If you want to live in central London, the chances are you’ll be living in a building where the freehold is owned by one of the major landowners – the Howard de Walden Estate, the Duke of Westminster, Lord Cadogan et al.
Part of the reason people like to live in these buildings, apart from their architectural beauty, is that they are maintained regardless of cost. Lessees in the building share the costs of upkeep, so the look and authentic period feel of these (often stucco-fronted) buildings is maintained.
Luckily most who live in these buildings can afford to. But if you want to buy a flat here you’ll have to prove to the freeholder that you can afford to maintain it.
Almost all buyers have to provide a personal, bank and professional reference to the freeholders to be “allowed” to buy a flat in their building.
These last archaic requirements are withering somewhat as lessees buy their own freeholds. But even if you do own your own freehold, you will be subject to your ex-freeholders’ own “Estate Management Scheme”, set up to again make sure cycles of maintenance are carried out – so that your building doesn’t become the rotten tooth in your terrace.
So once you’ve graciously proven to your landlord that you can afford to buy a set number of years in their building, you then set about paying to keep it in tip top order. Not a bad deal if you’re a freeholder.
There’s more. If the set number of years you’ve bought in the building isn’t enough to see you out, you have to engage in an esoteric process to buy an extension. This again not only lines your freeholder’s pockets, but pays their costs too.
The inequalities continue. Let’s compare two similar flats in adjoining buildings on a well known (charitable) estate located near Horrids.
An estimated 20 per cent of leases on this estate run out in September 2015, so they have less than four years left.
One building is lived in by an elderly Dowager Countess who’s lived there for over 60 years. The adjoining flat is owned by a Russian commodities trader who bought the flat two years ago.
Given the good Lady has spent most of her life helping upkeep her freeholder’s investment, you might feel she’d be entitled to a discount. Not a bit of it – she has to pay exactly the same as her recent neighbour.
And there’s more. Try, say, enhancing the value of your freeholder’s investment by doing some work that’ll improve it. Most freeholders in central London will charge you for the privilege.
The old fashioned method is to charge you a “license fee” equal to half the uplift in value of the property, less the cost of doing the works. This can be pricey, given the costs and potential uplift. Just ask one of the rich developers you see lunching in Knightsbridge.
I’m not finished yet. A friend recently bought a flat on the same (supposedly charitable) estate, as a rental investment for his kids. Again, it’s commonplace to charge lessees for the luxury of renting a flat out and vetting the tenants. After all, the estate owners don’t want just anyone living in their building.
But in this particular case, after the flat was bought, the landlord appointed a new managing agent for the whole of the estate.
This agent evidently felt they required an impressive start in the search to make their new masters some more money. What they spotted was a “loophole” in many leases – many didn’t actually specifically state that lessees had access to the gardens their residences overlooked.
The agent apparently having pointed out the anomaly to their masters, it was suggested that a modest fee should be required to allow insertion of the necessary clause into the leases.
Except that there’s no such thing as a modest fee, even if two to six per cent of capital value could appear “modest”. With values climbing well into the millions, such payments are well beyond most.
Ed Mead has been an estate agent in Chelsea for over 30 years. He sits on the Board of the Property Ombudsman and has written about property for the Sunday Times and the Telegraph. He’s never afraid to say what he thinks and is a tireless campaigner for higher standards in estate agency.
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