Secret commissions

[Stacker]

eagle2,

Disclosure is required so that the leaseholders know how much the policy has been inflated by. FTT tribunal cases state no more than 10% is acceptable because its to cover the claims handling should there be a claim so they can hardly charge hundreds for doing the work, the FTT know this and apply this....they base it on the time taken to manage any claims and if there are no claims then claiming a high commission is not justified. Also I found out that the brokers receive a commission from the insurance company for the volume of business they place with the insurer...so possibly the managing agent, freeholder and broker benefit at the expense of the leaseholder..

[michelle230]

Michelle - Is your link relevant to this thread? You have posted the link before on a different thread,

No. Apologies - I was aware of that. But it was relevant to your post.

[eagle2]

The newspaper article again raised nothing new, it just identified that insurance commission can amount to 40% to 60% of the premium and that the commission can be shared by 3 different parties. There is nothing wrong with raising the subject again but you wonder why the practice has not been stopped before and the proposal for disclosure of part of the commission is hardly the solution.

[eagle2]

"Back in 1998 a government minister said that leasehold “has its roots in the feudal system and gives great powers and privileges to landowners. It is totally unsuited to the society of the twentieth – let alone the twenty-first – century.” Why hasn't this abusive system been killed off yet? "
This was a comment made in the same newspaper article.

[eagle2]

And thats of course because it's a fair and balanced system and you can expect totally unbiased judgement.
https://www.leaseholdknowledge.com/l...outham-resigns

Michelle - Is your link relevant to this thread? You have posted the link before on a different thread,

[michelle230]

Michelle - if you are representative of the LKP, I would strongly object to you being involved with the FTT. I am not saying that the FTT is perfect by any means but there is a layperson on the Tribunal, maybe the choice of layperson could be improved.

And thats of course because it's a fair and balanced system and you can expect totally unbiased judgement.
https://www.leaseholdknowledge.com/l...outham-resigns

[Stacker]

Yes Gordon the CMA and the Office of Fair Trading are looking at this, unfair terms etc

[Gordon999]

In many leases, the wording states the "Lessor has sole right to decided on the insured cover ".

The Times dated 5 July 2019 carried the report about secret commission extracted from buildings insurance:

" Freeholders and managing agents are overcharging leaseholders for the insurance of their flats, while also pocketing large commissions from the insurers. Campaigners for leasehold reform are calling on the government to crack down on the practice.

Sir Peter Bottomley MP, the co-chairman of the All-Party Parliamentary Group on Leasehold and Commonhold Reform, says: “We believe unfair service charges cost leaseholders hundreds of millions of pounds each year with secret commissions on buildings insurance deals making up a large part of it. Regulators must do more to bring this corrupt practice against leaseholders to an end.”


The above 2 paragraphs is all I could see free of charge. The paper charges £8 for 2 months reading.

https://www.thetimes.co.uk/article/l...ions-k39fz6x8f

[JK0]

Can you break down the 52%? Was this for insurance commissions only?

Let me guess:

Asbestos survey, Electrical inspection, health & safety inspection, accountancy... (Usual lucrative nonsense.)

[Stacker]

I didn't say it was anything new.
I am aware of how the NHBC are funded which is the whole point as to why these organisations are ineffectual.

And despite your vastly superior knowledge, I will continue to champion LKP. They have helped many desperate leaseholders.

HANDLING INSURANCE AND THE DISCLOSURE OF COMMISSIONS

Regulation of Insurance Activities 9.1 Managers must not advise, arrange or administer insurance or handle claims unless they are authorised to do so under the rules of the Financial Conduct Authority. This requirement does not apply to Registered Providers. Policy content and value for money

(S.19 of Financial Services & Markets Act 2000)

9.2 Managers should, when asked, be transparent and prepared to demonstrate value for money to the landlord, or leaseholders, without the need for an application to be made to a tribunal for a determination of reasonableness.

9.3 Managers should consider the need for, and arranging valuations for insurance purposes, such valuations to be carried out by a qualified valuer.

9.4 Managers should identify to landlords and leaseholders in a clear manner, any non-standard cover or additions to any relevant insurance policy, as well as the reason and cost of those additions. This can include but is not restricted to such things as terrorism and flood insurance.

9.5 Managers should also notify landlords and residents of any increases to the excess relevant to the policy, and any associated increases to the premium.

9.6 Managers should notify landlords and leaseholders of any material change in cover. Handling of Insurance and Commissions



9.7 No manager or any associated company of that manager must place insurance on behalf of a landlord or leaseholders in order to increase the receipt of any commission or other profit or income of any kind to it or any other party. It is an accepted legal principle that in dealing with service charge monies, the landlord and /or manager should not profit from those monies, other than to take a reasonable commission for carrying out insurance-related activities, which may include a profit or surplus element. This principle is extended to any associated company or associate of the manager or landlord. Managers should ensure that the landlord and leaseholder(s) are kept informed on the progress of any claims, and settlements. Receipt and Disclosure of Commissions

(Bribery Act 2012 Consumer Protection from Unfair Trading Regulations 2008)



9.8 Receipt of a commission or other payment of any kind by a manager, whether for insurance or any other activity, is permissible but only if: • It does not breach any statutory requirements • It is in receipt for services related to that activity of an equivalent value to the commission or other payment received.

The services provided for the income should be declared on request • The cost of providing those services is not also part of the manager’s management fee • It is disclosed to the landlord before the manager acts for that client landlord, and is agreed in writing by the landlord as acceptable • It is disclosed as a percentage of the sum or premium payable, and also as a sum, to all leaseholders who pay the relevant charges that attract that commission – without the need for a request by any lessee, at least once per annum •



The disclosure regarding insurance commission includes details of the relevant authorisation held by the manager under the rules of the Financial Conduct Authority • Receipt of any commission payable to the landlord including the amount, is disclosed to leaseholders.

9.9 Disclosure as a separate entry in the annual service charge account is acceptable.

[Stacker]

Hi,

Are we only concerned with insurance here?

On recently becoming a director of our RMC and finally having sight of the financial statements it has become apparent that our outgoing managing agent actually acquired 52% of the money paid into our service charge account over a 4 year period.

How is this possible when RICS had conducted 2 investigations?

During the same period the same defunct Ombudsmen Services Property also concluded 2 biased investigations!

In my opinion neither of these organisations should have any input into a new Regulator.

Can you break down the 52%? Was this for insurance commissions only?

[Macromia]

Michelle - if you are representative of the LKP, I would strongly object to you being involved with the FTT. I am not saying that the FTT is perfect by any means but there is a layperson on the Tribunal, maybe the choice of layperson could be improved.

I would agree that representatives of the LKP should not be involved with the FTT. No one who is likely to be strongly biased should have any involvement.

I don't know how the members are chosen for a tribunal (other than that there is a judge/legal person, surveyor, and layperson) but they all need to be impartial. It was the layperson who gave me the hardest time at a recent tribunal, but his questioning/criticism was (I.M.O.) generally reasonable, and he gave the other party an equally hard time (not necessarily over the same issues), so wasn't biased towards either side.

[eagle2]

I have only ever witnessed the strong support they have given, and continue to give to leaseholders trapped in appalling situations. Along with exposing some of the worst offenders.
If they had been allowed involvement in FTT, perhaps the system would be more balanced.

Michelle - if you are representative of the LKP, I would strongly object to you being involved with the FTT. I am not saying that the FTT is perfect by any means but there is a layperson on the Tribunal, maybe the choice of layperson could be improved.

[michelle230]

Michelle - I agree entirely that leaseholders need a voice, it may well be that you are doing the LKP a disservice,

I have only ever witnessed the strong support they have given, and continue to give to leaseholders trapped in appalling situations. Along with exposing some of the worst offenders.
If they had been allowed involvement in FTT, perhaps the system would be more balanced.

[eagle2]

I suspect that what will happen next is that the new regulator will state directly or indirectly that a certain level of commission is acceptable, lets say that it is 10% although I have seen higher levels accepted in the past.

All freeholders or agents will then claim and declare that they have received 10% commission, which could be higher than what they claim now.
Additional commissions will be paid to businesses which cannot be directly connected to the freeholders or agents and which will not be declared to leaseholders.

Freeholders or agents will then apply to the new regulator and claim that 10% is insufficient, it does not compensate them adequately for the service which they are providing, they will claim that they are researching the market for the most reasonable level of insurance (whether or not that is true), they will claim that they have reduced the cost of insurance (whether or not that is true) which has reduced their income, they will claim that they are providing other services such as dealing with insurance claims etc.

The new regulator will then increase the level of commission.