The ‘crooked’ landlord whose leases had a £52m catch
Huge ground rent DOUBLES every decade
A LANDLORD has been accused of exploiting leaseholders in a block of flats after billing some for thousands in annual ground rent that doubles every ten years – eventually leaving a bill for millions.
By the time the lease on one flat bought for £58,000 three years ago ends in 2110, the current yearly rent of £8,000 will be £8million.
Another owner pays £3,200 in ground rent, meaning when their lease ends in 2151, it will have reached £52,430,000.
Other tenants, however, only pay a set annual ground rent of just £12.
Martin Paine, director of Mercia Investment Properties (MIP), which owned the freehold of Blythe Court in Coleshill, Warwickshire, has been called a ‘crook’ in the Commons.
The firm’s management of the block is said to be one of the worst examples of a freeholder imposing ‘unjustified and onerous’ terms on buyers.
But Mr Paine enjoys the spoils of his property investments with his wife Margaret Anne Kirmond at a gated barn conversion in the idyllic Cotswold village of Lower Slaughter, where the average house price is £867,000.
MIP, which says it has tried to help owners with any issues, sold the freehold for £180,000 to an undisclosed buyer on Thursday. But the auction details exposed the varying ground rents charged to owners of near-identical flats.
The firm is accused of imposing complicated leasehold arrangements that even conveyancing solicitors struggle to understand.
In several cases at Blythe Court, the firm legally granted owners an ‘informal’ lease extension, with terms stating the annual ground rent would double every ten years. But in at least two cases, the doubling did not begin with the extension as leaseholders expected, but was imposed retrospectively to when the flats were built in 1961.
Last night, Tory MP Sir Peter Bottomley called for a change in the law to prevent landlords exploiting leaseholders and leaving them with spiralling bills.
Social worker Kadian Kennelly, 36, purchased her flat at Blythe Court as a first-time buyer in 2015, and was expecting to pay £250 in ground rent. So she was shocked to receive an email shortly after moving to tell her the annual amount was £8,000, because it had doubled each decade since 1961.
She said: ‘It was just ridiculous. I was really shocked.
‘Since then it’s just been hell. It has had a significant impact on my mental state. This is just blatant exploitation of obscure legal rules.
‘Now the freehold has been sold, I am hoping we get fairer terms.’
Sir Peter called for a proper enquiry into the controversial leasehold practices.
Referring to Mr Paine, he added: ‘If what he has done is not criminally crooked, the law needs changing. He has caused upset, alarm and financial loss to leaseholders, to solicitors and to insurance companies.
Sir Peter previously called Mr Paine a ‘crook’ in a House of Commons debate on leasehold reform.
Leasehold law experts said Mr Paine’s practices appeared to be
legal, but said such behaviour was morally wrong. others pointed out that the liability for not being aware of clauses in lease agreements belonged to the buyer’s conveyancing solicitor.
Martin Boyd, of the charity Leasehold Knowledge Partnership, which has worked to expose the plight of those at Blythe Court, said: ‘Leaseholders at this block have been put through misery as they have faced one of the worst examples of a freeholder trying to impose unjustified and onerous ground rent terms.
‘It seems that too many conveyancing solicitors have missed the way in which the freeholder has introduced ground rent terms during a lease extension. It shows why more protection is needed.’
Last night, Mr Paine said the retrospective doubling of the ground rent was not hidden from leaseholders but was a‘a plainly worded clause that was approved by the solicitors of the tenant who took the extension. the clause is neither unique or unusual and was recommended by our lawyers’.
He added: ‘We have been working with the residents at Blythe Court since February 2016 and openly agreed a dialogue with the leaseholders regarding payment of their ground rent.
‘For two years we have been in constant negotiation with tenants and their solicitors and have provided them considerable support.’
He said the rent for Miss Kennelly’s flat had been waived for two years, and for a flat with a ground rent of £2,800 for the past year.
A spokesman said that the calculations for ongoing ground rent did not account for inflation.
In a statement, MIP said: ‘Mercia Investment Properties has endeavoured to be fair and open about resolving issues with tenants.
‘the company and its employees adhere to professional standards and endeavour to act with integrity at all times.’