Freeholders in chains

When is a freeholder not a freeholder? In 1987, writer Peter Nicholls paid the Grosvenor Estate £22,000 for the freehold of his 1960s Belgravia mews house and was expecting the rights and freedoms that enfranchisement usually brings a houseowner. But after the purchase had gone through he was astonished to discover he still needed Grosvenor's permission to alter his property. He also still has to pay service charges. Furthermore, under current law he no longer has the right he possessed as a leaseholder to challenge those charges.

Seven of the nine £600,000-£800,000 houses in Nicholls's mews are now freehold, but they all come under Grosvenor's Belgravia estate management scheme, which entitles Grosvenor to charge houseowners for a mews warden along with street cleaning and lighting. Nicholls currently pays £180 a year, but if the sum goes up he can't, as a leaseholder could, take Grosvenor to a leasehold valuation tribunal (LVT) to challenge the increase. If he doesn't pay within 21 days, Grosvenor is entitled to put a charge on his property. When he built a roof extension, as well as obtaining local authority planning permission and paying his own architect and structural engineer, he had to submit his plans to Grosvenor and add to his costs by employing a Grosvenor surveyor. Nicholls is outraged: "You pay £22,000 to enfranchise your house and find you've bought nothing."

Although 1993 legislation effectively prevents any new estate management schemes being introduced, a number of previously existing schemes still operate on London estates, enabling the original landlord to maintain control.

Jack Jones (not his real name) bought the freehold of his £225,000 1960s terraced house on the Dulwich Estate for £450 in 1980 but found, under the terms of the Dulwich Estate Governors' EMS, that he "no longer [has] the rights that a leaseholder has". He too pays a service charge, which varies (£250 last year, plus £186 for road repairs), but has no right of appeal to an LVT. He too risks a charge on his property if he doesn't pay. And he is subject to planning controls more stringent than his local authority's, which even stipulate the colour of his front door. "I'm not a freeholder," he says wryly; "I'm an enfranchised owner."

Baroness Gardner of Parkes is concerned about the principle of these schemes. She has established that freeholders do have the right to go to an LVT to ask for the terms of the scheme to be changed. "This point of clarification has been really valuable," she says. "It costs a maximum of £500 to go to an LVT and the tribunal is meant to be simple, you shouldn't need to hire a solicitor."

Nicholls is unconvinced. "If you go to the LVT, the Grosvenor Estate will turn up with 20 solicitors. For one individual, it's impossible." Indeed, when the Dulwich Estate went to an LVT to vary the terms of its scheme in 1997, it hired a QC, while the freeholders could not afford representation.

Peter Haler, of the Leasehold Advisory Service (Lease), which advises on LVT applications, agrees with Nicholls. He would categorically not recommend taking on a company like Grosvenor without a lawyer. Besides, there's no certainty of winning, since estate management schemes can usually be justified as preserving the environment: "Principally it's of benefit to the residents," claims a Grosvenor spokesman. "It's maintaining the environment and the fabric of the buildings." And he's echoed by John Wylie of the Dulwich Estate: "Rights and powers are conferred on the managers to conserve the amenities of the estate for the common benefit."

Haler argues that what freehold houseowners need is the legal right they lose when they stop being leaseholders: the right to question service charges. "You can only go to the LVT to challenge the content of an estate management scheme. You can't challenge the cost."

The good news is the Government has now amended the commonhold and leasehold reform bill. When the bill is finally passed by Parliament (expected next month) freeholders under estate management schemes will gain the right to challenge service charges at an LVT. But the law probably won't come into effect until 2003. And anyway, will it be enough? Houseowners Nicholls and Jones would like the Bill to outlaw estate management schemes altogether. They want " freehold" to mean what it says.

Leasehold Advisory Service: 020 7490 9580 or e-mail info@ lease-advice.org