Flat Owner Describes Leasehold as a ‘Painful Scam’ After Being Left with Freeholder’s Legal Bill

A London flat owner has described England’s feudal leaseholder system as a “painful scam” after she was left with a legal bill from her block’s freeholder that has run into tens of thousands of pounds.

The resident of Johnston Court in Leyton told the Byline Times that being left with the bill from the court case, which had nothing to do with her, alongside poor communication and a lack of transparency had left her deeply regretting buying a leasehold property.

The 42-year-old resident, who wished to remain anonymous, said: “Buying a leasehold flat feels like the biggest mistake I have ever made. It’s completely out of control. It’s a disaster.”

The legal bill arose after a dispute in February 2021 between sports promoter, Edward Hearn, who was the under lessee of a flat in the block, and a company called Rosleb Ltd, who is the freeholder of flats one to 42.

The claim by Mr Hearn concerned the alleged losses of rent and utility charges due to water ingress stemming from the roof. The first time the leaks were identified was around January 2012 and affected multiple flats.

Solicitors JB Leitch were initially instructed to file a defence on Rosleb’s behalf, but the firm eventually settled the matter along with other lessees who had raised similar issues in their penthouses following mediation. 

The Byline Times tried to contact Mr Hearn through his events company Matchroom, but he did not respond. JB Leitch would not even confirm the details of the case and also declined to comment on their involvement, or on behalf of Rosleb.

The freeholder has little of a digital footprint online, but Companies House shows Rosleb is registered to an address in Regents Park Road, London, and has five current directors.

A company called Hather GR Limited is listed as a person with significant control. This company is owned by Renbuff Investments Ltd – both are registered at the same address as Rosleb and have the same directors. 

Rosleb’s latest financial accounts, for the year ending 31 December 2021, boast of profit for the year of £5.8m, from a property investment portfolio worth more than £152m. 

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Landlord Entitlement 

The problem for leaseholders is the current system. Under this setup, you own the right to use a property for a fixed period of time, typically 99 or 125 years. The leaseholder pays ground rent to the freeholder – who owns the underlying land – and who is responsible for maintaining the property.

Typically there is also a service charge to cover the upkeep of communal areas in blocks of flats. Within this set-up, those who wish to take their landlord to court to challenge exorbitant fees or unfair hikes in annual charges also run the risk of being forced to pay their landlord’s legal fees. 

This applies even if the court rules in their favour – hitting some tenants with bills of tens of thousands of pounds.

Former Communities Secretary, James Brokenshire MP, pledged to scrap this in March 2019. He said at the time: “I have repeatedly made clear my ambition to end those exploitative and unfair leasehold arrangements that have no place in a modern housing market.”

However, following the announcement that 40 leading property developers and freeholders voluntarily signed a government-backed pledge, more than four years later the legal loophole remains open.

The resident, who works in publishing, told the Byline Times that the loophole “feels completely insane to me. We are just enslaved to the system”. 

She added: “After months of eye-wateringly slow communication with the management company, KFH, and E&M, who represent Rosleb, we discovered that extra unbudgeted costs have also been included.

“It was £28,986 of legal fees between Eddie Hearn and Rosleb. But continuous requests by multiple leaseholders to explore ways to ease the crippling, escalating costs, such as using our reserve fund, which is now at £113,000 and growing by £35,000 every year are rejected and ignored. KFH says it’s the decision of E&M. E&M remains entirely uncontactable.”

The resident added: “On a highly personal level, the impact this is having on our life is huge and upsetting. We feel unable to have a second child while we are trapped here. My main advice to those looking to buy now is to avoid leasehold at all costs. It’s painful, and an absolute scam.” 

Carl Warland, Block Management Director at KFH, said: “KFH and the landlord are mindful of the impact of costs on leaseholders, especially in the current economic climate. 

“However, under the terms of the leases, the landlord was entitled to recover fees, which amounted to substantially less than the figure you referenced. The leaseholders at Johnson Court are aware of this provision in their leases and we are in regular dialogue with them to address their concerns.”

Emails seen by the Byline Times between residents and KFH show there was some confusion around the legal bill due to difficulty in getting clarification on the items in invoices sent to them, but the final legal bill appears to be in the region of £37,000.

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‘Obscene but Perfectly Legal‘

The Byline Times reported in March how the UK government introduced a series of reforms last year. They are aimed at making the leasehold system fairer and more transparent, including reducing ground rents to zero for new leases of houses and flats. 

The Government has promised that this is just the start and that future legislation will give leaseholders of flats and houses the same right to extend their lease agreements “as often as they wish, at zero ground rent, for a term of 990 years”, among other reforms. 

But property sector insiders began briefing in March that they believe the next stage of legislation is unlikely to get off the ground. However, Harry Scoffin, co-founder of Commonhold Now, an anti-leasehold campaign group, told the Byline Times he believes the Leasehold Reform Bill will pass.

He said: “This is just one of the many injustices of the quasi-feudal leasehold system on flats, which is unique in the world to England and Wales. 

“It is obscene, but sadly perfectly legal, for freeholders and landlords to pass on their legal costs to leaseholders after a legal case. 

“The government promised to end this deeply unfair legal costs regime in 2019. All these years later, no action has been taken, although ministers now suggest a landlord costs ban will be part of a Leasehold Reform Bill set for the King’s Speech. 

“But legal costs should not be an issue for leaseholders in the first place because they should not be having to appear before judges in order to not be ripped off in their own homes or suffer poor block management.” 

“Flat owners in England and Wales shouldn’t have to become serial litigators against building mismanagement including leaks and service charge abuses. This is not the position in most other jurisdictions where resident-controlled commonhold systems are the default and remove the need for faceless freeholders and building landlords.”

Earlier this week, housing secretary Michael Gove outlined his long-term plans for the housing sector. In a wide-ranging speech, he said: “Making the housing market work better will also require fundamental reforms to leasehold law.”

“We want to ensure that those who have paid for their home by acquiring a leasehold can finally truly own their own home by becoming free of an outdated feudal regime which has been holding them back.

“So we will continue action on exploitative ground rents, expand leaseholder’ ability to enfranchise – and to take back control from distant freeholders we will reduce punitive legal service charges, reduce insurance costs – and improve transparency.”

Mr Gove said these plans will feature as part of new legislation in the King’s Speech, expected in November.