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LEASE Annual Report 2003

1. Board of Management

Chairman : Lord Richard PC QC

Directors
Ron Armstrong Jennifer Ellis
Muriel Guest-Smith David Marcus
Trevor Moross

Chief Executive : Peter Haler

2. Chairman's report

Once again, our year has been greatly affected by the passage of the new legislation. The Commonhold and Leasehold Reform Act gained Royal Assent on May 1st 2002, finally bringing into law the comprehensive reforms to the leasehold system towards which our efforts have been concentrated for so long.

The Act has had little effect to date, as we continue to wait for the provisions to be commenced. Some of the welcome changes to freehold purchase and extension of leases were introduced in July, but none of the remaining matters were commenced during the remainder of the year. While we fully appreciate the need for the drafting of regulations and concur with the move back to prescription of the many forms required, we have to regret the continued delay in bringing to the leasehold sector the new rights and remedies the Government has decided upon.

During passage of the Bill, both the Lords and the Commons raised concerns in being required to consider and vote upon matters still requiring the drafting of regulations; our view then was that the proposed primary legislation should be scrutinised together with the supporting regulations, in order to properly assess whether the proposals as a whole would be likely to achieve the desired result.

It seems regrettable that these significant changes to leasehold law should, at the end of 2002-3, still not be available.

LEASE reacted to the amendments to freehold purchase and lease extension in a redraft of five of our advice notes; these were posted on our website on the day of commencement of the legislation and available in hard copy very soon thereafter. We will produce new publications on the Right to Manage and all the other major changes, and will ensure that this written advice is fully and freely available to the public immediately upon the commencement of each of the provisions.

We anticipate a high level of interest in the new right for leaseholders to take over the management of their building and have some concern as to the general availability of professional advice and help. Leaseholders will need proper support and assistance; we hope that both the legal and property management professionals will react to the situation and the new market opportunities it offers.

In addition to new advice notes and our input to the drafting of the regulations, we felt we should do a little more to inform the professions, and arranged our own conference on the new law. This was a first for LEASE, but something we deemed appropriate to our wider advisory role.

As well as publications and conferences, we recognise our task in disseminating knowledge of the new law to all sides of the leasehold sector - leaseholders, landlords, managers and their professional advisers, if it all is to work as the Government intends. Commonhold continues to hover on the horizon, apparently never getting any nearer; we now understand that commencement is unlikely before spring 2004. There will need to be preparation during the coming year for our advisory role in commonhold, including advice to the Lord Chancellor's Department in the preparation of the extensive regulations that will be required. LEASE remains concerned at the lack of any adequate provision in the legislation for dispute resolution and the apparent complacency of the Department towards this. There seems an easy assumption that in a commonhold there will be little cause for dispute, with no landlord to worry about and everyone pulling together to a common end. Our experience and research of the equivalent Australian system paints a rather less rosy picture.

The past year has shown a substantial increase in advice output by LEASE, but with the expected further demand likely to arise from the new legislation, we cannot afford to rest on our laurels.

As Chairman, I was, naturally, very pleased with the highly positive results of the customer satisfaction survey arranged during the year by the Office of the Deputy Prime Minister. While my Board is satisfied that LEASE provides the service expected by both our clients and our paymasters, it was reassuring to receive such a complimentary report, confirming our own views of the service the organisation provides.

I was pleased that LEASE's performance, both in service output and customer satisfaction, has enabled the Minister to approve a further three-year period of funding, and a sufficient grant for 2003-4 to allow the recruitment of an additional adviser. My Board shares with the Minister concerns at the reliance of LEASE on the public purse, and we will need to look at this in coming year. Whatever form of income generation might be considered, LEASE remains committed to the provision of free advice.

I look forward to an interesting year to come, with the new law beginning to take effect, and I express my appreciation, as ever, of the input of my fellow Board members and the staff of LEASE.

3. About LEASE

3.1 LEASE is unique in providing a source of free specialist legal advice on all aspects and issues relating to residential leasehold. We are recognised as a centre of excellence on the subject, and as a resource readily available not only to leaseholders and landlords, but also to professionals working in the sector - solicitors, surveyors and managing agents.

We publish a wide range of advice materials, available both in hard copy and on our comprehensive website; the website also provides unique access to all decisions and determinations of the Leasehold Valuation Tribunals relating to purchases and lease extensions under the Leasehold Reform Act 1993, as well as to disputes over service changes and management under the Landlord and Tenant Acts 1985 and 1987.

3.2 LEASE has a formal role in the provision of advice to Government, through our agreed work programme, on issues of leasehold reform and the development of commonhold. This advice is provided both directly by LEASE, from our special perspective as the recipient of some 23,000 enquiries per year, and through our stewardship of the Commonhold and Leasehold Reform Working Party.

3.3 LEASE is an independent private company, managed by a Board.

4. What LEASE does

4.1 LEASE is an independent service providing free advice on all aspects of residential leasehold in England and Wales. The advice is impartial and is provided to leaseholders, landlords, professional advisers and agents and anyone else with an interest in leasehold property; it is given on legal rights, responsibilities and remedies sufficient for the client to proceed on a self-help basis. Our objective is that the client should be adequately informed and confident of his or her position to then be able to resolve the situation or to seek the appropriate professional assistance. We do not act on behalf of or represent clients, nor provide any long-term casework. It is not our role to replace the services offered by solicitors, valuers and other relevant professionals.

4.2 LEASE provides advice and information on the following areas:

  • Rights, obligations and remedies of residential leasehold tenants;
  • Service charges and application to Leasehold Valuation Tribunals, forfeiture and possession;
  • Rights relating to information and the management of the building;
  • Rights and procedures for freehold purchase and lease extension;
  • Proposals for leasehold reform and the introduction of commonhold.

Advice is provided by telephone, by correspondence and email, in person to visitors to the office, at on-site meetings with interested groups, through the LEASE website and through a range of published material. In addition, LEASE provides training in leasehold for local authorities, housing associations and professional bodies.

4.3 LEASE is entirely funded by grant-aid from the Office of the Deputy Prime Minister and the National Assembly for Wales, under the provisions of Section 94, Housing Act 1996.

5. The demand for advice

5.1 There is little doubt that the passage of the leasehold reform proposals through Parliament has increased expectations by leaseholders. However, there also seems to be evidence that the small percentage of landlords and managers prepared to exploit the system have been intensifying their activities before the new law curtails them. Whatever the reasons, LEASE experienced a very high levels of demand during the year, necessitating some changes to working arrangements.

The result is, for the second year, a substantial increase in our advice provision, at 22,981 responses to enquiries; this represents a 26% increase over the 2001-2 total of 18,157.

6. Customer Satisfaction Survey

6.1 As part of the conditions of our grant, the Office of the Deputy Prime Minister wished to evaluate LEASE's service prior to renewal of approval; ODPM commissioned MORI to carry out a customer satisfaction survey.

The survey was carried out during summer/autumn 2002 and based on a sample of 1,001 LEASE clients randomly selected by MORI from our client data base. Methodology was a telephone survey plus the results of a number of focus groups; LEASE took no part in nor had any influence in the conduct of the survey.

6.2 The objectives of the survey were:

  • to establish the existing standard of LEASE services to users;
  • to identify the level of satisfaction of users;
  • to make recommendations where improvements could be made;
  • to investigate opportunities and implications of charging users for the service;
  • to provide a baseline to measure future performance.

6.3 The findings of the survey were most encouraging. We believe that the services we provide are of a high standard and that LEASE is operated in an efficient and cost-effiective manner; anecdotal evidence from clients confirms these views. While we were confident that the survey would substantiate our own perception of the service, we were favourably surprised with the levels of satisfaction shown.

To quote: 'The service provided by LEASE is rated very highly by the majority of its customers and is clearly a service that is largely meeting the needs of its customers.'

'87% rated the service as fairly or very good (indeed, two-thirds of those rating the service as good rated it as very good)'

'84% said they were satisfied with the way LEASE had dealt with their specific query or problem, and 92% said their experience of the service would lead them to recommend the service to others.'

6.4 Inevitably, the principal area of dissatisfaction was with the difficulties experienced by clients in getting through to LEASE on the telephone. We remain acutely aware of this problem, but have to accept that it is simply a result of our limited resources; there are only seven full-time advisers available and just two telephone receptionists dealing with a level of demand ultimately beyond our means. We have introduced a low-cost, local rate telephone line in an attempt to reduce costs for those clients required to wait on the line to speak to an adviser, but remain concerned about the problem. In the coming year, the appointment of an additional adviser, enabled by a generous increase in grant, will assist.

6.5 While a majority of respondents said they would be prepared to pay for advice, the amounts suggested would not provide an economically viable platform for LEASE. The original concept of the advisory service, from our inception in 1994, was the provision of free advice and we are reluctant to move from this position.

6.6 Click here to access the ODPM Research Department summary of the MORI report..

7.1 We were pleased to see the eventual enactment of this comprehensive reform legislation on May 1st. While LEASE fully appreciates the requirement for extensive regulations and forms, we are disappointed by the very slow progress in commencement of these important changes. Some of the changes to freehold acquisition and lease extension were commenced in July, but nothing else was forthcoming for the remainder of both the calendar and the financial year. After the considerable build-up toward the legislation, it seems regrettable that the leasehold sector has to continue to wait.

7.2 LEASE fully recognises our major task in dissemination and education arising from these changes; not only do we need to ensure familiarity of leaseholder and landlord with the new rights and requirements; there is also a pressing requirement for professional advisers to be fully competent in the procedures.

We will be revising our existing advice notes and publishing new ones to coincide with the various commencement dates. We were able to complete redrafting of our five advice notes on enfranchisement issues in time for the July commencement; these were available on the website on the commencement date and as hard copy two weeks later. For collective enfranchisement, the part-commencement has resulted in a transitional situation with some new provisions alongside those already existing; the delay in introducing the requirement for the right to enfranchise company and the right to participate has been a source of confusion. The two notes on collective enfranchisement have been revised to show the transitional situation on the website, correct on day of viewing, and the printed copy carries an addendum sheet.

Advice notes are proposed to cover the right to manage, and the new jurisdictions and procedures for applications to the Leasehold Valuation Tribunal; we have recently published a comprehensive guide to service charges, ground rent and forfeiture.

We will also need to revise most of the remaining notes and there may be a case for a new note on participation agreements in the context of the RTE company. These will be produced to meet the remaining commencement dates.

7.3 In addition to written advice, LEASE needs to further explore means for open dissemination of information. We have already spoken at public meetings arranged by Hastings Council and this provides a model for future events.

Many public sector landlords are recognising the needs of their leaseholders for information and are arranging 'leaseholder days'; during the past year, LEASE has made presentations for Aldwyck, Windsor, Wales and West Housing Associations and for Dacorum and East Hants. Councils. Again, this is a route to be developed further.

7.4 It was not unexpected that the provisions for commonhold were not commenced during the year, and we look forward to its introduction in the next year. LEASE responded to the lengthy but comprehensive consultation paper issued by the Lord Chancellor's Department, and we would hope for a further opportunity to input to the drafting of the regulations.

LEASE retains considerable concerns at the lack of any substantive machinery for dispute resolution within a commonhold. From Ministerial statements during passage of the Bill, there is perhaps a degree of complacency which seems to assume that, in the context of an association of unit owners managing the building together, the absence of a third party landlord will raise little cause for dispute. The legislation provides for regulations on 'enforcement and compensation' and a requirement for membership of an ombudsman scheme. From our understanding of the Australian experience in strata living, there is a need for considerably more than this.

LEASE was represented at a conference on dispute resolution in strata-title in Melbourne and heard presentations from the different state legislations. It was general across the states that the majority - more than 60% - of all disputes requiring mediation, adjudication or a determination from the Residential Tribunal were between unit-owners and related to the use and occupation of the flats; disputes between the unit-owner and the owners' corporation, appropriate to referral to an ombudsman, were relatively few. There can be little doubt that the Australian experience should provide guidance for commonhold, and LEASE considers the development of an effective dispute resolution machinery vital to the effective future operation of commonhold.

We will continue discussion with LCD and with the Independent Housing Ombudsman.

7.5 There is no question that the overall effect of the Commonhold and Leasehold Reform Act 2002, when fully implemented, will bring about major improvements to the leasehold sector and provide greater rights and powers for leaseholders.

8. Working with other organisations

8.1 In the past year, we have continued to develop our working relationships with other organisations and have made new contacts; some of these demand particular mention:

8.2 AIMS (Advice, Information and Mediation Service for the retirement sector). We were pleased, and much relieved, to see AIMS survive its funding problems and return fully functioning. AIMS is an important referral point for leasehold issues in purpose-built retirement flats, in that they are able to provide both a meditaion service and to act directly on their clients' behalf in pursing problems. LEASE attended the annual AIMS Policy Forum and will be co operating with AIMS in the redrafting of our joint advice publication Leasehold Retirement Housing to include the new legislation.

7.4 It was not unexpected that the provisions for commonhold were not commenced during the year, and we look forward to its introduction in the next year. LEASE responded to the lengthy but comprehensive consultation paper issued by the Lord Chancellor's Department, and we would hope for a further opportunity to input to the drafting of the regulations.

LEASE retains considerable concerns at the lack of any substantive machinery for />8.3 ARHM (Association of Retirement Housing Managers). Characteristically, the ARHM acted quickly in arranging a series of training sessions for their members on the new Act in May. LEASE contributed to the training seminars and also spoke at the ARHM Annual Conference in June and the Winter Seminar in December. The ARHM produced the first code of management practice under 1993 Act powers and is now revising this to incorporate the requirements of the new legislation.

8.4 ARMA (Association of Residential Managing Agents). ARMA shares with LEASE concerns about the practical management of property through the right to manage. The Association is anxious to ensure, as far as it is able, a resource of professional managing agents able and is willing to provide both initial advice and property management services to RTM Companies. Much of the early advice needed by leaseholders working toward RTM will be on management issues outside the expertise of the average solicitor and there is a clear need to develop an advice expertise within the management profession.

8.5 CIH (Chartered Institute of Housing). LEASE remains concerned at general levels of awareness of the legislation and general management practices in the public sector. The Chartered Institute is taking steps toward an overall improvement in both areas through its annual Leasehold Management Conference and its proposed publication of a Good Practice Guide.

LEASE has spoken at the past six annual Leasehold Management Conferences and this year presented a paper on the 2002 Act; this was the largest attendance yet, with in excess of 300 delegates, presumably suggesting an increasing awareness in the sector for information on the impending legislative changes to management practices.

The Good Practice Guide, being produced in conjunction with the National Housing Federation and the Housing Corporation, is aimed at the public sector manager, although the CIH has accepted the case for a generic guide of value to all leasehold managers. LEASE will input to the drafts prior to intended publication later in 2003.

8.6 CML (Council of Mortgage Lenders). As the co-ordinating body and voice of property lending, the CML has a vital role in input to leasehold legislation. LEASE spoke at a seminar for lending managers arranged by the Council and will continue to work with them in the implementation of the new legislation, especially the particular lending implications of commonhold.

8.7 IHOS (Independent Housing Ombudsman Service). LEASE welcomes the appointment of Dr Micheal Biles as the new Housing Ombudsman and looks forward to continuation of discussions on the development of a dispute resolution machinery for commonhold.

8.8 NCTI (National Community Titles Institute). The institute is a similar organisation to ARMA, representing managers and others operating in the strata-title industry in Australia. LEASE has spoken at the NCTI's first two annual conferences and had received a huge amount of practical help and advice in the legislative application and the management of community-title property. This has been of immeasurable assistance in preparation for commonhold.

We maintain contact with a number of solicitor and strata manager members of the NCTI and met with a representative group who visited the UK in October to attend the ARMA Conference.

We were able to arrange a reception for them at the House of Lords, hosted by our Chairman and kindly sponsored by Dorrington Investments, at which our visitors were able to meet the Minister responsible for the introduction of commonhold, Baroness Scotland.

8.9 RPTS (Residential Property Tribunal Service). The service, through the Leasehold Valuation Tribunal, will have widened jurisdiction under the 2002 Act, and, inevitably, a much greater workload. LEASE acknowledges the substantial improvement in throughput of cases achieved by the LVTs in the past year, although has concerns as to the potential effect of the increase in demand arising from the new jurisdictions, particularly determinations arising from the right to manage.

In the revision of our advice note Application to the Leasehold Valuation Tribunal, we have agreed that LEASE will no longer produce the application forms which will be supplied and distributed by the RPTS.

8.10 SHOW (Shoreditch New Deal Trust). The Trust provides an umbrella structure for the major residential and commercial renovation of the Shoreditch area, working with the local authority. There are a substantial number of Council leaseholders included within the project area and the Trust is keen to provide a source of impartial advice to them. LEASE addressed an initial public meeting and has agreed in principle to a series of further smaller meetings with the leaseholders.

It is useful that all of the leaseholders' addresses are within walking distance of the LEASE office and therefore fully accessible to us.

9. Looking to the future

9.1 LEASE is entirely funded by grant from the Office of the Deputy Prime Minister and the National Assembly for Wales, and we are grateful for the generous allocation we receive. However, we share with our funders a concern at our total dependence upon the public purse and agree that we should investigate other possible areas of income generation.

We already generate some very limited income from training provision to local authorities and housing associations but this is not significant.

9.2 One of the objectives of the MORI survey was to establish whether our clients would be prepared to pay for the service, and how much. The results suggest a general willingness to pay, but not at a sufficient level to fund the service. This was not unwelcome news - LEASE was originally established as a source of free advice and we are very reluctant to move from this principle.

It is clear that there are other areas to be considered to bring in some funding without the need to charge clients. One is profits from professional conferences, and in furtherance of this LEASE held its first conference, on the 2002 Act, in May 2003. This may serve as a model for further events.

There may also be potential in provision, on a commercial bases, of some form of alternative dispute resolution such as mediation. This will be further researched and proposals developed for the future.

9.3 Not withstanding proposals for part-funding, we were grateful to receive the Minister's approval of funded status for LEASE for a further three-year term, 2003-6, and a generous increase in allocation for 2003-4, allowing the recruitment of an additional adviser.

It is reassuring, at this time of great changes to leasehold law, that the Government continues to recognise the value of our service.

9.4 All LEASE activities are dependent upon the continued funding of the service.

10. Income and expenditure account

 

31.03.03

31.03.02

 

£

£

Income:

 

Office of the Deputy Prime Minister

545,000

485,000

National Assembly for Wales

4,700

4,763

Donations

400

-

 

550,100

489,763

Expenditure:

 

Staff costs

328,335

307,878

Rents, rates, heat and light

93,229

86,715

Post, telephone and stationery

23,094

17,077

Travel and subsistence

7,984

454

Printing

17,970

22,438

Other expenditure

51,731

39,904

Auditors remuneration

1,750

1,500

Fixtures and fittings

8,544

-

Computer equipment

3,150

-

 

535,789

475,966

Excess of income over expenditure

14,311

13,797

11. Balance sheet

 

31.03.03

31.03.02

 

£

£

Fixed assets:

 

 

Tangible assets

11,696

-

Current assets

 

Debtors

29,688

18,503

Cash at bank

39,911

1,419

 

69,599

19,922

Creditors

 

Amounts falling due within one year

(58,058)

(10,996)

Net current assets

11,541

8,926

Total assets less current liabilities

23,237

8,926

Reserves

 

 

Surplus income

23,237

8,926

 

23,237

8,926

This information is extracted from the full accounts audited by Hodgson Hickie, copies of which can be obtained from LEASE, 70-74 City Road, London EC1Y 2BJ.

Illustrations by Barry Reilly, London NW7