Tenants have been flexing their muscles to take on Peverel, Britain's biggest property management group, claiming excessive fees and poor service. This is their story:
Stephen Holden, Weekday Cross, Nottingham: £730,000 returned after tribunal ruling
Leaseholders in the Weekday Cross apartment block in Nottingham are expecting a payout worth thousands of pounds each after a tribunal ordered the property manager, Solitaire, to refund £730,000 in service charges. In a case that has extraordinary ramifications for the property management industry – and which is being vigorously appealed – it was ruled that all 120 apartment owners should be refunded all their service charges dating back four years.
The tribunal also ordered Solitaire (taken over by Peverel in 2008) to repay £67,000 that was missing from a long-term reserve fund for the buildings. In his summary, the chairman of the tribunal also rebuked the legal approach taken by the property managers at the tribunal. He said that the "late submission of thousands of pages of documents was both vexatious and unreasonable".
The case was brought by consultant microbiologist Stephen Holden, 31, who was fed up not only with soaring service charges – his went from £1,327 in 2006 to £2,321 in 2008, a rise of 75% – but with the litany of broken promises and botched repairs which left the building open to vandals and even arson attack.
Initially, Holden tried to follow official complaint procedures with the property's manager, Solitaire Property Management. "At our first meeting, where we complained about the security system, lots of promises were made, but very little was done. We had vandals coming in, throwing paint down the common parts of the building, and an arson attack in the car park. We had two more meetings with Solitaire and more promises, but that was all. So we began to investigate what else we could do."
He threatened not to pay his service charge, but was told legal action would be taken against him, as it would be a breach of the terms of his lease. He tried ARMA, the Association of Residential Managing Agents, which told him to contact Solitaire's head of complaints. But even after sending letters by special delivery, he heard nothing.
Exasperated, he decided his best option was to ask a leasehold valuation tribunal (LVT) to replace the management company.
"I realised I had embarked on a voyage of discovery in leasehold law," Holden says. "LVTs are supposed to be approachable by the layman, but it's very much like a court, and you have to have a properly structured legal argument and comply with all legal directives.
"Peverel would turn up with solicitors, QCs and a large legal team. In the end, I had to do it nearly all myself. If I hadn't had the help of a personal assistant lent to me by a fellow lessee, I don't know how I would have managed it. The maximum costs you can win at an LVT are £500, and I spent a hell of a lot more than that."
In April 2009, a tribunal agreed to appoint a new property manager for the buildings at Weekday Cross. Then, in September 2010, it ruled in favour of Holden after he asked the tribunal to review the service charges.
The unexpectedly large refund is based on the tribunal's ruling about delays in sending bills to tenants. It found that no demands for service charges were made within 18 months of the end of the service charge year, which meant the property manager could not legally recover them.
Peverel says: "It is important to note that Solitaire Property Management only became part of the Peverel Group in mid-2008, when management of its developments was assumed by Peverel Property Management (PPM). Given Solitaire's poor history, PPM implemented a £4m investment plan to improve services to residents, who were kept informed of changes. It is also important to note that Solitaire's entire senior operations team had been changed by early 2010.
"We can confirm that Solitaire appealed the decision, as we believed it was wrong as a matter of law. Permission to appeal was granted by the upper tribunal (lands chamber) on 19 January 2011. We are not in a position to provide further comment on the LVT case or appeal itself at this stage."
Neil Healey, City Heights, Nottingham: £200,000 win after three-year legal battle
The fireworks were sparkling at midnight on 31 December last year at City Heights in Nottingham, but it wasn't just the New Year that residents on the estate were celebrating. After a three-year legal battle, they had finally junked their property managers, won back £202,000 in overpaid service charges, and installed a new company to look after the 165 leasehold apartments.
The battle started in December 2007 when new resident Neil Healey decided to fight the £1,260 service charges on his two-bedroom apartment, built in 2003. "The garden and grounds looked a mess, the building was a mess, some people had stopped paying their charges, and repair work wasn't being done," he says.
His first step was to bring the residents together so he could bring a leasehold valuation tribunal (LVT) case against the freeholder and property manager. Only 27% of the leaseholders actually lived in the estate, with most of the units rented out, and a couple in repossession, so getting agreement from other leaseholders to go ahead was a battle in itself.
At an LVT, leaseholders have a choice – they can dispute individual service charges and assessments, ask the tribunal to appoint a different manager, or try to take over the management of their block themselves using the "right-to-manage" process.
After what Healey calls "a mountain of paperwork and accounts", and several pre-trial hearings, the tribunal finally ruled in favour of the residents, ordering a return of £202,725 in service charges and a further £4,461 to be repaid from the reserve fund. On 1 January a company formed by Healey formally took control of property management on the estate, in what is believed to be the biggest right-to-manage case in the UK to date.
The tribunal found against the freeholder, Holding and Management (Solitaire), and the property manager, Solitaire Property Management, on the grounds of "significant failures in dealing with essential maintenance items", inadequately scrutinised invoices and unexplained service charges.
Peverel, which acquired Solitaire in mid-2008, lays the blame on practices that took place long before it managed the buildings. A spokeswoman said: "In accepting the findings of the tribunal, we did so recognising that no Peverel employee had any involvement with the management of this development for all but the last nine months of the six years that the tribunal assessed." She added that it inherited a number of "operational and service issues" from Solitaire.
But a connection between Peverel and Solitaire goes back before mid-2008. Solitaire was acquired in 2006 by property magnate Vincent Tchenguiz – this was confirmed to Guardian Money in a statement – who then bought Peverel in 2007. So although they ran independently, they both, ultimately, had the same owner.
A crucial part of Healey's case against Solitaire/Peverel was that residents were paying a 42.5% commission on buildings insurance policies for the block. The tribunal ordered this commission be cut to 15%.
Money asked Peverel to justify the level of commission, and its spokeswoman told us it had been collecting the money on behalf of another company: "Solitaire Property Management Company passed this commission on to the landlord, Holding & Management (Solitaire) … Holding & Management (Solitaire) is not owned by or part of the Peverel Group."
That is the legally correct position. But both the landlord and the property management company, and Peverel itself, are among the 350-plus different companies, many registered in locations such as the British Virgin Islands, ultimately controlled by the trustees of the Tchenguiz Family Trust.
A spokesman for Vincent Tchenguiz said the many different companies should be judged as financial investments by the family trust, and that they run completely separately. "They may be financially connected, but they are operationally completely independent. There's nothing sinister about this at all. It's like an investment trust. Vincent Tchenguiz is not a property manager himself; he wouldn't know how to change a light bulb."
Sue Wood, Kings Court, Sheffield: Peverel took £2,000 when father's retirement home was sold
Peverel is Britain's biggest manager of retirement homes, in charge of services such as house managers, security systems, call monitoring and maintenance at thousands of McCarthy & Stone flats. The large fees it takes when a leaseholder dies and the property is sold are highly controversial.
After her 96-year-old father died last year, Susan Wood sold his property at a McCarthy & Stone development, Kings Court in Sheffield. She was shocked to discover she would have to pay Perevel 2% of the value of the property – in her case around £2,000.
The fee is split into two: 1% goes into a contingency fund for future repairs and maintenance, and 1% is a transfer fee. Wood accepted the need for a payment to cover repairs. But the transfer fee? "As far as I could see, it was simply to check the age of the incoming buyer and ensure they were capable of independent living. £1,000 for that? Nice work if you can get it."
When she complained, she was told she had no option but to pay. "Effectively they said, 'he signed the lease, he knew what was in it', and that was that. So I got my solicitor to hand over the money, but said it was paid in protest."
Wood is not the only person to be angered over the transfer fees. In January 2009, the Office of Fair Trading secured a commitment from McCarthy & Stone that it would remove the 1% transfer fee from future contracts, and not enforce it in existing contracts. The OFT said it was likely to be in breach of the Unfair Terms in Consumer Contracts Regulations 1999. Peverel continues to enforce the fees in cases such as Wood's where McCarthy & Stone is no longer the landlord.
A Peverel spokeswoman said: "We cannot change what is in the original lease signed by Mr Wood, and payment of both these fees is a legal obligation. The OFT indicated in 2009 that it was reviewing the practice of charging and collecting transfer fees. The investigation relates to the entire retirement sector and has not yet been concluded. The OFT raised this point with the landlord rather than Peverel so we cannot comment further."
The spokeswoman added that Peverel Retirement, as the property manager, "is obliged to collect transfer fees on behalf of the landlord (Fairhold). The company then passes these fees direct to the landlord". But the statement omitted the fact that Fairhold shares the same common beneficial owner as Peverel – the trustees of the Tchenguiz Family Trust. Money from the transfer fees, plus the ground rents and payments for warden flats, is passed into a vehicle called Fairhold Securitisation, registered at a box number in the Cayman Islands.
The £353m vehicle was created by Vincent Tchenguiz in 2006 at the height of the securitisation craze. In effect, Tchenguiz sold the future stream of income from residents' fees and rents to other investors. In other words, it allowed him to take the money upfront from fees that would be paid many years down the line.
At the time, the deal to securitise future rents and fees was hailed as unique in the investment banking world. But in a note issued by Fairhold in November 2010, investors in the securitisation were issued a stark warning. It said the OFT was pursuing its case against the fees, and "a consensual agreement with the OFT may not be reached and the OFT may seek to explore other routes to ensure its views prevail … Fairhold Finance disagrees with its views".
Residents of St George Wharf, London: launching £2.6m over-charging claim
St George Wharf is one of the capital's most striking new luxury apartment developments, where penthouses with breathtaking views of parliament sell for £7m and even modest flats fetch £500,000. But the well-heeled residents of the development on the Thames riverside will shortly go to a tribunal to reclaim £2.6m in alleged overcharging.
In April last year the residents' association filed a leasehold valuation tribunal (LVT) application against the various landlords of the development, alleging unreasonable service charges dating back to 2000, when the first of more than 900 apartments were constructed.
It claims this was "the last resort" after four years of failed negotiations with the landlords and their managing agents to get them to change their ways.
At the pre-trial review, the application was vigorously opposed by the landlords and property managers, who attempted to bar claims for the period 2000-2004. Then in September 2010, after what the residents' association called "intense legal arguments", the LVT rejected all the arguments raised by the landlords, and determined that no limitation period applied.
"This is one of the most comprehensive reviews on this issue by the LVT and may well become a landmark decision," the residents' association says.
A full hearing will now take place in May, with more than 300 apartment owners joining the LVT action. It is a complex action, as there are a number of landlords covering private apartments and affordable shared-ownership flats. The managing agents for the entire development was OM Property Management Limited which, following name changes, is now cited as "Peverel/Consort" in the residents' claim.
Consort is a Peverel company that manages large-scale developments.
Residents of St George Wharf say they expect to pay a relatively high service charge given the luxury nature of the development – even modest apartments come with a £5,000 annual service charge – but say they are angry at how the charge has been apportioned. They claim there are accounting errors, late charges, and charges that should fall on the developer rather than leaseholders.
Peverel denies the allegations and will be contesting the claim at the leasehold valuation tribunal.