Flat owners beware: a grumpy freeholder can be big trouble

A new acronym is about to emerge kicking and screaming into the property world. Carla - the Campaign Against Residential Leasehold Abuse - is being born out of the anger and frustration felt by flat owners towards their landlords. The Leasehold Reform Act became law two years ago, but some landlords are using it as a stick with which to beat their leaseholders.

It goes like this. You are the owner of a flat where the freeholder charges exorbitant prices for repairs and slaps on a 12 per cent fee. When you complain he sends you a solicitor's letter and adds the cost of that to your bill. Now you decide to use the leasehold enfranchisement process to be rid of him. You employ a surveyor to value your freehold and write to inform your landlord that you are starting enfranchisement proceedings. You might then expect a period of difficult negotiations leading to a settlement in the leasehold valuation tribunal. But the chain of events could be far more unpleasant. You may be informed that the freeholder is about to embark on repairs costing as much as pounds 100,000. The sum might wipe out the funds for the freehold purchase.

You reject this as unreasonable and receive the threatening Section 146 notice. This is the point at which flat owners must band together fast. Freeholders are increasingly using this tactic, according to lawyers, surveyors and advisers who specialise in leasehold property. It is expected to be highlighted in the annual report of the Leasehold Enfranchisement Advisory Service, due to be published this week.

The biggest threat for the leaseholders is that if they refuse to co- operate with the works, the freeholder may start proceedings to forfeit their lease. Once that has happened, the individual cannot take part in an enfranchisement action unless he or she applies to a court. In addition the freeholder's solicitor usually threatens to inform the mortgage company as well.

Tim Curran is a surveyor specialising in leasehold reform work and is the author and publisher of the manual Buying Your Freehold or Extending Your Lease. He has analysed eight enfranchisement cases and found the average cost of buying the freehold is pounds 763 per flat. The cases include converted houses in suburban London, Brighton and Bournemouth.

Mr Curran says enfranchisement works best in small blocks, where the tenants are genuinely committed. Two-thirds of those involved in the enfranchisement process live in blocks of six flats or less.

David Marcus, a leading property lawyer with Franks Charlesly, is acting for a number of people who are alleging their landlords have instigated expensive building works so that the tenants will not have enough money to pay for the freehold. He says: "The issuing of a Section 146 notice does not prevent you putting in a claim to enfranchise, but you must do it before the Section 146 notice expires. That means you have to move fast."

But where do you turn for advice? Few solicitors and surveyors have genuine expertise in the leasehold laws. Peter Haler of the Leasehold Advisory Service says: "Not a day goes by in which we don't take a call from a solicitor or surveyor who has taken on a case and doesn't know how to do it."

Mr Haler says more and more people are applying to buy their freehold, encouraged by the first batch of cases settled under the new act. One growing group of applicants consists of residents of sheltered or retirement housing schemes, where the service charge is often a bone of contention. The first such case, due to be heard in Birmingham on 16 October, involves the Coniston Grange development in Kenilworth, where elderly residents have had their lift closed down and their emergency alarms switched off in a long-running dispute with the freeholder.

Tim Curran says one effect of the Leasehold Reform Act has been to make prospective flat owners study their leases more carefully. Most first- time buyers are questioning any lease with less than 90 years to run. Almost all those applying for lease extensions (the alternative to buying the freehold) are doing it in order to sell their flats.

When Alison Vickers got a new job in Oxford, she and her husband, Tim Wainwright, needed to sell their flat in Chiswick, west London. The lease of 69 years, which was also badly worded, made the flat virtually unsellable. They asked Mr Curran to negotiate with their freeholder - the Borough of Hammersmith and Fulham - and ended up paying pounds 5,500 for the extension. The fees rose as a result of the rewording of the lease and the fact that they had to pay their purchaser's legal costs. "If you can, get the whole thing sorted out before you are trying to sell," says Tim Wainwright. "We were somewhat naive. Now we're renting and it's bliss."

The Department of the Environment has commissioned research into the operation of the new leasehold reform laws. In the meantime, aggrieved leaseholders may turn to Carla in the hope that there is strength in numbers. Those contemplating buying a flat might welladopt the motto, look before you lease.

The Leasehold Enfranchisement Advisory Service 0171-493 3116; Tim Curran of Leasehold Enfranchisement Limited 0181-742 8829; David Marcus at Franks Charlesly 0171-353 1588; Carla 01787 462787