The Essential Guide
By admin | September 10th, 2009 | Category: Past Articles | 4 commentsSince making the ”TheTruthAboutSolitaire’s essential guide to dealing with the Consensus Business Group of Property Management Companies ” available for download. Many visitors and supporters have helped support TheTruthAboutSolitaire website, by purchasing the guide – so a very big thank you to you all.
We have also seen quite a few purchases from residents in the Hampshire area (who are located very near to Peverel’s head office) and we therefore assume that this guide has been purchased on behalf of Peverel, so that they can find out just what we are advising visitors to do.
Not that we are worried about them possibly having a copy of this information, as it goes to show that they take our site very serious, if that’s deemed to be the case.
We trust that the guide goes some way to assisting with dealing with the Consensus Business Group of Property Management Companies and will be providing updates to those that have already purchased it, when more information is gathered.
If anyone has any information that they feel would be beneficial to this guide, please let us know and we’ll include it.
I am happy to supply, for inclusion in the guide or indeed for any other purpose, the direct mobile phone numbers of the Senior Executive in respect of both Solitaire and Peverel, if this will help leaseholders achieve effective communication?
I too am happy to provide details of the Peverel Group Directors who have a responsibility and continually FAIL to understand the organisational objectives of each of their businesses. This issues is something that is at the CORE of the pathetic senior management of Peverel. No wonder Mr Middleburgh has such a difficult time when he is dealing with a group of individuals at Peverel Group who CONTINUALLY fail to address the problems.
I totally agree, perhps it’s not the people in Peverel Luton we should be looking at, but the idiots that are trying to control them from Hampshire…
If they had more cusomter focused managers who understood the business rather than paper pushers we maybe would have more action and less corporate speak
hi
maybe something in this lot that will help …
it was done for some mp’s and a pro bono lawyer acting for a http://www.carlex.org.uk member
richard
ps brilliant web site …
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Note on Factors or Property Managers [& Peverel]
by Eur Ing Richard Townsend-Rose MA CEng MICE, August 2009
Apologies to the readers of this note: some of it [viz relating to my own experiences] is written in the first person, but much of it is written more formally. Although some of it relates to Peverel Scotland Ltd and or Hacking & Paterson, much of it relates to factors and property managers in general.
History & Background.
Factors traditionally acted for landlords: firstly collecting rents, and secondly from the proceeds, spending [as little as possible] on upkeep, maintenance and running costs. Their income was derived as a “factor” or proportion of the net income. The target was therefore to maximise rents and minimise outgoings.
Post the second war two things happened: first was the control of rents, and second was the adoption by the populace of the Thatcherist concept of becoming an “Owner Occupier”.
The impact on factors was such as to force them to alter their business: most expanded their activities to become estate agents, and letting agents, offering factoring simply as a service.
McCarthy & Stone introduced a new concept in providing “owner occupier” homes for older people. When someone bought a McCarthy & Stone property, they were secure in the knowledge that it would, for a modest monthly fee, be managed and maintained. The firm expanded rapidly in the south east of England.
Due to the partners [and it would appear their families] falling out with each other, and the subsequent hiring of senior staff who can only be described as “undesirable”, McCarthy & Stone managed to get into a situation where their landbank was inadequate to support their new building activities. Typical of the undesirable things done was to include within the deeds for new properties clauses that when sold, a premium of ??% of the sale value was to be paid to the property management arm. Another undesirable item was to include within leasehold or ground rent burdens the requirement that insurance was to be purchased through the leaseholder.
The in-house Property Management Division of McCarthy & Stone was sold in a management buyout [excluding the above mentioned undesirable staff] being financed by a group of Angels and was named Peverel. It had two main branches one in England and one in Scotland.
The first non McCarthy & Stone estate that Peverel Scotland was appointed to manage was the 66 flats comprising the Riverside Park estate. Although the removal of previous factor Hacking & Paterson and the appointment of Peverel was done entirely within the remit of the deeds, the process was NOT without its problems. There were two main problems: first was that Hacking & Paterson simply “refused to go”; second was that one particular resident continually disrupted public meetings of the residents to discuss the matter. This person was a year or so later discharged from the Police Service allegedly for bullying.
From 1994 to 1999, Peverel, run by its managers, provided a fantastic service: nothing was too much trouble, and prices were lower than under the Hacking & Paterson regime.
In 1999 or therebouts, the funding Angels sold out to an american firm called Holiday Retirement Inc. of Oregon. This firm had been subjected [unsuccessfully] to several senate investigations into unfair practices. The new owners of Peverel discharged the services of the managers who had formed the buyout team by various means including payment of a large lump sum to some of them, and promptly hired the undesirables mentioned above.
Accounts were simply not provided for the next few years, and charges rose rapidly. In 2002, it became clear that the Peverel were as they say “up to no good”. It emerged that the residents funds which were mostly collected well in advance of payment to contractors [most of whom were all bitching about late payment] were being used to fund property acquisitions especially leasholds and ground rents.
To cut a long story short, Barclays bank were persuaded to “pull the rug” and they did so in December 2006, appointing a Belgian firm of liquidators / receivers. They decided to assist Barclays in selling the business as a going concern and took Holiday Retirement Inc’s US and Canadian property portfolio in settlement.
Vincent Tchenguiz’ Consensus Business Group purchased the Peverel group companies at a knock down price, and became a major player in the Property Management market. They have recently acquired Humbert’s property management division.
The principles of Factoring or Property Management
The overriding general principle for many factors is to try and leverage as much cash as possible out of the properties they manage. This is based on the fact that most people, especially the more vulnerable sections of society namely the poor and to an ever increasing extent the [mainly female] elderly population are nether able to make any sort of assessment of “value for money”, nor stand up for themselves – especially in court.
What is important to a factor therefore is to increase costs to the point where the owner occupiers start to feel the pinch irrespective of the actual service delivered. The general rule appears to be that if someone is paying say, £1,500 annually in council tax, they should be able to pay the same amount in “management charges”.
Details of some of the common “Scams”
Setllement Discounts
Most factors have a core of maintenance contractors and suppliers upon whom they rely.
These contractors render their invoices in the normal way. However, although it is common in the construction industry for a client to “nominate” a sub contractor and require the main contractor to employ him at a given rate of uplift (normally 2 or 3 %), factors are known instead to make a deduction from the payment due to a maintenance contractor for example for “prompt payment” and instead of crediting the residents they keep the deduction made.
This is unethical and contrary to most deeds which mention “reimbursement of cost”. “Cost” means the NET monies paid out – unless otherwise agreed. There are innumerable court caes to demonstrate this.
As most of these monies are subject of VAT, it would appear that most factors are therefore infringing the VAT regulations with regard to passing on costs.
The fact that the factors present the costs as the GROSS ones rather than net costs as they ought to do means that in fact they are making a “Fraudulent Misrepresentation” for which, under civil law, exemplary damages may be ordered by the courts in addition to costs and reimbursement of the defrauded amounts.
Settlement discounts are known to range from a just few percent to as much as 40%.
Insurance Brokerage
Most of the larger factors run their own brokerage.
Peverel have TWO in house brokers – Kingsborough belong to Peverel who place the business with {Consensus Business Group’s broker ??} Berkeley Burke [Leicester] who place the business with Norwich Union [last I heard].
There are also concerns that Peverel issue a “back reinsurance” clause which means that the insurance company is obliged to “reinsure with the insured”. It is a common practice – but abhorred in civil construction, where these days the wise client insures for 100% of the insurance risk on a project. In Stirling when the roof of a block of flats managed by Peverel came off in a serious storm, Peverel claimed that the insurance did not cover storms for which the met office had not issued a storm warning. The residents had to pay. Note that Berkeley Burke have a reinsurance arm. In Stirling one resident was able to motivate the others to change factor, but the hell that this retired Detective Inspector went through was unreal. It also led to me Peverel raising an injuction to prevent me communicating with anybody. This was determined by the Court of Session some four years later (as Peverel went bust) that it was contrary to my Human Rights. Peverel’s costs were some £0.3 Million. I was on legal aid – my contribution £140.
Damage caused by a contractor appointed by the factor should not have to be paid for by residents. However Peverel are known to introduce the concept of “fair wear and tear” for roof’s etc which have been damaged by their contractors thus requiring residents to pay for repairs (on which of course settlement discount etc is levied). An estate in Edinburgh has just been subjected to this treatment.
Overall therefore insurance costs are often far higher than is reasonable.
Insurance Valuation and Risks
There is an occasional need on to ensure that the reconstruction valuation is up to date. On an annual basis this can be increased in line with the construction price index. Every decade or so, this needs reaffirmation.
Insurance relates not only to the costs of reconstruction but alos to the risks which are insured. The risks which are to be included are specified in the deeds. The insurable risks provided for by Peverel are often at considerable variance to those specifed in the deeds, and are often of no benefit to the owners e.g. loss of income to the Factor.
The charge for assessing the reconstruction costs is levied too often, and often at a rate in excess of the RICS scale fees. Peverel persuaded the Sunday Express to publish an article on June 21st slagging off the bulk of factors with the headline: “factors failing residents”, Peverel then used this to support their valuation efforts which raised them estimated £20 Million – and that every second year !
Insurance Excess
On insurance claims the excess usually forms part of common charges shared out between all the residents, rather than being charged to a single resident.
On a recent claim, Peverel acted as follows:
i) Attempted to charge the resident causing the flood some £180.
This was resisted and it was immediately withdrawn.
ii) Some months later, attempted to charge the flooded resident £300. Again resisted.
Very often the amount charged to the Insurance Company is well in excess of the amount paid out in respect of the damage. Cases are known where a factor can use such payments as a sweetner to persuade people to ensure their continued appointment.
Building Regulations and Deeds of Condition
The fact is that many minor changes made to building by factors are NOT subject to regulation by the local councils who administer the building regulations because such changes do not require a building warrant.
Thus planning permissions can be ignored on matters such as the erection of flood lights and satellite dish’s with their consequent running of cables externally, fabric replacement such as external gas meter cupboard doors, and so on.
One particular money earner [See electricity below] is to persude one elderly lady that the stair lighting is “not bright enough”. This is then used as an excuse to considerably to “self instruct” an increase in the installed wattage – and with the new class of lights which is five times brighter, plus a 60 percent increase in wattage and new fittings result in EIGHT times as much light. Most of these lights are PERMANENTLY on.
In fact lighting manufacturers [such as Thorn Lighting] abhor this practice when they could provide lighting that is automatically switchable [the Building Regulations now require that all common lighting to be at least manually switchable]. In the case of Riverside Park, Thorn recommended five no 16 watt circular bulbs in a small fitting with an opal diffuser to replace the original three fittings with surface diffuser each with two 36 watt tubes with ones suited for factory working surface illumination with two 58 watt new style tubes.
So instead of reducing the laod from 648 watts to a switched 240 watts, it was increased to 1044 watts. The installtion was carried out by an unregistered contractor. One who was an accredited member of the NICEIC would probably have refused to execute the works. Noted alos that the “starting current” exceeds the rated circuit capacity under the BS:7671 Requirements for Electrical Installations which is mandated by the Building Regulations.
The net effect is that the owners, who are responsible for ensuring that the property that they [jointly] own, are at risk if a breach of the regulations causes an accident for which damages are awarded for which the insurance company [rightly] refuses to payout.
Environmental Health Regulations
The regulations although enacted some time ago have only recently come into force. However flood lighting remains a concern shining reflected light into bedrooms in particular. Street lighting points downwards and does NOT usually generate reflected light. Increasing power consumption overrides any sensible considerations.
Fear of being broken into is used as a tool to persuade residents not to complain. However, unless the area being lit is continuously monitored said flood lighting would appear to pointless. The police recommend in Greater London triggered lights [and indeed the], whereas
Electricity
Most larger firms of factors “bulk buy” and sell back to the residents under what are known as “Affinity Agreements”. The reason that Peverel just changed from Scottish Power to EDF was probably that I and a few others extracted from Scottish Power a letter stating that an Affinity Agreement existed. It was fortunate that I met the man who when he worked for Scottish Power as a consultant actaually negotiated the deal, and later [in the Old Smiddy pub near to Scottis Power's headquarters] the lady who typed it up.
Most of these buyback agreements seem to have an uplift of about a 40%.
Changing Light Bulbs
The call out charge for an electrician ranges from £25 to £40. The obvious way is an annual “light bulb change” as carred out by most large companies and commercial property managers.When I worked with the Lithgow Electrical Group, we did this for IBM in their summer shutdown. The biggest prpblem was to stop old tubes from being resold to the locals in Greenock. The solution was to break every tube and weigh the skips bepfre and after filling ….
However, Peverel can easily find an elderly lady to say “what a waste” and the cost of a single light bulb goes from £1 to between £26 and £41 at a guess….. Riverside Park and G&B Electrical again.
Door Entry Phone
This is probably one of the easiest scams to set up, but also to dismantle. It is similar in nature to the “photo copier lease” scandal of the 1980′s.
It consists simply of “leasing” the entry phone system to the residents. At Riverside Park, Hacking & Paterson, who were appointed by the developers who were also the builders who had purchased and installed the Door Entry system, added an item to the budget of some £90 per flat per annum within a budgte of about £400. The door entry phone system had been purchased from Chubb, and installed by a sub-contractor. On enquiry, a “lease document” was provided by Hacking & Paterson depsite the fact that Chubb rserve to themselves the right to lease equipment they manufacture when it has NOT been purchased.
Hacking & Paterson, after a short discussion, simply removed it from the items for which they sought reimbursement [viz the factor's charges]. The equipment performs faultlessly twenty years later. Peverel dress the scam up in the form of a high priced maintenance agreement with a group company.
Cleaning
Cleaning is always a contentious item. The industry generally pays cleaners on the basis of the work done as opposed to an hourly rate.
At Riverside park a cleaner was happily employed by Peverel at £3,000 per annum. For the six staircases over 50 weeks that works out at £10 per clean. Allowing for a 20% “administration fee”, thats £8 for a half hour visit. That is a reasonable rate.
It is very easy tio trigger compliants, especially from old peoplle with a lot of time on their hands by asking the “right” question – in legal terms a “leading question”.
This allowed Peverel to sack the previous cleaner and replace her with a Peverel nominated firm increasing the costs from £3k to £6k. Note: this happened some years ago [2003] after which the residents then instructed Peverel to appoint a cleanter of their choice at £3k. Even at £6k the cleaners still get the same money ….
Instructing the factor
The right way
The right way is tedious and requires administration, but in the long run is well well worth it. It is simple, and just requires following the rules set out in the deeds.
At Riverside Park, it requires that a Written Notice of the resolution to cover any intended action [like changing cleaners or light fittings] to be given to all residents, and a vote taken and recorded. It is not illegal to allow people to appoint the person calling the meeting as their proxy and indicate in writing the way they wish their vote to be cast. As long as the required quorum of votes is received, then the resolution can be accepted or rejected.
Other deeds require a firmally elected committee to become directors of a limited company of which all residents are shareholders and thus the proceedings are governed by company law.
The wrong way
The wrong way is what has happened and continues to happen at Riverside Park. A dis-enfranchised policeman and a banker who had to be “let go” [presumably because his talents were inadequate for more senior management] have politicated their way onto an informal committee and have taken it upon themsleves to instruct Peverel almostly entirely on Peverel’s suggested course of action – such as replacement of old lights with new ones that fail to meet the requirements of the Building regulations, and replacement of cleaners etc etc.
There is thus no accountability and costs escalate without any form of control. In simple terms there has been a total failure of the democratic process coupled with a total lack of governance.
Recently the vexed question of painting came up. Painting is required by the deeds to be every fifth year. As it is now seven years since the last (almost pointless painting as firstly no prpeparation wwork was carried out, and secondly the external painting was conducted in adverse weather conditions during the month of November.
Voting manipulation by Factors
Some factors manipulate the votes to suit the answer that they want. Tricks include counting uncast votes which ever way that they want. This is done by wording the question “correctly”, and ignoring anything in the deeds about quorums and majorities. Peverel ran this trick recently at Riverside Park. The result is that no painting has been carried out for seven years, and bearing in mind that the last painting executed under Peverel’s supervision was effectively useles, many residents have been forced (contrary to the deeds) to replace their windows. The steelework is in many places now very badly corroded – viz the original coatings [from 23 years ago when erected] are now visible and raw metal is rusting.
Litigation by Factors
Factors often raise charges which are unfair and unreasonable. See several Glasgow Newspapers in the spring of 2009 when Patricia Ferguson MSP managed to bring the matters to a public head.
The Glasgow Sheriff’s court is almost overwhelmed by cases involving factors suing residents [their clients]. The very sad fact is that the vast majority of people have little or no understanding of the how the civil legal process works. In the small claims court factors are at a huge advantage because they appoint a lawyer who can stick his hand up at the appropriate moment ata hearing, or sprint in from another court, whereas the person sued must turn up and wait for many hours to confirm his or her name and address.
The advantage thus lies heavily with the factor. In Hacking & Paterson -v- Townsend-Rose there were some 35 hearings BEFORE the case came to be heard, following which is was settled “on the court steps” [on the instruction of the sheriff who presumably had a couple of hours light relief]. The result was that Hacking & Paterson walked off the Riverside Park estate, along with a lawyers bill (for which they then sued … thrown out on the first hearing) for an amount in excess of £50,000.
A further point is that the factor is supposed in accordance with most deeds to seek the authority of the residents before commencing what might turn out to be hugely expensive litigation.
Peverel took the unusual step of raising an idictment [viz an injunction] attempting to stop me from communicating with anyone including my MP and MSP with whom communications are priveleged in any event. Their costs were very considerable, and the whole process was ineffective.
Peverel also had two residents [see the "wrong way" above] sue the owner of my flat claiming I was acting in breach of the deeds by working from home [as I have done for many years]. I simply decared that I was living in accordance with the deeds. Case dismissed with costs. My landlord took the high ground, and declined to sue for costs.
Some questions to ask of Factors before appointing them
Insurance: “Who is your broker, and what percentage do you pay ?” Good factors will dela directly with an insurance company and there will be NO brokerage fees.
Electricity: “at what price do you buy electricity ? Please supply copy of agreement” Good factors will deal directly with the power company and there will be NO affinity-type agreements.
Cleaning: “Do you employ cleaners directly, and if not what is the arrangement. Factors who quote “its only £1.50 per flat per week” are to be avoided.
Litigation: “How many cases have you raised in the last ten years ?” Validate this by visiting the listing officer in the local sheriff courts.
A word of wisdom: It is infinitely better to have a higher fee and lower costs. The residents are then in control of costs.
Useful [Useless] Contacts
There are two bodies who represent factors. They claim to “regulate on behalf of”, but in fact this manifests itself as “protect from” the general public. These are:
ARMA – Association of Residentail Managing Agents
http://www.ARMA.org.uk
Note: The current chairman is pushing for regulation at the behest of the smaller firms.
PMAS – Property Managers Associateion of Scotland
Web Site: http://www.PMAS.org.uk
Note: The solicitor who manages the orgainsiation is resisting regulation at the behest of the larger firms.
A much more useful body is the one which regulates its professionals under Royal Charter:
RICS – The Royal Institution of Chartered Surveyors
http://www.RICS.org