A stand-off between insolvency administrators and leasehold owners has resulted in most of the 97 studio flats in the former Vive Hotel block at 44 Havelock Rd standing unoccupied and empty for the past six months.

Virtually all the flats had been sold off in previous years on 100+-year leases to buyers – many of them based abroad – who paid between £80,000 and £120,000 for them as buy-to-let investments. The original idea was that most would be sub-let by their owners back to a letting company for use as hotel rooms and/or student accommodation, which would ensure high occupancy rates and thus a good return. But when conflicts arose between the owners and the hotel companies over aspects of sale agreements, service charge demands and accounting of income, the majority of owners started using an alternative letting agency, My Property Host, to rent out their flats, or else let them separately on assured shorthold tenancies.

As reported in HIP back in June [see Uproar Over Vive Closure in HIP 281], two companies involved in the hotel enterprise – Havelock Properties Limited and Havelock 1 – were declared insolvent in May and put into administration. The administrators, Ian Goodhew and Abigail Shearing of London insolvency firm Voscap, immediately installed security staff to restrict entry through the common parts of the building. A small number of leasehold owners and their assured shorthold tenants were allowed access, since it would be a criminal offence under the Protection from Eviction Act to deny it to those occupying their one-room flats as homes. But all guests, would-be lodgers or other invitees were barred – and remain so, nearly six months on.

HIGH COURT ACTION

On 9 July a body of up to 87 leasehold owners joined in a High Court action to apply for an injunction requiring the administrators to permit access and to appoint a managing agent. A consent order made between the parties on 25 July contained undertakings by the administrators (i) to appoint a managing agent immediately; (ii) to ensure that the appointee agent would comply with the landlord’s covenants to give leaseholders “quiet enjoyment” of their properties, i.e. at the very least unfettered access, and to provide services as set out in respective leases, including effecting insurance; (iii) specifically, following the appointment of an agent and effecting of insurance, to afford access to the leaseholders.

Within days of that order the administrators rejected the applicant leaseholders’ proposal for the appointment of My Property Host as agent, but instead appointed a dormant company DR25 Limited with no track record in property management. A sum of £150,000 was allegedly paid by this company to secure their bid, though it’s unclear to the leaseholders what the source of these funds could be.

Since its appointment, DR25 Limited has continued to exclude all but a handful of leaseholders and/or their subtenants or invitees from access to their properties. Services such as repairs and cleaning have been withheld. Individual properties have been accessed and fixtures such as air conditioning units have been removed without notice to leaseholders.

SERVICE CHARGE DEMANDS

The leases provide that at the beginning of each service charge year leaseholders are to be sent an estimate of service costs. Instead, the leaseholders have been served with a series of purported service charges in respect of costs already claimed to have been expended. The amounts charged are grossly in excess of what would be normal for this size of block. They have included an item of £67,250 described as “security costs”, incurred in the period of 16 May to 13 August, presumably for the purpose of excluding leaseholders and their invitees as detailed above.

At least one leaseholder, perhaps many others, have sought to challenge these purported demands in the First-tier Tribunal. Rather than seeking to justify them, the administrators have effectively blocked these challenges by asserting their right to a moratorium during the insolvency process, thus forcing the applicant/s to seek the consent of the High Court to proceed.

In the meantime, the leaseholders have been attempting to restore their application to the High Court for a full hearing. A combination of lack of court time plus what they view as further obstructive manoeuvrings on the part of the administrators and/or their lawyers mean that no such hearing will now take place until the back end of January, perhaps longer.

At a rough calculation, the likely aggregate gross value of lost lettings of 90+ properties may be running at £15,000-£20,000 per week – i.e. approaching £400,000 total loss since May to date and a further prospective £200,000-plus loss continuing to accumulate between now and a court hearing in January.

The administrators’ solicitor Demetrios Dionissiou filed a statement on their behalf in the High Court on 24 July. It declared: “The Joint Administrators are sympathetic to the Leaseholders’ concern that they should obtain a return on their investment as speedily as possible.” The reason for denial of leaseholder access, Mr Dionissiou asserted, was concern for personal safety within the building arising from the build-up of waste debris and consequent fire risk. However, he admitted in the statement that it is the landlord’s obligation under the leases, not the leaseholders’, to keep the building clean and safe. In any event the cost of resolving any safety issue would no doubt be a small fraction of the loss that is resulting from the exclusion.

PURPOSE OF ADMINISTRATION

The supposed purpose of administrators of insolvent companies is to rescue the companies as going concerns or, if that is not possible, to achieve better results for their creditors than would be likely to be achieved if they were wound up. The leaseholders do not understand how this purpose is being served in this case. The companies were not engaged in any profitable business which could be sold as a going concern. The residual value of any property not already sold on long leases is surely dwarfed by the insolvency costs or, in any event, could be realised more easily by a liquidator.

From their point of view, Mr Goodhew and Ms Shearing have appointed a managing agent which appears to have no interest in working with the leaseholders. Furthermore the administrators seem intent on obstructing the resolution of legal issues through either the High Court or the First-tier Tribunal.

That assessment has led the leaseholders to question the relationship between the companies in administration and the purported creditor by whom the administrators were appointed, KNWZ Limited. How and why did it manage to lend £125,000 to these companies when it seems clear that they were already in financial trouble?

Last week HIP raised these and other questions with the co-administrator Mr Goodhew. He declined to make any substantive response, on the ground that the matters at issue are currently subject to court proceedings and that any report run in this newspaper “may prejudice the outcome…The administrations are continuing.”

HUGH SULLIVAN

The Vive Hotel at 44 Havelock Road in Hastings Town Centre closed last month after two companies involved in its management – Havelock Property Limited and Havelock 1 Limited – were declared insolvent and put into administration. Sole director and shareholder of both, Sean Cochrane, appears to have dissociated himself after firing up to 15 hotel staff with their last month’s wages unpaid. The administrators have subsequently installed security staff to bar guests from accessing rooms they had booked and paid for.

As well as former staff and prospective guests being out of pocket, the current losers from the business collapse are 97 leasehold owners of the building. As explained on page 4 overleaf (Qui Vive: the Model for a Designer Hotel), the cost of its refurbishment was covered by selling all or virtually all of the 97 studio units to “investors” on individual 109-year leases. The units were sold at prices of between £80,000 and £120,000 each on the basis that on completion the leasehold buyers would enter into an agreement with one of Cochrane’s companies to market and manage as student accommodation or holiday lets. The income was either to be shared under a revenue agreement or released to the company in return for an assured rent.

However, there have been major conflicts between Cochrane and these leasehold owners from early in their relationships, over aspects of the sale agreements, and disputes over service charges and the accounting of the income.

It is alleged by the latter that the refurbishment of the building was never given building regulation final certification, and that no valid practical completion certificates have been issued. Building standards, including fire safety, could be potentially compromised. Furthermore, hotel occupancy rates fell far below the optimistic predictions of the original sales pitch, so that the owners found themselves receiving low returns

Simmering discontent boiled over in December 2024 when the owners were each served with an £8,000 demand, claimed in respect of service charges for the management of the building. It was not backed by any certified accounts, and most refused to pay it. Additionally, rents believed to be due to owners were not paid over, but retained to cover the management company’s costs. 

The owners started – at first individually, then in increasing collectivity – to engage a rival letting agency, My Property Host, to organise their own lettings outside the hotel remit. The management of the common parts of the building remained the responsibility of Cochrane’s companies, though with sharply reduced revenue to cover the costs. 

The owners then resolved to form their own management company to take over the building under leaseholders’ ‘right to manage’ procedures.

On about 28 April, Cochrane summoned the remaining hotel staff – around 15 housekeepers, receptionists and maintenance personnel–to a meeting, and told them that their company employer had run out of money: their employment was at an end, and their month’s wages, due the following day, could not be paid. They would be given a ‘code’ that would enable them in due course to recover from the government’s Insolvency Service what they were owed. However, one of these employees says that he and his former work colleagues are still waiting, more than one month later, for the papers that would be needed to put this claim into effect.

“I am owed around £2,300 pay for April”, said Mohammad Eqbal, an Afghan refugee who had been working for Cochrane as a housekeeper for the last two years. “Others have similar debts. It is very painful. They cheated us. They didn’t give us any notice, so none of us had the opportunity to find other work … I have been looking, but so far haven’t found anything”.

THREAT TO ELECTRICITY SUPPLY

A few days later, Cochrane wrote to all the owners warning them that an electricity bill of £130,000 was owed. Unless they paid it collectively with immediate effect, the electricity for the building would be cut off, and all rooms would have to be vacated for health and safety reasons. Although Vive had by then ceased to take bookings, many of the rooms were occupied by short term guests booked by My Property Host through Booking.com or in some cases by assured shorthold tenants. The owners, whose alternative management company, 44 Havelock Road RTM Company, was incorporated on 14 May, protested that Cochrane’s threat of eviction was illegal.

On 15 and 16 May Ian Goodhew and Abigail Shearing of ‘business recovery’ firm Voscap were formally appointed as administrators. Their first step was to direct local security firm Continental Security Services to take over the communal parts of the building, including front door access, and to bar entry by any tenants or guests.

It was swiftly recognised that eviction or harassment of residential tenants without court sanction would be a criminal offence, and those occupiers who could show they had their own entry keys were then allowed to continue to access their rooms. However, guests who arrived on fresh bookings were denied entry. Over the bank holiday weekend of 24-26 May, a succession of would-be holidaymakers wheeling suitcases down from the station were turned away by reference to notices posted on the glass entrance door giving (initially false, later corrected) email addresses for contact with the administrators Voscap.

By the following week the booking system through Booking.com had been withdrawn and all future bookings cancelled, since Voscap continued to deny access to any new guests.

The owners have pleaded subsequently with Voscap to allow letting of their rooms to resume through My Property Host without intervention while all disputes over service charges and letting arrangements are negotiated or, if necessary, resolved by legal process. At the time of going to press, these pleas have apparently fallen on deaf ears.

The administrator Ian Goodhew has said that the action Voscap have taken is “to protect the creditors of the companies.” He was not willing to comment further. Sean Cochrane was also approached for comments but has not responded.