Leaseholder committed mortgage fraud, won't pay service charge. Can I contact lender?

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    Leaseholder committed mortgage fraud, won't pay service charge. Can I contact lender?

    Hello, I bought the freehold of a building where the two out of four flats belong to one long leaseholder who clearly committed mortgage fraud a few years ago to acquire the flats. It's a classic case where the leaseholder is not the actual beneficiary of the purchase, and the mortgage value was way above the correct value. Also the flats were a shambles with clear structural issues so there is no way any bank would have been happy with them without any improvements.

    Anyway, it's been a few years now and still I have never received a penny of service charge even though I have been maintaining the building and sending service charge demands. The building's structure is in a terrible state and is need of major works that will cost a lot of money.

    A friend of mine suggested that I contact the leaseholder's lender and inform the bank of the service charge arrears and the upcoming major works, and also potential forfeiture proceedings against the mortgage fraudster. This might either force the leaseholder to pay service charge and contribute to the major works, or force the bank to make him refinance... I would consider buying the flats at market price too, the building requires work and I can't do it when this leaseholder is unreachable. He has an agent who sublets his flats for him, that is my only contact.

    What do you guys think? How do I contact the leaseholder's lender, or do I need a lawyer? Any advice would be helpful as I've never come across a fraudster before!

    #2
    You start proceedures to forfeit both flats for none payment of service charges.
    forget the mortgage issue, as that is not your concern.

    You are a freeholder so you will know how to do this ( we hope )
    Do the leases state that leaseholders are responsible for paying your legal costs for a Section 146 forfeture action, if so then apply to the F.T.T. for them to determine that a breach of the lease has occured.
    Then once they determine the outcome of the tribunal, in your favour, you take your F.T.T. determination to court and apply for forfeiture, and recovery of your costs.

    At the same time a court order will be issued to pay the outstanding service charge, and if he does not pay, you seek forfeture, or bailifs.

    Forfeture for a small amount of service charges does not always work, but getting your costs back, and a court order to pay the overdue service charges will work.

    But do not issue any more service charges or have ANY contact with leaseholder after your letter stating you intend to apply for forfeiture, as you will waive your rights to seek forfeiture, and waive your right to get the service charges paid.

    Comment


      #3
      Thanks for that.

      Strangely, the lease for one flat states that lessee has to pay all costs for Section 146, but the other lease doesn't....not sure if that is very bad news?

      So far I have only served notices for ground rent payments via a no win no fee lawyer, and got two years of ground rent as a result (currently Lessee owes one years of ground rent). I have not served any notice for service charge, as after I send the initial demands, the lessee will always come back with a bunch of questions and excuses to hold back proceedings. He seems to know the game, whereas I've not been in this situation before.

      Our lawyer suggests that we serve a section 20 for major works, which would hopefully force either the leaseholder or his lender to pay.

      Comment


        #4
        The lender will be informed as part of the FTT process. They'll probably only get interested once you have a determination of a breach in your favour.

        Comment


          #5
          You may have waived the right to forfeit by issuing GR or S20 demands, to follow forfeit route you must not do anything that recognises lease as continuing, there is nothing magical about s20 works that would force him to pay.

          Forfeiture is complex area, it would be far easier to issue standard monetary court claim, why don't you do this ?
          Advice given is based on my experience representing myself as a leaseholder both in the County Court and at Leasehold Valuation Tribunals.

          I do not accept any liability to you in relation to the advice given.

          It is always recommended you seek further advice from a solicitor or legal expert.

          Always read your lease first, it is the legally binding contract between leaseholder and freeholder.

          Comment


            #6
            The more I think about it, this leasehollder will be difficult even if I manage to get all the service charge owed as it will just repeat itself. He doesn't take care of the property at all, and the building needs serious repair works to last another decade.

            The best solution would be to somehow force a situation with his lender so that he has to refinance and I buy the two flats off him. It seems like the only thing that bothers him is his lender, and he knows that his flats are a shambles and would struggle to get a new mortgage. Do you think the S146 route is right one for this outcome?

            Advice I've been given so far is to serve section 20 so that the leaseholder either pays up or decides to sell due to high (and necessary) structural repair costs.

            Comment


              #7
              If works need doing then they need doing, I can't recommend using s20 works as some sort of tool to force him to remortgage or anything, in any event getting mortgage company to pay varies depending on company, some only will if there is genuine threat oc forfeiture, it's very unlikely, again won't font you issue simple money claim for the arrears ?
              Advice given is based on my experience representing myself as a leaseholder both in the County Court and at Leasehold Valuation Tribunals.

              I do not accept any liability to you in relation to the advice given.

              It is always recommended you seek further advice from a solicitor or legal expert.

              Always read your lease first, it is the legally binding contract between leaseholder and freeholder.

              Comment


                #8
                The leaseholder is fairly cash rich, he just doesn't pay because he thinks he is beyond the law. If push comes to shove he will pay the service charge as he can easily afford it, but it still won't solve the problem long-term as he will continue to mistreat the property and won't pay any service charge or contribute to major works.

                So the more I think about it, the only long-term solution is to somehow get in touch with the lender so that the lender is aware the flat has serious structural issues, the lessee is in breach of his lease and owes many thousands in service charge.

                Also he has a history of dodging court cases by citing illness, remember the name on the leases is not the person behind the fraud....

                Comment


                  #9
                  I have to wonder why you would buy the freehold of a property when it is in poor condition. You're going to have years of stress.

                  Comment


                    #10
                    Farrella, you are scared of going through the correct proceedures, and usually it's because it costs money.
                    And the offending leasholder knows he does not have to pay, and mortgage companies are not responsible for the leasholders debts, and may only pay out if forfeture is going to rear it's head, and not with " anticipated works may cost this much but we have not produced a bill yet, therefore the leaseholder has nothing to pay yet"

                    S20's is only an indication of cost of works, not an unpaid invoice.

                    You seem to think that there is no way you can enforce the lease except by way of other none workable solutions.

                    You go to the F.T.T.
                    You ask for a paper determination ( that way he does not have to turn up )
                    You send a copy of the lease that shows S146 costs are payable by the leaseholder, and state here is the lease for his flat, and other lease will be identical ( you of course are going by memory - of course, but don't say that ).

                    You can say that you have already had to take him to task over the ground rent, ( show proof you got it ) and now he is refusing to pay the service charges.

                    Simple, job done.

                    the lease may also state the freeholder can inspect the flats ( and leaseholder must not refuse ) and once inspected, you add that to the F.T.T. case.
                    The F.T.T.can and do inspect flats if you say it is in a bad state of repair.

                    You cannot just keep thinking of unworkable alternatives to the due process !

                    Comment


                      #11
                      Thanks Ram. This may be a silly question, but I've not been down the FTT road before. Is this something that requires a solicitor?

                      I've come across a few no-recovery-no-fee solicitors who say they specialise in service charge recovery where the other side pays the costs...

                      Comment


                        #12
                        I agree with Ram,, you should follow the correct legal processes not think of wierd and wonderful schemes, the leaseholder is in the property there is no realistic way to try and force him out and sone of your actions could be deemed harrasment which is both a civil and criminal offence.

                        A FH chasing arrears has to make a choice to either allow the lease to continue and make a monetary claim at court OR to follow the forfeit route, he should not chop and change between the two or follow both routes otherwise he risks waiver of the right to forfeit.

                        A FH should IMO only approach the lender if he has determination from ftt or court that there is a breach.

                        A determination for breach can be made be either, personally I would start a claim in cc and ask for it to be transferred to ftt, no there is no need for a solicitor in either BUT bear in mind that a clever LH may be able to run rings around you as you clearly don't have a full understanding of landlord/tenant law.
                        Advice given is based on my experience representing myself as a leaseholder both in the County Court and at Leasehold Valuation Tribunals.

                        I do not accept any liability to you in relation to the advice given.

                        It is always recommended you seek further advice from a solicitor or legal expert.

                        Always read your lease first, it is the legally binding contract between leaseholder and freeholder.

                        Comment


                          #13
                          Kay, the structural issues are a lot worse in the leaseholder's flats than mine, and I was not able to view those flats during purchase. The leaseholder has been trying to make me pay for all leak damages caused by structural issues because I am the freeholder, even though he has not paid one penny of service charge all these years! He is a real nightmare...

                          Comment


                            #14
                            Farrella ,

                            Use google search and look for a firm of solicitors offering service for recovery of ground rent and service charge arrears. Some firms e.g slcsolicitors may be willing to charge their fees to the delinquent tenant.

                            Comment


                              #15
                              I actually used SLC before and they got nowhere with this leaseholder! The person behind the mortgage fraud is not the leaseholder, who is just a pawn. The only time the leaseholder ever got tetchy was when our managing agent mentioned she would contact the lender about potential forfeiture, but it never happened.

                              Comment

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