Leaseholders in a Canary Wharf block of flats have secured a rare victory against their landlord in a battle over excessive service charges after a tribunal ruled they paid £1.6mn too much.
In what campaigners hailed as a “brilliant result”, a London property tribunal determined that individual leaseholders in Canary Riverside Estate should not have paid £1.5mn to a managing agent for insurance-related services. The late December ruling also found they should not have been charged £121,000 in linked taxes.
The ruling showed that the tribunal criticised a “complete lack of transparency with leaseholders regarding these commission payments” by the freehold owner and a management company, which are both subsidiaries of property tycoon John Christodoulou’s Yianis Group.
Leaseholders up and down the UK have been engaged in lengthy battles over excessive costs that are folded into their service charge. These have included fees for umbrella buildings insurance contracts they have no control over.
The Financial Conduct Authority has previously warned that property managing agents and brokers “may be selecting insurance policies that maximise their own remuneration . . . rather than the policy that offers the best value for the leaseholders”.
The UK’s financial regulator warned last year that “significant” intervention could be required in the leasehold sector, after a review ordered by housing secretary Michael Gove.
Martin Boyd, chair of the campaign group Leasehold Knowledge Partnership, said the plight of leaseholders at Canary Riverside was widely shared. However, he cautioned that while their victory was “a brilliant result”, it may not help others in a similar position. He highlighted the “huge amounts of power, time and money” the leaseholders spent bringing the case to the tribunal.
In the Canary Riverside case, the tribunal concluded that £483,000 plus taxes paid to insurance broker Reich was justified, but that other monies paid in respect of insurance to managing agent Westminster Management Services (WMS) were not.
“We conclude that all the work said to have been carried out by WMS is more accurately described as the provision of services concerning management of the estate, including obtaining insurance,” the tribunal said.
Liam Spender, a commercial lawyer who is acting as litigant in person on another case involving leaseholders, said “the decision is important because the most common justification for commission, that valuable work is done to justify the cost, has failed”.
According to the tribunal ruling, the leaseholders argued that WMS appeared to be a Yianis Group company and that payments to it were not actually for services but “rather a rebate, or discount” relating to the insurance cover. The Yianis subsidiaries said WMS was not part of the group and the monies paid to it were related to the insurance and recoverable from leaseholders.
The ruling shows there are some links between the companies. The financial controller since 2015 of the Yianis subsidiaries is an employee of WMS. Various Yianis group companies share a registered address with WMS, corporate filings show.
In a statement, Reich welcomed the tribunal findings in its favour and said Canary Riverside represented a “large and complex risk”, adding that it had worked “exceptionally hard to produce a bespoke insurance programme, in an extremely difficult market, involving multiple insurers”.
Yianis did not reply to a request for comment. WMS could not immediately be contacted for comment. The tribunal delayed the question of reimbursement to allow for possible appeals.