A group of flat owners have been left “distraught” after they had to pay £55,000 to buy back their freehold after they lost it due to poor practice of property agents.
The Brighton neighbours have called for stricter regulation of property agents to be introduced quickly to avoid the same happening to others.
Stuart Martin bought his flat two and a half years ago, and quickly became concerned about the quality of the repairs which were taking place in the building.
Alongside nine other flat owners, he was a director of the private limited company set up to manage the building and its freehold, which is a property owner’s share of the land and building which their flat occupies.
The group hired a managing agent to act as the company secretary.
However, Mr Martin discovered that the company had in fact been dissolved in 2016, meaning they were no longer owners of the building.
The neighbours in Brighton were left ‘distraught’ by the situation
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He also found their insurance and fire alarm contracts had lapsed.
He told the BBC: “I felt like I’ve been completely ripped off. Then having to tell everyone else in the building, it was really not a nice situation for me.”
A company is dissolved if it fails to file accounts with Companies House three times in a row.
When this happens, all assets, including freehold, are returned to the Crown.
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The flat owners have called for stricter regulation of property agents to be introduced
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As a result, Mr Martin and his neighbours had to pay £5,000 each, as well as solicitor costs and legal fees, in order to buy back the freehold.
He added: “People didn’t have that money, they were really distraught. Some of them had to borrow money from family, some of them had to take out personal loans.”
Julian Clark, who has owned his flat for 18 years, also said he was not aware the company, of which he was a director, had been dissolved.
He said: “It’s been stressful, it’s been very expensive. We are all trying to claim some money back from the old managing agent but we haven’t got very far.”
Head of property litigation at Slater Heelis solicitors Daniel Stern said property owners were vulnerable to exploitation due to the lack of regulation.
He added: “Anything which affects one’s property which isn’t regulated is at serious risk of being misused or abused by individuals in the marketplace who think this is an easy way to make money and they don’r actually have to honour their duty of care to the residents.”
The Government has assured that it remains committed to introducing stronger legislation in order to hold managing agents to account.
In July a Managing Agents Regulation Bill which includes mandatory professional qualifications for managing agents was introduced in Parliament.
It would also see a code of conduct and a new requirement to be registered with a government approved redress scheme to handle complaints independently.
The Ministry for Housing, Communities and Local Government said: “We’re also giving people greater protections over their homes by bringing in stronger powers from the Leasehold and Freehold Reform Act.”
Although the Leasehold and Freehold Reform Act 2024 became law last year, it has yet to be brought into force.
It aims to increase the rights of leaseholders by making it easier and cheaper to extend leases or buy freeholds as well as banning new leasehold properties.