Author : Marry-Anne Bowring
The prime Canary Riverside site in London's Docklands is in the news again this time because John Christodoulou, a regular litigant of the leasehold sector, lost a 1.6 million case over excessive insurance costs.
According to the first-tier tribunal, Christodoulou company lacked transparency while dealing with the commission payments to leaseholders. The dealings date back to 2010. Large sums leading to a major percentage of premium were demanded of the leaseholders without providing any notification about the nature of payments and details of commission calculations. Leaseholders have welcomed the decision of the first-tier tribunal, but there is little doubt that Christodoulou will challenge the ruling and appeal to the Upper Tribunal.
The tribunal ruled that Canary Riverside Estate leaseholders should not have paid 1.5 million to a managing agent for insurance-related services. The charging of a further 121,000 in linked taxes is also not legal. Communities Secretary Michael Gove, who ordered the Financial Conduct Authority to investigate insurance and commissions in the leasehold sector last year, will be watching the development closely.
The tribunal justified the 483,000 plus taxes paid to insurance broker Reich at Canary Riverside. It slammed the payment in respect of insurance to managing agent Westminster Management Services, saying it was not right.
Liam Spender, a commercial lawyer, welcomed the decision as an important one because the most common justification for the commission that valuable work is done to justify the cost has failed.
The leaseholders maintained that Westminster Management Services was part of the John Christodoulou Yianis Group company. The payments made were not remuneration for services provided, but rather a rebate, or discount associated with the Yiannis block policy.
The work done by accountant Angie Jezard came in for praise by the tribunal. Angie was a leaseholder leader at Canary Riverside. The tribunal commended how she conducted herself right through the proceedings while representing the Applicants. She played a crucial role in bringing out into the open the information about the commission retained and fees paid to Westminster Management Services. Insurance broker Reich also provided this information.
According to the tribunal, the service charge accounts do not mention the commissions and fees said to have been retained by Reich in the statement provided by the respondents on 28 August 2020. The statement was inaccurate, probably deliberately incorrect. It was the same case with the figure specified in the schedule provided in November 2020. Reich had estimated that from 2013 to 2019 they earned 28,725.38 per year in total revenues across all of the CREM policies of Christodoulou, including broker fees. The actual figures, in this case, were around 50,000 per year.
John Christodoulou lost the management of Canary Riverside in August 2016. At that time, the leaseholders had demanded a Section 24 court-appointed manager. This, too, is the subject of seemingly unending litigation.
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