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In a recent letter from the new OBHA ‘Leasehold Strategy Manager to all ‘Leaseholders it is suggested that we should start to think about operating 'Sinking Funds' in order that when the time comes for major repairs the money is there ready. Further to his letter, a ‘Sinking Fund’ was suggested by the OBHA ‘Leasehold Strategy Manager at a meeting with Jim Parsons and Bernard Clackett when they met to discuss Rutland Gate's Leasehold Valuation Tribunal (LVT) application they have submitted against Orbit. Both Jim and Bernard gave a resounding NO! to this suggestion as Orbit cannot get their annual statement of accounts right, and witnessing the erroneous charges for scaffolding, replacement lighting and other dubious works subject to the LVT, how on earth can we trust an organisation not to simply take the money from the fund to pay for these without true and proper consultation with ‘Leaseholders? 

We copy an article from the London Leaseholder's web site to show, apart from our own comments above, exactly why a ‘Sinking Fund’ will not work.

From time to time it is suggested that leaseholders should pay regularly into sinking funds in order that when the time comes for major repairs then the money is there ready. These have been tried in the past but they generally fell into disrepute because;  

• When the time came the money was not enough and so leaseholders still felt cheated.
• Accounting for the money, and the interest earned upon it, was open to fraud by the landlord.
• Paying the money up-front does not grapple with what is usually perceived as the real problem which is that the works are so often not perceived as being value for money.
• There is an inherent problem with leasehold in that it is sold as home ownership when it is not.

In reality, Leasehold is a paper transaction. The leaseholders either write out a cheque or get their mortgage company to do so. For this they get the lease, the wallpaper and, in time, the bills. The property ownership remains with the landlord.

However the illusion of property ownership has the leaseholder taking on board the mind-set of the real home owner who is to be found in 'Wickes' on every Saturday morning buying plaster mouldings and paint. The expectation is that all expenditure is going to be on a domestic scale and commensurate with the sort of prices that a real home owner will pay.

Meanwhile the actual owner of the leaseholder's home, the landlord, enjoys the all together alternative economies-of-scale associated with a corporation that will only strive hard to save on expenditure that can't be recouped from elsewhere. Landlord companies that expend time and effort saving money to no purpose could be acting illegally in that Company law dictates that they have a duty to maximise the profits of their shareholders and other activities could be Ultra Vires

As Karen Buck, MP for Regent's Park and Kensington, North put it,

"There is great deal of mistrust of the landlords, and people want independent advice because they are not necessarily convinced that the landlords will act in their interest; indeed, the landlords are not acting in their interests, because they have a fiduciary duty to act in their own interests."