The video produced and shared via the HP Facebook page may have expanded interest in buying the Freehold but has engendered misplaced doubts in the whole objective of acquiring the freehold.

It would have been a sensible first step for us to have been contacted to discuss the project. We have  seven years of experience contributing to new legislation and helping to lobby in support of legal changes. Some of the misunderstandings in the video could have been avoided.

To take these misunderstandings in reverse order. The video raised the liability issue if an accident on the beach path, not the fault of the person, led to them suing for compensation. In fact, such a liability would apply to any accident on the site, not just the beach. It is technically correct that the Freeholder is ultimately responsible but, in the real world, the liability stays with the management company and will, of course, stay that way in the future. HP RTM’s agreement with Avon (clause 4.1) indemnifies Avon against any such claims. While it is right that the liability would switch to the Freeholder if HP RTM went into liquidation, this would not occur because the agreement requires HP RTM to carry Public Liability Insurance of £1m. Above that, legal costs are an allowable expense within the Service Charge, enabling Avon to recover the money from leaseholders if HP RTM failed to have the insurance in place. Once we purchase the freehold we would need to keep such insurance current, paid for by leaseholders as it is now.

The liabilities for major maintenance was also mentioned. We addressed these concerns in recent member mailings, as the Freeholder is able to recover these costs, in full, from Leaseholders. For both major planned and unexpected costs and accident liabilities, the situation after the Freehold purchase would effectively be the same as now.

Other concerns raised are focused on the potentially high legal costs of the freehold purchase. This is something of great concern to us as well. The reason we suspended the attempt to buy the freehold under the old legislation, was that legal costs would have been much too expensive for us to succeed. Members agreed that we would suspend the attempted purchase while new legislation, based on Law Commission recommendations, was put in place. Recommendations designed in part to reduce ballooning legal costs. It is why we concentrated on contributing to the Law Commission report and then lobbying the UK and Welsh governments to implement the LC’s recommendations. The new law, which passed in July this year, before the election, left some of these recommended legal changes out. However, the new Labour Government committed, in the Kings Speech, to draw up further legislation, this year, to fully implement the Law Commission recommendations. While further changes are coming the 2024, the new Leasehold and Freehold Reform Act has made important changes that are planned to drastically reduce legal and other costs. These include:

• Freeholder to be responsible for their own legal costs, probably the most important change to eliminate frivolous appeals designed just to inflate legal costs.

• Minimising potential for freeholder appeal from the Tribunal to the law courts, designed to exclude frivolous appeals and minimise legal costs. Ministers yet to specify the details of how this will work.

• Leaseholders (not Freeholders) empowered to purchase the whole site, not just the buildings, or to purchase only those elements they wish to buy. In our case this would mean we could, if we wished, exclude the beach from the purchase.

• Removing estimated future development income (marriage value) from the site valuation

• Giving the minister power to specify key elements of the calculation a tribunal will use to set the purchase price of the freehold with the stated intention of significantly reducing the price. We are still waiting for this announcement

Over the coming months, it is expected that UK and Welsh Ministers will publish the detailed secondary legislation (statutory Instruments) needed to specify the procedures. This will include: how support is demonstrated, how restrictive legal appeals will be, and how price is calculated. As we stated in our recent publications, we will get detailed legal advice on likely costs once this information is available. Once we have reliable estimates of the legal and all other costs, we will finalise a prospectus for members to decide on what to do.

Only when this information is available, will members be in a position to decide whether we should proceed or not with the purchase immediately, or choose to wait for the additional legislation promised. They may also decide that the costs are too great and accept defeat. In such a circumstance we would arrange to return funds back to those members who have contributed. It is essential to recognise that before a purchase process can proceed, a majority of leaseholders will have to sign and confirm their full consent to the collective purchase.

Members have approved the co-operative legal structure, which will be registered once it is agreed by members that it is practical to proceed. The co-op will then purchase the freehold on behalf of leaseholders. Once the process has been completed, members will elect the board to manage the site. It is likely there will be significant cross over with the existing, elected HP RTM Board. Our campaigning role will have come to an end and the Collective Freehold Company will fold. Any remaining assets will transfer to the Co-operative.

It has been a long frustrating slog to get to this position. Many leaseholders who have purchased in the last few years, do not necessarily have a full understanding of the issues. Giving the opportunity to buy is getting closer, we need a drive to recruit new members. We will be calling on leaseholders door to door to discuss, writing to leaseholders not resident at HP and holding a series of face to face and online meetings, bloc by bloc, to discuss the details and next steps.

 

Hayes Point Collective Freehold Committee

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