Mar House: Leaseholders meeting where leaseholders learned how the former freeholder embezzled £303,000

Mar House, a 7-storey building with nearly 100 flats in North West London, serves as a stark example of the flaws inherent in the current leasehold system. The building has experienced a cascade of systemic issues: from maladministration and questionable financial practices to outright legal violations. Leaseholders faced exaggerated service charge demands, with some bills reaching an astonishing £99,000 per annum per flat. The building’s balance sheets inaccurately claim millions owed by leaseholders to the freeholder, further complicating financial transparency.

Adding to the turmoil, the freeholder misappropriated £303,000 granted by the Greater London Authority (GLA) for a critical re-cladding project. This embezzlement has resulted in a 7-month halt to essential work. Mar House’s situation vividly underscores how the leasehold framework can enable mismanagement, financial exploitation, and neglect of legal responsibilities, leaving residents burdened with constant uncertainty and escalating costs.

 

SUMMARY OF MEETING

(scroll down for full text)

Meeting Context:

• Date & Attendees: Held on 25/09/2024, chaired by Michael Maunder Taylor of Maunder Taylor, the managing agents of Mar House. Attendees included leaseholders and residents.
• Purpose: Summarize key updates on management, cladding remediation, finances, and ongoing claims, following the distribution of a large information pack.

Key Updates:

1. Management Progress:
   • Maunder Taylor was appointed as managing agent in May 2023; however, progress has been slow due to complexities in the freeholder's (Old House Group) insolvency.
   • Receivers (handling property issues) and administrators (addressing company insolvency) have jointly instructed Maunder Taylor since May 2024.
   • Receivers are now independently managing building-related matters, which has brought impartiality but also delays in briefing them on past issues.
2. Cladding Remediation:
   • Background: Delays due to unpaid contractors, administrative issues, and missing funds.
   • Missing Funds: £303,000 from the Greater London Authority (GLA) was embezzled by the Old House Group; this issue is under legal investigation.
   • Current Status:
     • A new client account for cladding funds has been established by Maunder Taylor.
     • Contractors (TNT Facades) were paid overdue invoices except for the embezzled amount. They demand full payment before returning to work.
     • GLA is awaiting Treasury approval to provide further funding or advance remaining grant funds.
     • Building panels have been removed, reducing fire risk, but further assessments of compartmentation between building pods are needed.
3. Freehold Sale:
   • The freehold is being sold by the receivers, with a bid accepted.
   • Uncertainty remains about leaseholders' right of first refusal under the Landlord and Tenant Act.
   • Any sale must align with the GLA's cladding remediation responsibilities and funding agreements.
4. NHBC Claims:
   • Cladding: Settlement funds received but await GLA guidance on allocation.
   • Waking Watch Costs: NHBC is reviewing liability for these costs.
   • Water Ingress & Roof: Ongoing investigations with documentation under review.
   • Gas Issues: Initial certificates were missing; now located and under NHBC review.
   • Fire Stopping: Three claims, including one on pod compartmentation, require further intrusive surveys.
5. Fire Safety:
   • Interim fire protection measures remain, including a waking watch, until compartmentation and communal fire door issues are resolved.
   • A move to a “stay-put” fire policy depends on satisfying London Fire Brigade's concerns.
6. Delayed Budget Issuance:
   • Budgets for 2023 and 2024 were issued late (in the third quarter) due to administration changes in the Old House Group.
   • Service charges for the first three quarters of 2024 were sent following budget drafting in April.
7. Invoice Corrections:
   • Recent invoices omitted year-end credits for March 2024 due to staff holidays and deadline pressures. Corrected invoices with credits will be issued shortly.
   • Leaseholders have received:
     • A budget vs. expenditure report.
     • A balance sheet as of March 31, 2024.
     • A formal Section 20b notice under the Landlord and Tenant Act 1985, explaining delays in service charge accounts.
8. Service Charge Account Concerns:
   • Maunder Taylor raised issues with the March 2023 accounts prepared by a previous firm, noting:
     • Disallowed cost items in 2022 accounts based on an expert determination.
     • No adjustments made for 2022 findings in the 2023 accounts due to lack of instruction by the Old House Group.
     • Balance sheet discrepancies, with large sums allegedly owed by leaseholders and to the freeholder deemed inaccurate.
9. Forensic and Service Charge Accounting Review:
   • A forensic accountant was appointed to review the 2022 and 2023 accounts, addressing:
     • Errors in balance sheets.
     • Invalid claims by the Old House Group under service charges.
   • Initial findings confirm balance sheets for 2022 and 2023 are incorrect.
   • The review will not reverse expert determination findings but aims to provide accurate financial statements.
10. Next Steps:
    • Service charge accounts for 2024 cannot be finalized until corrected opening balances for 2023 are determined through the forensic review.
    • It is expected that many non-recoverable expenses claimed by the Old House Group will be removed in the revised accounts.

 

FULL TEXT, partially edited for brevity

Good evening, everyone, just for the purposes of the recording I'm Michael Maunder Taylor I'm one of the three partners at Maunder Taylor and we are the managing agent of Mar House. The purpose of this meeting was to try and assist with conveying all of the information that was given in the rather offensively large pack of information that went out late last week. 

We appreciate there was a lot of paperwork to work through, there's a lot of information in there so I thought it's the main aim of the game tonight is to just sort of summarize it at a summary level. There will be time for questions and answers a bit later on and I'll address anything I can. 

I just want to address the fact I think there are some people in the meeting tonight that are leaseholders and there are some that might be residents and I think they're joined because they're interested in the building updates that impact residents but I don't know if they're paying a service charge so there's going to be sections of the meeting that deal with costs and service charges that may be of no interest to them. 

We have wanted to do a meeting with residents with leaseholders since we were appointed in May 2023 so I want to kick off with an apology that it's taken this long to organize something.

From our side and first-hand experience of dealing with the management of Mar House things move painfully slowly and that over the last year and nearly a half, we have found ourselves in a position where there is really very little information to give to leaseholders on key things that I know you all want to know about. 

We are at the point now where there are really key changes happening and I think there's been enough slow progress to sort of summarize where we're at and as I say it's a lot of it was put in writing.

May 2024 - The freeholder - The Old House Group goes into administration

I'm going to kick off with the Old House Group and the changes that have happened with the freehold company - there were insolvency related problems earlier this year which led to the appointment of receivers - the lender for the Old House Group appointed receivers and the main aim of the receivers is to deal with property related problems in a way that eventually will involve the sale of the freehold with a view to paying off the security the money that was loaned by the lender to Old House Group. So, the receivers deal with property related problems. Shortly after the receivers were appointed, the insolvency problems continued - creditors were pursuing Old House Group for various debt recovery actions and it got to the point where the lender then appointed administrators and the intention and the purpose of the administrators is to handle company related problems and the intention is to realise as much of the company's assets as possible with a view to paying off as many of the creditors as possible in as fair way as possible. So, we have receivers dealing with property problems administrators dealing with company problems and the two teams of insolvency practitioners jointly have continued to jointly instruct Maunder Taylor. We've been acting under their instructions since around May 2024 that in some respects I'm sure some of you will be quite pleased in a way that there's been an outcome where the freehold control and the instructions issued to the managing agent and the instructions issued to the consultants that are handling remediation aspects are now coming from independent impartial people with no prior history with no personal feelings involved and I think from a building perspective purely black and white I think it is a good thing for that lack of history and baggage and personal feelings. 

The consequence to the appointment of outside people is that there has been a significant amount of problems and ongoing matters that they have needed to be briefed on. They've needed to read about a lot of the background information, reports, the documentation that has been obtained over the last few years and really getting up to speed is a process in itself that has taken months so that this has sort of tied into to where we are today from the point of view of the issuing of the service charge budget to replacing various stakeholders on the clouding remediation team to continuing with remediation organization for the roof and the gas and so that this is what has in a way facilitated the very large volume of information that has been recently sent out to you all so I will try and run through these updates in a way that:

• I will handle all the building matters and then
• We will deal with the financial stuff towards the end

In terms of the cladding the administrators and the receivers first had to be cleared with the Greater London Authority (the GLA) who are administering the Building Safety Fund process so they had to effectively swap out the former directors of Old House Group and replace them with the receivers and the administrators. That took some time and there were various meetings to understand why the works had stalled, why the contractor TNT Facades had walked off site.

The simple answer is that TNT facades hadn't been paid up to date - there were three invoices outstanding and there was a concern over Benjamin Stevens who had been appointed by the Old House Group to receive the GLA funding and then to pay it to the various suppliers, contractors, consultants that are involved in the project as and when the drawdowns are made from the GLA fund.

Missing £303,000

There was a drawdown payment of about £303,000 that have been sent from the GLA and the appointment of the administrators and receivers would made at a time where Benjamin Stevens said that that money's been sent back to GLA because they had an issue with a new client account that was being opened. The GLA says they hadn't received it so the money had gone astray. Once we had clarified that the administrators and receivers were involved in the project, they started discussions with Benjamin Stevens and it was confirmed that the £303,000 had been paid to Benjamin Stevens. They had received it and the former director of Old House Group had instructed Benjamin Stevens to transfer that money to a bank account (we aren't sure so I'm not going to speculate over what that bank account was) that had nothing to do with Mar House. Again, I'm not sure what the money was used for, where it's gone. It is now part of a legal process - the relevant investigations are happening.

Editor note: This simply means that the freeholder – the Old House Group embezzled £303,000. We are also in possession of an email where their director has asked Maunder Taylor – the managing agent brought to manage Mar House as a result of out-of-court settlement (Sanctuary Housing vs Old House Group) – to transfer £440,000 held on behalf of the private leaseholders to one of their accounts. Rightfully, MT had not complied with that request, for which they should be commended.

The GLA had been asked whether they will pay a further 303,000 pounds on the basis that there were these difficulties on the basis that it has been pursued legally and on the basis that if it is recovered at a later date, it will be reimbursed to the GLA. The GLA have a procedure on problems of this complex nature where they have to refer it up to the Ministry of the Department of Housing, Levelling Up and Communities and in turn they refer it up to the Treasury Department so the problem has been with Treasury for over a couple of months.

We haven't had an answer. The GLA are chasing regularly, the Ministry is chasing the Treasury. We are all pushing for a response that we know is it possible to just either repay a further 303,000 pounds in order to help facilitate the recommencement of the project or if not out of the balance of funding that has been awarded can we just advance another 303,000 so that the problem still remains but it can be sorted out towards the end of the project.

So, we're waiting for answers. The GLA are as frustrated as everybody else. In the meantime, TNT Facades (the contractor) haven't been paid £303,000. There were also two other invoices that were outstanding. Those two invoices have now been paid.

Shortly after this problem came to light, the receivers and administrators terminated the involvement of Benjamin Stevens, instructed Maunder Taylor to set up a new client account specifically for the cladding. We have done this and we have been cleared with the GLA to hold funds in that account and to draw down payments. One drawdown payment has been made which included both TNT Facades invoices and then some supplier invoices that have been outstanding for a while - so with the exception of the £303,000 TNT Facades have been paid up to date.

They have said initially that they were looking to return to site, they would do an assessment of any repairs that were needed as a result of them being off site for a while and get the site back up to safe conditions. The messages coming from TNT Facades (through CBRE - the project managers of the cladding project) is they want the payment of the £303,000 before they draw an up-to-date timetable and proactively return to site.

So that’s where we are – we are pushing the GLA to get an answer from Treasury so that we can start to move forward.

The other aspect arising from the administrators and receivers is the sale of the freehold. The freehold has been marketed for sale by the receivers and a marketing campaign has taken place. The latest position we understand is that a bidder has put an offer in. That was accepted. We do not know who it is; we've been told they have nothing to do with the former director of Old House Group. At the moment the receivers are seeking legal advice as to whether legal notices need to be served on leaseholders of the building if they qualify for the right of first refusal under the Landlord and Tenant Act. In layman's terms when the freehold to a building is being sold, in certain situations the leaseholders in that building qualify to have the right of first refusal, which is the right to say yes we will buy it collectively at the price that has been agreed and the freeholder would then be obliged to sell it to those leaseholders who have taken up their right. In Mar House’s Sanctuary owns a large number of flats so it’s unclear whether or not the building is qualifying for the right of first refusal and whether leaseholders – including Sanctuary, including their sub leaseholders, and including the private leaseholders are qualifying leaseholders for the purposes of Section 5 of the Landlord and Tenant Act 1987. If the building does not qualify then I am led to believe a sale will take place. The new freeholder will need to be cleared with the GLA to take over the clouding remediation responsibilities. The existing grant funding agreement will need to be novated to them so that the grant funding award is in their name. I imagine they will then decide whether they keep the existing consultants, TNT facades. I imagine any sensible purchaser will recognise the scale of the problems that are affecting this building and that significant changes to the people that are involved in remediation matters immediately post acquisition is probably going to further delay completion of remediation. My expectation is that the purchaser is probably going to be advised to keep people on to see through the remediation and then decide what they want to do with the future of the building if they want to continue owning it or sell it.

At this stage the receivers have said they're not in a position to confirm yet and they know that it's the burning question on everybody's mind including the GLA including the London borough of Barnet. There will be further communication as soon as we receive confirmation of who it is and confirmation that we can update everybody.

NHBC Claims

In terms of the NHBC claims - there was a table included within my management report letter that indicates the six claims that are ongoing at the moment.

The first claim is the external facade claim. This is the cladding claim - the NHBC settled that claim in earlier this year. They have paid the settlement monies – the majority to Sanctuary Affordable Housing in relation to their flats and a portion to Maunder Taylor – in respect of the 16 private leaseholders. At the moment we have put it to the GLA to confirm what we are expected to do with that money because the grant funding award (that is the contract between the government and the freeholder) obliges the freeholder to notify the GLA that they have recovered money from a third party such as the NHBC and to confirm the sum that's been recovered.

In this case the NHBC policy is in the names of leaseholders. The leaseholders are the beneficiaries of the NHBC policies, not the freeholder. That’s not the case in all buildings – in some cases the freeholder has the policy.

As a result of this somewhat subtle but important distinction technically speaking the freeholder hasn't recovered any money from a third party and the GLA are being asked to confirm whether we're expected to pay it back to the GLA. The NHBC have confirmed that their intention is for it to be paid to the GLA or put towards the remediation or funded the eligible items. The GLA have said that this money cannot be used on the non-eligible cost items. It is a very complicated problem. There is a lot of money involved and we are waiting to receive a formal written response from the GLA as to what they expect both sanctuary and Maunder Taylor to do with the settlement money is received (whether paid back to the GLA or paid towards the remediation costs).

We are also waiting to see the outcome of the other aspects of the cladding claim - - the waking watch costs. The reason the NHBC is considering the waking watch costs is because the waking watch service was initially needed as a result of the flammable cladding and combustible insulation on the external wall system of Mar House. Due to the fact that it was a consequential requirement they have accepted they are responsible to a degree for the cladding and also consider the waking watch. I expect that there will be a settlement. Maunder Taylor has supplied them with all waking watch costs up to the beginning of this year. That’s sufficient for them to decide whether it is covered under their policy.

The second claim to the NHBC was the water ingress to flats and common areas. This claim has morphed – it initially was filed as water ingress claim and it now effectively a claim on the defective roof.

we have obtained a series of reports from chartered surveyors (an independent firm) who carried out various investigations and tests to the roof areas. Those results with quite a bit of documentation have been sent to the NHBC. The consultancy firm and NHBC senior investigations officer attended discussions so they understand the scale of the problems. Final documentation is still to be submitted to NHBC after it has been reviewed by Sanctuary. It is expected that after submission the NHBC will review the documentation, appoint their own consultant and consider whether they're accepting the claim or rejecting it.

The next major claim to NHBC is the gas claim. They initially asked for commissioning certificates. There was a struggle to find any electronic copies at Maunder Taylor systems, at Sanctuary’s systems, at the freeholder – the Old House Group’s systems, at the previous managing agent – Benjamin Stevens’ systems. Finally, after certificates were found in a back storage room in Mar House in the summer of 2024, they were sent to NHBC. The original fire strategy of the building was also found. The NHBC are trying to finalize the appointment of their consultant to carry out the review that's needed in order to properly consider the gas claim.

Editor comment: the NHBC claims in question here have been dragging for 5 years. Successive managing agents did little to nothing to produce adequate certificate and reports, submit them to the NHBC and follow-up. The simply raised the service charge bills (up to 99,000 for 2-bedroom apartment).
The above also clearly indicates of gross negligence from the side of the freeholder and their managing agent in keeping important records.

The next 3 claims all have very similar names – they all have to do with fire stopping and compartmentation:

• The first one is an additional cladding related claim. The NHBC are considering a claim and indicated there will be some sort of settlement. We are waiting to find out what the figure will be.
• The next claim is about the internal fire stopping, this is within the common parts of the building where a pipe or cables penetrate through walls. Earlier report done by Benjamin Stevens was not accepted because it wasn’t detailed enough. Currently, the NHBC have accepted 27 items of work and £2,500 was made as a settlement offer. It’s a small claim.
• The final claim in this category is fire stopping between pods. Between each pod (the building being modular) there should be sufficient fire stopping. Consultants raised concerns about the what they thought could be inadequate fire stopping in between the pods throughout the building. Their recommendation is an intrusive compartmentation survey needs to be carried out. This is effectively where within the building holes are made in the walls to look between the pods to see whether there is adequate compartmentation now as a result of that we have notified the NHBC of a potential claim.

 

Cladding Update

Update on the cladding: the ACM panels have all now been removed. Replacement insulation that is non-combustible has been put on the building and it's been weather-proofed in that red rap tight material. That protection is intended to be whilst the panels remain off the building.

The overall fire risk associated with the external wall has reduced quite significantly. The London Borough of Barnet has said that that hasn't been formally risk assessed. Neither the council nor the insurer require a waking watch. The insurance policy has been renewed by the receivers anymore. However, London Fire Brigade have said that before the waking watch is removed, they want to see the information of the fire stoppage between the pods (units).

They have said that as long as the compartmentation between the pods is acceptable and adequate, they fully support the intention to re-adapt the fire alarm and effectively remove the need to fully evacuate the building (and get back to ‘stay put’ policy).

Editor Note: all this preoccupation with compartmentation between the pods is, in my opinion, overdoing it. It would be very intrusive and expensive to change this after the building has been built. Bear in mind the pods (units) are made of metal and metal doesn’t burn. I would personally prefer to evacuate should there be a fire. I have no confidence in stay-put policy. We saw what happens with stay-put – you may as well die.

The carpark basement area remains evacuation area (as there is petrol in the cars’ tanks).

In summary: before we disband the waking watch, we need to make sure that the compartmentation is adequate

The final heading on fire safety is the is the communal fire doors. I have sent a consultation notice (Editor notice: Section 20 notice – this essentially tells leaseholders that there is a big bill coming their way). Since the threshold for consultation was not met (Editor note: >=£250 per leaseholder) we withdrew the Section 20 notice. The works were instructed and the contractor carried out a survey of the common parts doors. They said there are a lot more problems with these doors. They thought there are no adequate seals on the doors (so that smoke cannot pass through the doorways). Intumescent strips are needed which expand at heat and stop hot smoke. However, they don’t stop cold smoke. So, we have inadequate cold smoke seals. These repairs, costing approximately £40,000 in addition to an initial £20,000 phase, are essential for compliance with fire safety legislation and the landlord’s repairing covenant. The costs will be covered by Sanctuary and the Freeholder under Schedule 7 of the budget, with no financial contribution required from private leaseholders.

 

Financial Updates and balance sheet irregularities 

The final part of the updates concerns the financial updates. The budget for this year (and also for last year) has been issued very late. It has been issued in the 3rd quarter. So, 3 quarters worth of service charges have been sent. The reason for this is that the budget has been drafted in April but following the start of administration procedures regarding the Old House Group and the appointment of administrators and receivers it had to be re-done.

Apologies are extended for the oversight in recent invoices, which did not reflect the end-of-year credit for the financial year ending March 2024 due to staff holidays and efforts to meet deadlines. Corrected invoices with the appropriate credit will be issued tomorrow. In the meantime, leaseholders have been provided with the budget versus actual expenditure report, a balance sheet detailing funds held as of March 31, 2024, and a formal notice under Section 20b of the Landlord and Tenant Act 1985, explaining that the service charge accounts for the year will be delayed. This delay stems from significant concerns Maunder Taylor raised about the March 2023 service charge accounts, prepared by a previous firm of accountants and approved by the former director of the Old House Group. There was an expert determination of the 2022 accounts (agreed between Sanctuary and the Old House Group) where various significant cost items were disallowed as they were deemed non-recoverable through service charges. Efforts are ongoing to provide transparent financial information while addressing these unresolved issues.

The intention was to make the adjustments that were necessary following that determination within the accounts to March 2023. The accountants had said they hadn’t been instructed by the freeholder – the Old House Group – to make those adjustments. More worryingly Maunder Taylor flagged with the accountants and with the administrators and receivers that the expert determination focused only on expenditure items. As it wasn’t a forensic accounting review - it didn’t look at the balance sheet which contains significant sums allegedly owed by leaseholders. The balance sheet only contained a significant sum allegedly owned to the freeholder. This is in the accounts to March 2023.

On the balance sheet for 2023 those sums owed by the leaseholders and those sums owed to the freeholder increased significantly (by 5- or 6-figure sums). Maunder Taylor has not circulated those accounts as they were deemed “not worth the paper they were written on” and “not to raise questions and concerns from leaseholders until they are reasonably accurate”. Whereas in the 2023 accounts, it appeared as though as the leaseholders collectively owed the service charge millions of pounds, and the service charge owed the freeholder millions of pounds. As this was not possible to be true, the administrators have appointed a forensic accountant. They have met with the service charge accountant (who were instructed to mingle book-keeping information from the Old House Group. Per MT, the service charge accountants have done good job in a difficult set of circumstances (different managing agents; Editor Note: it was only Benjamin Stevens since 2022) amidst incompetent landlord.

Currently both the forensic accountant and the service charge accountant agree that the balance sheet is incorrect. It’s been agreed that they will carry out a review of the 2022 accounts and the 2023 accounts. They are not going to be reversing the findings of the expert determination. They are going to advise their findings – it is expected that in any corrected service charge accounts many of the claimed expenses of the Old House Group will be removed as they are not recoverable under the leases.

Once we have got an outcome from the forensic accounting review, we will then finally be in a position for a firm of accountants to produce service charge accounts to 2024. The reason MT cannot do that at the moment is because part of that process involves opening balances from the end of 2023 for which there are no opening balances yet.

Q&A Section omitted.