In his latest blog exposing the reality of buying a new build home in the UK, David Frise looks at the tangled mess organisations he has to deal with to try and get things done
Living in a new purpose built 56-apartment block can be very confusing. There are so many people in this relationship but none of them want to commit. There’s the freeholder (there have been two in 18 months), leaseholders, tenants, a housing association, a managing agent for the leaseholders, a managing agent for the freeholder, and the developer.
Where do they all fit in? The developer was the first freeholder. his is very convenient for them because they can claim all defects in the communal areas are their own problem and therefore don’t need to be rectified. However, they then sold the freehold to a very large insurance provider, without bothering to inform the leaseholders. This is not supposed to happen given the first right of refusal under the Landlord and Tenant Act.
Now the new freeholder has insured the building, at leaseholders’ expense, with a well known national insurance company that just happens to share the same name as the freeholder. How convenient, I’m sure. But not very good for the poor leaseholders, as the premium would appear to be, shall we say, uncompetitive.
Now this is probably all above board but when I asked for an explanation of how the managing agent tested the market and how much commission was paid, I was told “any commercial arrangement we may or may not have with our brokers to receive a share of their income to contribute towards our own administration costs and expenses is confidential”. I bet it is.
There is no question of the housebuilder sorting out the defect and arguing with the water company afterwards: they don’t do customer care.
This just looks wrong, if there is nothing to hide you would be open about it wouldn’t you? It is, however, perfectly legal. There is no one we can turn to for help – I tried the Financial Conduct Authority (FCA), Association of British Insurers (ABI) for a code of practice, the Information Commissioner (ICO) and the Leaseholder Advisory Service (LAS). None of whom could help, as from the FCA perspective, I wasn’t the holder of the insurance policy (just paying for it), the ABI referred me to the insurer, the ICO said the information was not about people, and the LAS agreed I did not have a right to this information. I can ask to see a copy of the invoice but that is unlikely to show the commission paid.
So the leaseholders are expected to stump up the premium on a building that the owner insures through itself, and have no right to know how the premium is calculated.
It is no wonder then that getting government policy implemented such as energy efficiency measures and community heating schemes, is so difficult. The default position is no change.
The insurance arm of the freeholder to our property, was recently quoted saying it was concerned at increasing losses from fire damage, which are now running at the highest level ever experienced.
However, at the same time their managing agent is telling us – their leaseholders – that the insurer/freeholder cannot get involved in fire safety issues within the building. The agent said: “Unfortunately matters pertaining to the actual fabric of the building is something that [the developer] will have to resolve with you, we cannot fix the problems directly”. Actually we weren’t asking them fix to the problems themselves, but simply how we could work with them to make the building they now own, safe to live in. That would, incidentally, also reduce the insurance risk.
There are other fractious relationships. The developer appointed the managing agent and signed a contract requiring six months notice be given to end the contract. Residents and tenants frequently wonder who the managing agent is actually representing. They have many contracts throughout the country with the same developer (a large national housebuilder) so appear keen not to rock the boat and seem unable to get the builder to fix anything.
For example the water meters have leaked and the residents are stuck in an argument between the water company and the developer about who is responsible. There is no question of the housebuilder sorting out the defect and arguing with the water company afterwards; they don’t do customer care. The managing agent doesn’t want to get involved as the water meters are demised to the individual properties. This means that each time a water meter fails the leaseholder has to report the fault themselves, despite damage being caused to communal areas.
That is inconvenient but far worse is that the communal heating system has not been properly commissioned. Getting that resolved is proving very difficult, because so many parties are involved and because while the heating system works, there is no compulsion on anyone to see that it works efficiently and according to design.
The complexity of property law and holdings and the opaque nature of who is entitled to what means that as a country we stick huge hurdles in the way of progress. How do you make landlords carry out energy efficiency improvements, or agree to community energy projects?
In London we are about to embark on large-scale residential tower developments along the River Thames, with centralised heating systems. Who will ensure that these highly efficient systems actually deliver on those low energy promises?
David Frise is chief executive of the Association of Interior Specialists