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The man at the top

Flat Living met and spoke with Lee Middleburgh, the man at the top of peverel, one of the uK’s largest managing agents.

What is it about the leasehold sector that interests you?

Residential Property Management has that wonderful mixture of customers that you can get to know, teams committed to providing great service, a complex regulatory environment and the need for practical and sensible solutions to unusual problems. Frankly at any level you either thrive in this cocktail or you hate it! It is clear that the industry is at the beginning of a period of change. The old standards and ways of working simply will not do, we must recognise what needs to change and ensure that we deliver ‘worthwhile and valuable change’ for our customers.

How long have you been working at Peverel Property Management?

I have worked for Peverel Property Management for a little over four years, I have to say that it has been one of those periods in your working life that stands out as one where you learn more about people and doing the job. Without doubt no two days have been the same.

You are one of the largest, if not the largest, managing agent in the UK; how did the company achieve this position?

We don’t set out to be big. We do set out to deliver good service, to be helpful to clients and customers, to forge relationships and seek to find common ground when dealing with disputes or difficult issues. I firmly believe that building positive and constructive relationships drives new business and that by sticking to these principles for a long time the end result is a business to be proud of.

What has been the company strategy during the recession? How have you fared these past 12 months?

For us the last two years have been immensely busy as we have integrated a number of Property Management businesses within the division. This has been an immense challenge and one the team has been committed to achieving. At the same time some of our customers have been affected by redundancies through job loss as well as having less disposable income. This means we have had to rise to the challenge of becoming more transparent in our explanations of what we do and at the same time where we are able to work harder to provide payment plans and sympathetic credit control. This has not been an easy task but we are committed to becoming ‘easier to do business with’. Another part of our strategy during this last period has been to deliver increased customer service training across our business and to remain committed to the development of our teams. Saving cost in these areas was not an acceptable option to us. This has culminated in us receiving the prestigious Investors in People (IIP) accreditation in November 2009 that reflects both the commitment and professionalism of our team.

What are your future plans?

We will start with our customer’s requirements and do whatever they need us to do, whether that is to improve our communications standards, the clarity of our communication, transparency of our business processes or making sure that they always have someone knowledgeable and approachable to deal with.

What is the key to success to successful property management?

It is increasingly clear through all of our discussions with customers, through our market research, customer focus groups and through our own experience we need to provide just three things:

1 Skilled and knowledgeable Property

Managers who can see what is happening on the developments and who can get things done.

2 High quality and timely accounts and expenditure information that is easy to read and is informative.

3 An Office based Customer Services team that can be contacted the way our customers want to contact them, that is seen to work as a team with the Property

Manager and is able to reassure that problems can be resolved.

What upcoming regulation will either adversely or positively affect your business in the future?

We know that we will see the last parts of The Commonhold and Leasehold Reform Act passed. We will see more Health and Safety compliance, especially as a result of the recent tragic loss of life in the Camberwell fire, but critically for the long term health of the Property Management profession we will hopefully see the introduction of regulation and practice accreditation.

What is the best thing about property management? And the worst?

Seeing younger property managers develop, accept increased responsibility and gain the appreciation of their customers is the best thing. The cynics are the worst.

How do you fill up what little spare time you have?

If I can combine a long drive with music and a camera then I am at my happiest.

Enforcing service charge payments

Effective management of service charge arrears is essential for all Resident Management Companies (RMCs) and, by extension, the leaseholders that are dependent on them to provide services, writes Stan Gallagher, Barrister, Tanfield Chambers.

s with any landlord, an

ARMC is obliged to perform the landlord’s covenants whether or not some or all of the leaseholders are actually paying their service charges: see Yorkbrook Investments v Batten (CA). However, unlike external landlords, a RMC will have no funding other than what it collects as service charge. Arrears therefore threaten the RMC’s solvency. Enforcing payment of service charges is more difficult these days. Consider the twin peaks of: 1 The further statutory constraints (but as yet not the wholesale abolition) of the right of forfeiture for the non- payment of service charges by residential leaseholders; and 2 The concurrent (but not exclusive) jurisdiction of the

Leasehold Valuation Tribunal (the LVT) to determine service charge disputes. Unlike the Civil Courts, the LVT has very limited powers to award costs.

The traditional form of long residential lease is a product of the days when the landlord’s principal remedy for unpaid service charges was to forfeit the lease. Broadly, the right of forfeiture (as moderated by rights of relief against forfeiture) amounts to a security for compliance with the tenant’s covenants: generally, forfeiture will only be relieved on terms that fully compensate the landlord for the breach, for example a forfeiture for non-payment of service charges generally only will be relieved if the leaseholder pays all outstanding service charges, together with the landlord’s costs of the proceedings. The result being, where forfeiture is available, that it is the defaulting leaseholder, not the service charge fund or the landlord, who ultimately bears the landlord’s reasonable costs of any enforcement proceedings.

MAKe no provision

The conventional form of a lease is not designed to operate in the now common circumstances where forfeiture is not readily available. A typical lease will either make no provision at all for the recovery of the landlord’s legal and other costs of enforcement, or else, the lease will only provide for the landlord’s costs of enforcement to be recovered from the service charge, rather than borne solely by the defaulting leaseholder.

If legal costs cannot be avoided by avoiding litigation in the first place, the objective of the RMC must be to try and recover its costs from the defaulting leaseholder. Recovering these costs as part of the service charge (which will only be possible if the leases make clear provision for it) is very much a second best outcome: in this eventuality, each leaseholder, including the defaulting leaseholder, will be liable to pay their proportionate share of the landlord’s costs. This is unfair and likely to be a source of resentment among those leaseholders who have paid their service charge in the first place.

Unfortunately, ensuring that the enforcement costs only fall on the defaulting leaseholder is not always be possible to fully achieve. A strategy is to try to get into the position to either forfeit the lease, or at least to serve a section 146 notice as soon as possible after it becomes clear that the leaseholder is, without good reason, refusing to pay.

In order to forfeit a lease for the non-payment of service charges (unless the lease reserves the service charge as rent or additional rent), a notice under section 146 of the Law of Property Act 1925 (the LPA) must first be served on the tenant. Section 146(3) of the LPA imposes an obligation on the leaseholder to pay the “reasonable costs and expenses properly incurred by the lessor in the employment of a solicitor and surveyor or valuer or otherwise in reference to any breach giving rise to the right of re-entry or forfeiture”. Hence, the earlier the landlord can get to the stage of validly serving a section 146 notice (and if need be taking the ultimate step of forfeiting the lease) the better in terms of maximising the costs that can be recovered from the defaulting leaseholder.

However, there are hoops to be negotiated. Section 168 of the Commonhold and Leasehold Reform Act (the 2002 Act) imposes various statutory pre-conditions to serving a section 146 notice:

• the complained of breach has been finally determined by the LVT; or • the tenant has admitted the breach; or • the breach has been the subject of a determination by a court, or an arbitral tribunal in proceedings pursuant to a post dispute arbitration agreement.

In cases, where the lease reserves the service charge as rent and provides that it is recoverable as if rent, there is no need to serve a section 146 notice as a precursor to forfeiture proceedings in the event of non-payment. However, such service charges nevertheless fall within the statutory definition of “service charges” (section 18(1) of the L & T Act 1985) and are therefore subject to statutory protection. Consequently, forfeiture of the lease for non-payment of service charges reserved as rent is subject to the restrictions on forfeiture that are imposed by section 81 of the Housing Act 1996. These largely mirror the requirements of section 168 of the 2002 Act.

Case Study: Pullman Court, London

The difficulties can be illustrated by the recent LVT decision in Pullman Court (Claim No. LON/00AY/ LSC/2008/0354: decision dated 16th April 2009). PC is a block of approximately 200 flats. It has a RMC. The RMC had been badly let down by its former managing agents.

A very small minority of leaseholders, whose number included members of the previous board of the RMC (who had appointed these former managing agents) were in significant service charge arrears. However, most leaseholders were up-to-date with their service charge payments.

County Court proceedings were brought against the leaseholder (R) who owed the most, including undisputed elements of the service charge, such as the costs of insuring. The County Court entered judgment against R for the unpaid insurance and transferred the balance of the claim to the LVT.

A small number of leaseholders joined the proceedings before the LVT and, essentially, adopted R’s case. The final hearing before the LVT extended over six days, required expert evidence and resulted in the RMC incurring considerable legal costs.

Largely by reason of the action (or inaction) of the former managing agents, in failing, without good reason, to ensure compliance with the service charge consultation procedure, the LVT held that some elements of the arrears were irrecoverable. However, the balance of the arrears was determined by the LVT to be properly due and payable.

The LVT’s determination was endorsed by the County Court on application to the County Court (which was opposed by R, who had costs awarded against him). Consequently, in the event of continued non-payment by R all of the means of enforcing County Court judgement debts, including forfeiture, remain open to the RMC company. Similarly, it is now open to the RMC to serve section 146 notices and, if need be, to forfeiture the leases should the arrears and costs not be paid.