Secret commissions

[Stacker]

Bizarrely, the excess figure came down and the insurance premium came down after the claim? It has not been easy to get quotes from some brokers and we were turned down by a few after the claim

[Stacker]

leaseholder64,

Company expenses are not recoverable form most leases unless they say so, I know ours doesn't and LEASE have confirmed this, also company secretary fees cannot be recovered and the commission on any D&O insurance and building insurance must be declared.

[leaseholder64]

Whilst technically correct that it is not consistent with most leases, the Law Commission have confirmed that charging D&O to the service charge is very common, seem to think D&O is desirable, and also are in favour or changing statute to make payment of company expenses from service charges legal, even when the lease doesn't allow that

My gut feeling is that whilst it might not pass as a defective lease, there would be a lot of sympathy towards accepting a request to change the lease based on an overwhelming majority supporting the change,

If you did win a a case I think that would just increase the pressure to legitimise this by statute.

Whilst I wouldn't advise the other side to start doing this, I don't think it is an appropriate issue on which to raise a challenge, as there seems to be a general feeling that the strict legal position is inappropriate in the modern world.

I've certainly come across people who refused to become directors because they couldn't have it.

[Macromia]

On reading through previous FTT cases yes obtaining the insurance on a like for like basis is required. As an example the previous insurance covered the permitted pets and now it does not. Another example the % paid out for alternative accommodation has been substantially reduced.

IF it is only FTT cases that you have read, and not cases from higher courts, then these decisions will carry relatively little weight and don't have to be followed by future FTT's. It is also likely that there are specific details in those cases that won't necessarily apply to the circumstances of your case.
I really don't see why a Freeholder would have to provide like for like insurance, and cover things that the lease didn't require, just because these might have been included in the past.
It would be reasonable for the freeholder to have made sure that leaseholders were informed that less would be covered, so that they could potentially arrange their own additional cover if they considered this necessary.

Without the leaseholder knowing the Director wrote to the insurance company and stated in writing that "the leaseholder was responsible because of a faulty washing machine not plumbed in properly", she put this in writing, the insurance loss adjustor of the company then contacted the leaseholder and started asking him lots of questions, he thought it was odd they were asking about the plumbing to a washing machine when the leak was due to something else as confirmed by a plumber.

Could be a genuine mistake however this same Director collaborated on a secret commission deal which came out of the woodwork many months later.This same director also did not tell the insurance company that a business where people are coming, staying and going from the property through the communal parts...was going on...did not declare this to the insurance company. No business allowed for in the lease.

As said previously, if you feel that the director isn't acting in the best interest of all leaseholders, you have the option of going through the motions necessary to get them removed and replaced with a new director (if you are able to find someone willing to take on the role).

Spoke with LEASE and D&O insurance can not be recovered from the lease or any company expenses. Also LEASE said that if a leaseholder paid towards this directors insurance they would be helping the directors to insure their losses against him if he won!

Yes, I am well aware that D&O insurance, and other company expenses are expenses that are not recoverable under the terms of most leases.
Morally though, and if you actually want people to be prepared to agree to take on the role of looking after your building, you should accept the inclusion of these in the service charges (really legislation should be passed to permit this and remove the problem).

I'll ask again, would you be prepared to take on the role of director if you would have then have to pay company expense out of your own pocket, and would also have to pay to insure yourself in case you make a mistake and end up getting sued? Not many people would, which means that leaseholder owned companies may be more likely to end up being run by people who think they can use the position for their own benefit than by people who would genuinely look after the interests of all leaseholders.
Company expenses, including D&O insurance, are likely to be an insignificant cost when split between all leaseholders, but may be significant enough to prevent potential directors from standing if they have to pay these themselves.

[AndrewDod]

A leaseholder is only able to challenge on the basis that he can obtain like for like insurance at a lower premium.

Or that the insurance insures things that are not within the remit of the lessor to insure. We successfully claimed a policy was invalid as a result. So yes, like for like (like the same insured value -- unless that is wrong, and the same statements of fact -- if those are truthful). FTT would hardly only accept a challenge on the basis of quotes which reproduced a fraudulent statements of fact.

[AndrewDod]

Yes, I am well aware that D&O insurance, and other company expenses are expenses that are not recoverable under the terms of most leases.
Morally though, and if you actually want people to be prepared to agree to take on the role of looking after your building, you should accept the inclusion of these in the service charges (really legislation should be passed to permit this and remove the problem).

I'll ask again, would you be prepared to take on the role of director if you would have then have to pay company expense out of your own pocket, and would also have to pay to insure yourself in case you make a mistake and end up getting sued? Not many people would, which

But that's what ground rents are for (in part) ...... If a lessee owned company decided not to collect ground rents, that would be their hard lines. In the case of RMC, there is an issue if the Freeholder is being passed ground rents -- but then the legislation relating to RMC is defective and ill considered -- and this is one of many reasons why. By the way there are a host of other company expenses which are not service charges nor covered by insurance (like if the Directors fail to file with Companies House and get fined. A conventional freeholder is not covered against his own follies and private expenditure and the same should apply here. What would you suggest should be the case if only 3 of 6 lessees were shareholders in the freehold Company -- that the non shareholders should cover company expenses.......

[Stacker]

AndrewDod,

Thank you that is my point exactly as a director they should be acting in the best interests of all leaseholders, they have a duty of care and to act honestly, making misleading statements is a breach of trust

[Stacker]

Macromia,

As Andrew has said above, the ground rent or any other company income covers the company expenses NOT the Lease, cant see that being accepted by any FTT or Upper Tribunal cases.

[Stacker]

leaseholder64,

Sorry unless the item is recoverable for the lease then the ground rent would cover the company expenses.

[Stacker]

leaseholder64,

The company expenses are NOT recoverable from the Lease but they could be recovered from any company income such as the ground rent

[Stacker]

leaseholder64,

Company expense come out of the ground rent income.

[leaseholder64]

A lot of people here seem to want ground rents made illegal, and a lot of ground rents have been eroded by inflation to the point where they are too costly to collect.

[AndrewDod]

A lot of people here seem to want ground rents made illegal, and a lot of ground rents have been eroded by inflation to the point where they are too costly to collect.

Yes, and the free market dictates that those freeholds will be of low value -- at least in part because the freeholder is unable to cover their expenses - and they have to weight that against the value of reversion (and also their ability to cheat lessees via several mechanisms) .

Ground rents (which lessees knowingly sign up to) are a minuscule problem in comparison with theft and various other illegal and inappropriate behaviours by freeholders (which lessees do not knowingly sign up to). The whole legislative debate about leaseholds in misguided and misdirected.

[Stacker]

AndrewDod,

Can you expand on this more Andrew? What have been your experiences with cheating leaseholders via several mechanisms without naming?

[Macromia]

Or that the insurance insures things that are not within the remit of the lessor to insure. We successfully claimed a policy was invalid as a result. So yes, like for like (like the same insured value -- unless that is wrong, and the same statements of fact -- if those are truthful). FTT would hardly only accept a challenge on the basis of quotes which reproduced a fraudulent statements of fact.

If the insurance covers things that the lease does not require the freeholder to insurance, it is quite possible that any leaseholder who wished to do so could challenge the payability of the insurance as a reasonable part of the service charges, and it is likely that they would win a reduction of part, or perhaps all, of the costs for insurance.

However, if the insurance previously included cover that the leaseholders all considered worthwhile, but which the freeholder was not obliged to include under the terms of the lease, the freeholder does not need to continue to provide 'like-for-like' insurance and continue to cover these additional risks (unless they have been providing that level of cover for so long that the 'estoppel' argument could be used). In fact, the freeholder might be wise not to continue to provide like-for-like cover under these circumstances because any additional costs would be ruled unrecoverable if a leaseholder decided to challenge them.

So, it is wrong to say that like-for-like insurance cover must be provided. What must be provided is the insurance cover that meets all of the requirements given in the lease (and all legal requirements, with legal requirements taking precedence if they contradict the lease), no more, no less.