represents the majority of the leasehold sector.”

Justin Madders MP, co-chair of the APPG, asked what the time-scale was for investors in residential buildings: in what sense were they long-term investors?

“It is relatively well know that many are publicly involved pension funds and typically their horizon is 40-60 years,” replied Mr Spearman.

Sir Peter Bottomley, also APPG co-chair, referenced the RFA website saying that it was a common misconception that professional freeholders do nothing for the ground rent that they are paid.

Sir Peter pointed out that many freeholders are not paid ground rents at all but still fulfill the same role as those who do. So could the website be amended?

“Freeholders invest in professional teams who fulfil a vital role in management of large and complex apartment buildings,” replied Mr Spearman.

“Management services are provided by a managing agent. But an example of work done by freeholders would include remediating planning projects and several members have invested heavily in surveyors, solicitors, fire safety professionals and clearly there is an alignment of interests in that.

“They are not doing this altruistically; they are doing it to protect the long-term interest to have a well managed, well maintained building.

“A lot of the buildings here have not been designed to last for the duration of the lease, so there are long-term stewardship issues that need to be handled. So in this sense the leaseholder is absolutely getting something.

“50% of all leasehold properties that our members manage are owned by buy-to-let investors.”

Mr Spearman pointed out that there were a “plague of issues areound short-term letting” – AirBnB – and with neighbours falling out with each other and impacting the quiet enjoyment of their homes.

“These are not issues that can be dealt with by managing agents because they do not have the authority to do anything. They take instructions around it,” said Mr Spearman. “If you have a freeholder in place with a long-term interest in the building that is clearly of benefit and value.

Ina, a leaseholder in Southwark, South London, who attended the APPG, said that the majority of freeholders are in the British Virgin Islands and similar offshore territories. So it is impossible to find out who the people are who are investing in the buildings. Instead, there are simply nominee directors of companies.

Mr Spearman replied:

“This is a great case for regulation. If you want to be in our sector you must meet a minimum standard of regulation. And that means, you know, being approachable, being accountable and being able to get hold of people. Those operating in the sector should be accountable.”

He added that the RFA has a code of practice and it wants the code to be endorsed by the Secretary of State.

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