Freehold Estate Fees

– in Westminster Hall at 5:41 pm on 22 January 2019.

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Photo of Helen Goodman Helen Goodman Shadow Minister (Foreign and Commonwealth Affairs) 5:41, 22 January 2019

I beg to move,

That this House
has considered freehold estate fees.

It is a pleasure to see you in the Chair, Mr Hollobone. The residents of Hazelbank in Canney Hill in my constituency first brought this issue to my attention. I am grateful to them and to homeowners in the Burton Woods, Durham Gate, Grangefields, Merrington Park, Middridge Vale and Moorcroft developments who have shared their experiences with me. I also thank Cathy Priestley and Halima Ali from the national Homeowners Rights Network—HorNet—campaign group.

Photo of Catherine McKinnell Catherine McKinnell Labour, Newcastle upon Tyne North

I congratulate my hon. Friend and north-east colleague on securing this important debate and on her Freehold Properties (Management Charges and Shared Facilities) Bill, which I am pleased to co-sponsor. I am also pleased to add my thanks for the work of my Great Park constituent Cathy Priestley, whom my hon. Friend rightly mentions. I commend Cathy, who has worked tirelessly to raise awareness of these issues. Does my hon. Friend agree with me and Cathy that one of the key concerns for private homeowners in such developments is the sheer lack of transparency about what they are paying for?

Photo of Helen Goodman Helen Goodman Shadow Minister (Foreign and Commonwealth Affairs)

My hon. Friend is absolutely right. The lack of transparency is a significant problem across the country. I did a survey, which I thought would be for people in Bishop Auckland, but I got responses from Ulster to Plymouth, which shows what a massive problem this is.

If offered the choice between a leasehold property and a freehold property, most prospective homebuyers would opt for freehold. Who would not want the permanent and absolute tenure of their property, with all the freedom and security that promises? However, the large property developers—Barratt, Bellway, Persimmon and Taylor Wimpey—sell properties that are not free from hold but come with financial obligations and restrictive covenants administered by property management companies such as Greenbelt, Gateway, FirstPort and Trinity Estates, which take ownership of communal spaces once the developer has moved off the site.

Photo of Adrian Bailey Adrian Bailey Labour/Co-operative, West Bromwich West

I congratulate my hon. Friend on securing the debate. She mentioned Greenbelt. I have a problem in my constituency that goes back 16 years, when a group of people purchased houses from Bellway. The adjoining land is administered by Greenbelt. Since then, those people have paid fees every year for the very basic administration of that land, but the company has failed to take the remedial measures necessary to prevent the area from becoming a centre for antisocial behaviour. The residents have complained; one went to court but lost their case. Does my hon. Friend agree that there needs to be more transparency when freeholders buy their property from developers? Secondly, does there need to be a cheap adjudication system to ensure that the balance of interest between the freeholders and the companies is far more even than it is at the moment?

Photo of Helen Goodman Helen Goodman Shadow Minister (Foreign and Commonwealth Affairs)

Yes, of course. There needs to be more transparency and a system of redress, as my hon. Friend says. There also need to be some rules of the game about the standard to which the estates are built in the first instance. The management companies charge residents an inflated annual fee—in exchange, apparently, for tending to grassy areas, shrubs and other facilities on the estate. That is on top of their council tax.

This is a scandal. There has clearly been mis-selling. The public perception of freehold is deliberately exploited by the property companies in their sales materials. Many homebuyers are not made aware of the arrangements for the management of open spaces until the completion of the sale. One of my constituents reported that the first they had heard of their management company, which was Greenbelt, was a threatening late payment letter. They had not received a bill, let alone a welcome pack.

There is no room in the glossy brochure for an outline of the legal arrangements, but there always seems to be plenty of space for images of parks, playgrounds and woodland areas, backed up by verbal assurances from the sales rep that they are planned for the estate. Those promises are then broken and the land is passed or sold on to the maintenance company.

For example, at DurhamGate, a large housing development in Spennymoor in my constituency, the plans promised a “green spine” running through the centre of the site. Several years in, and with the site still under construction, residents are being hit with a full-price fee of £120 a year. Another of my constituents reported receiving a maintenance bill for a parking area that did not exist. The fees charged to residents for the maintenance of their estates are high, rising, uncapped and completely unregulated.

In Bishop Auckland, the annual fee for each household is somewhere between £100 and £200 a year, depending on the site. At first that does not sound too onerous, but when we consider that 278 neighbours on the estate are also paying the fee, it is obviously a grossly excessive £30,000 just for mowing some grass. In other parts of the country, in line with higher house prices, fees can be up to £400 or £600; I have even heard of fees of £800 a year. There is no limit to price increases and residents frequently report an annual leap in the fee. As my hon. Friends have said, there is no transparency and little accountability.

Photo of Justin Madders Justin Madders Shadow Minister (Business, Energy and Industrial Strategy) (Labour), Shadow Minister (Health and Social Care)

I thank my hon. Friend for securing the debate. I draw a comparison between the fees that councils ordinarily charge for communal services and the kind of fees she is talking about. Does she agree that if councils were so opaque and unreasonable, they would rightly be held to task by their electorate?

Photo of Helen Goodman Helen Goodman Shadow Minister (Foreign and Commonwealth Affairs)

My hon. Friend makes a very good point. We need more transparency and greater accountability, and I will come on to how we might secure those things. One of the things that homeowners have noted is their frustration that they do not have any control over who the managing agent is. The relationship between the big builders and their favourite management companies and the processes for acquiring these communal spaces are shrouded in mystery. The fees appear to be plucked from thin air. In some cases, a vague “administration” category accounts for up to 70% of the total bill.

What do homeowners get in exchange for their fee? Of the 200 people who completed my survey, only one indicated a very good standard of maintenance. That was perhaps an optimistic assessment. The person went on to explain that

“the grass is cut regularly, but…we were promised a play park and village green with a pond. None have materialised.”

Others complained of dead or dying trees, poorly maintained shrubberies, wastelands, fly-tipping, broken or absent street lighting, playgrounds awaiting repair and a general absence of the management company, aside from requests for payment. Specific complaints included how Greenbelt was using a strimmer within a dedicated nature park set up to protect newts; in another case, a community hedgerow project was destroyed.

Homeowners in freehold properties currently have no way to challenge unfair fees or poor service; the power is almost entirely in the hands of the management company. My constituents have faced threats to block the on-sale of their properties, and they have been threatened with bailiffs and court action if they do not adhere to the demands of the management company.

Photo of Mary Glindon Mary Glindon Shadow Minister (Environment, Food and Rural Affairs) (Farming and Rural Communities)

I congratulate my hon. Friend, as everyone else has, on securing this really important debate. Something that really frightened me about the case of one of my constituents was that she did not realise that if she defaults on her rent charge, the rent charge owner can repossess her property and enjoy the same rights as if she had never had the transfer of the freehold in the first place. I am sure my hon. Friend will agree that that is petrifying.

Photo of Helen Goodman Helen Goodman Shadow Minister (Foreign and Commonwealth Affairs)

What my hon. Friend says is absolutely right. That is a misuse of the Law of Property Act 1925. That is why we are looking to the Government to make some legal changes. This is not just bad behaviour; this is clearly a deliberate strategy and the company has obviously taken very expensive legal advice in order to develop that strategy. To stop them, we will need some legal change.

I heard from somebody who lives in the west midlands—I do not know whether it was a constituent of my hon. Friend Mr Bailey—who said that he had had a 17-year battle with Greenbelt and that he was charged legal fees of £25,000. Obviously, the ordinary homeowner cannot afford to shell out on legal fees like that.

Despite their name, property management companies appear to have no interest in actively managing the land they acquire. On the website of London and Economic Properties Ltd, a Wiltshire-based firm that manages the Middridge Vale development in Shildon in my constituency, property is listed under its “investments” section. The company boasts of its

“enviable track record, investing across the property spectrum to deliver profits for shareholders.”

There is no mention of homeowners. It says of the land at Shildon that it

“benefits from grant income from the Forestry Commission as well as a housing levy from the adjacent housing development which…will provide an annual payment in perpetuity of £100 from each of the 278 houses”.

There is no mention of the company’s obligations as the caretaker for the site. Ultimately, that is the problem: these extortionate fees and poor service are the result of a culture that sees housing as an abstract investment, rather than the foundations of our families and communities.

This is a massive scam. The House of Commons Library gave me figures that suggest that perhaps half a million people have been affected by this problem in the last 10 years. That means that somebody or some people are coining in about £100 million a year.

What change is needed? The Government have outlined their commitment to reform the process for those buying a new build home to obtain redress. They intend to bring forward legislation to require all developers to belong to a new homes ombudsman. They have also said that they hope to offer freeholders the same rights as leaseholders to challenge the reasonableness of charges at a property tribunal. Can the Minister say when that will be done? When will he bring forward these measures?

Legislation to improve access to dispute resolution is helpful, but it does not tackle the root problem. The Freehold Properties (Management Charges and Shared Facilities) Bill, which I introduced in November, recommended three changes for homeowners who are already caught in this trap. First, it would cap and regulate estate maintenance fees, to give homeowners financial stability and allow them to buy and sell their homes knowing that costs cannot increase indefinitely. Secondly, it would introduce measures to ensure that shared spaces are maintained to a proper standard, perhaps through something similar to the new homes ombudsman. Thirdly, it would contain provisions for residents if they chose to opt out of their management company and to self-manage, if that was what they wanted to do.

For estates yet to be built, the planning regulations need to be tightened, to require them to be built to an adoptable standard. Local authorities are currently often willing to adopt spaces in exchange for an agreed sum from the developer to cover upkeep for a fixed period. For example, Durham County Council asked for 15 years’ worth. That is a reasonable ask of an industry that can afford to pay its chief executive officer bonuses of £75 million.

Many of these estates were built with support from the Government’s Help to Buy scheme, financed by taxpayers. I would like the Minister to tell us this afternoon that the Government are going to stop providing support to any development using that model. Will the Minister also refer the mis-selling aspect of this to the Financial Conduct Authority to investigate, and to the Law Society, to strike off lawyers who have worked unethically in the interests of property dealers while taking fees and purporting to work for homebuyers?

A situation has arisen whereby the private estates model is rapidly becoming the norm for new developments, with those who have saved hard for their homes bearing an unfair burden and builders treating them as a cash cow. Homeowners do not want sympathy and understanding. They want action, and they would like to see action now. I hope the Minister will be able to make a clear, timetabled commitment this afternoon. I am looking forward to hearing his response.

Several hon. Members:


Photo of Philip Hollobone Philip Hollobone Conservative, Kettering

Order. The debate lasts one hour and the finish time is 6.41 pm. I am obliged to call the Front-Bench spokesman for the Opposition no later than 6.19 pm, but until then it is Back-Bench time. Four Members are seeking to contribute, but I will need to impose a time limit on speeches of five minutes. The first speaker will be Preet Kaur Gill.

Photo of Preet Kaur Gill Preet Kaur Gill Shadow Minister (International Development) 5:57, 22 January 2019

It is a pleasure to serve under your chairmanship, Mr Hollobone. I thank my hon. Friend Helen Goodman for securing this debate and for the work she is doing with her Bill to regulate freeholders and to ensure that freeholders have sufficient rights.

Under section 19 of the Leasehold Reform Act 1967, the creation of schemes of management allows landlords or scheme managers to receive and require fees from management charges. I welcome the work to support new builds, but the Government should go further than that—I wonder whether my hon. Friend agrees—and strengthen the legal position of all freeholders so that they have access to information about where the money they are being forced to pay is going and what it is being spent on.

As it stands, the balance of power is not appropriate or fair. Freeholders are not able to ask for details of where the money they are charged as part of estate management schemes goes. However, management companies are able, by law, to use enforcement agents to collect the money. Does that seem like a reciprocal relationship?

I have residents in my constituency who are freeholders but who are still obligated to pay management fees, separate and additional to service charges. Residents are concerned about the lack of transparency, and they have a feeling of helplessness when trying to find out where the money is being spent, or how much money is left in the pot. Despite paying into this opaque fund, the freehold residents are entirely powerless to compel enforcement of the management scheme.

Freehold residents are unable to ensure enforcement of the scheme that they pay into and cannot hold anyone to account over expenditure. We need transparency, for them to be able to hold it to account. I understand that the Government are legislating to give freeholders the equivalent rights to leaseholders when it comes to challenging service charges. Will the Minister extend that to management charges as well? If not, will he explain what the difference is?

Photo of Mark Tami Mark Tami Opposition Pairing Whip (Commons) 5:59, 22 January 2019

It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend Helen Goodman on securing this debate.

I am old enough to remember when developers would build estates that were brought up to adoptable standards, a bond was put down and the council would adopt and take responsibility for generally doing what we all expect to be done around our homes. A lot has changed. Councils now do not have much money and are probably keen to pass that responsibility on. As my hon. Friend the Member for Bishop Auckland said, developers have found another money-making exercise—a bit like leasehold, really—to squeeze even more money out of their sales.

In my own area, companies such as Persimmon in Buckley, Taylor Wimpey in Penyffordd and Bloor Homes in Broughton have passed that maintenance requirement on to maintenance companies: my hon. Friend has mentioned Greenbelt, and Trinity is another one of the big players. A person needs only to look on the internet and Google those companies to see what the average resident thinks of the service they are providing.

When people move in, perhaps the charge is only £100 a year at first; it does not seem too much and people are not that bothered about it. The lawyers have perhaps not pointed it out because, as my hon. Friend the Member for Bishop Auckland has said, they may well be close to the people selling the properties.

By year two, that charge may have risen to £200, and by year three, it may be £300 and so on. There is very little explanation of exactly what the charge is for, or indeed what the tendering process is for the people supposedly doing the work, when the work is actually done in the first place. These are not luxury London developments that have a swimming pool, a gym, and perhaps someone sitting on the front desk. The charge is for cutting the grass and, in some cases, maintaining a play area and maybe a nature area as well.

On top of the standard charge, there are things that are not covered—a very vague category. Greenbelt, in its nice, glossy little brochure showing happy, smiling people who are no doubt delighted to be paying the fees that the company charges, has a list of services. One of those is fencing, and under “What is covered?” it says “Fences will be checked as part of the routine supervisory inspections. The condition of the fence will be monitored and any repairs instructed as and when required.”

If we move on to things that are not covered but are chargeable, we find “fencing works”, which “will be identified as part of the routine supervisory inspections. The conditions of the fence will be monitored and any works instructed as and when required.” Now, to the ordinary person, those sound very similar, yet people are being charged extra for the work that is not covered.

Indeed, the list of things that can be charged for in these circumstances is a very open one; as I have said, residents in many cases are not aware of what they are being charged for. When people move in, certainly in their first year, there does not appear to be any breakdown of the charges. As my hon. Friend the Member for Bishop Auckland said, when a breakdown is provided, it appears that half of that charge—if not more—is the management fee. In my experience, that management fee is never broken down, and it is never explained exactly how that large sum of money comes about.

Photo of Catherine McKinnell Catherine McKinnell Labour, Newcastle upon Tyne North

I see a lot of similarities in the speech that my hon. Friend is making. Does he agree that there is frustration not only about the charges being levied, but about the fact that the standards being maintained are often not as good as they would be had those estates been adopted? I know of some cases in which children have practically lived in a home, left that home and gone to university before they have the basics, such as pavements, on their estates.

Photo of Mark Tami Mark Tami Opposition Pairing Whip (Commons)

My hon. Friend is right. The issue of how estates are left is a broader one: quite often, the moment the last house is sold, the developer does not want to know. As for the standard of work that is being carried out by the maintenance companies, I have heard from loads of people who say that they go out themselves and cut the grass in the communal areas, because those are left in such a terrible state.

Many people have described the charges as like a second council tax. They are now reaching a level that is not the £100 that people started off with; it is a much higher figure, particularly for something that most people thought was covered by the council tax that they pay in the first place. Freeholders who face those charges are now coming to me and saying they are increasingly worried that they could affect the saleability of their property in the future, just as leaseholders are telling me that sales are falling through because people look at a property and say, “I am not going to buy that.” That is just not acceptable.

At the moment, there are effectively no legal protections for people. Leaseholders have some, but they are very weak. My constituency has a lot of mixed estates where, between two houses next to one another—often both exactly the same—one is leasehold and one is freehold. What they have in common is that they both have to pay management charges.

I will summarise because I know other hon. Members wish to speak. People feel abandoned. They feel that the law does not actually protect them and that they do not have any redress. I welcome what the Government have said about leaseholds. My concern is that that relates only to people building houses, selling them and moving on. What about the people already affected by the arrangements, just as leaseholders are? We need to look after them and ensure that they have fair redress against unfair charges. Residents should have the ability—where they want to—to form their own management companies, run their own maintenance and put out tenders. The council might want to tender for some of that work and could provide it at a considerably cheaper cost. The charges are unfair. We really need to get to grips with the issue because otherwise we will store up huge problems for people in the future.

Photo of Justin Madders Justin Madders Shadow Minister (Business, Energy and Industrial Strategy) (Labour), Shadow Minister (Health and Social Care) 6:06, 22 January 2019

It is a pleasure to serve under your chairmanship once again, Mr Hollobone. I am delighted to follow my constituency neighbour, my hon. Friend Mark Tami. We may be on separate sides of national boundaries, but our constituents clearly have many issues in common, not least the terrible way that exploitation has seeped into what should be a well-regulated and secure investment.

I congratulate my hon. Friend Helen Goodman on securing the debate and on her work to address these issues through her private Member’s Bill. Hon. Members will be aware that I have also introduced my own Bill, to usher in a fairer, more streamlined and transparent system to enable the purchase of freeholds by leaseholders. On many occasions, both in this Chamber and the main Chamber, I have listed the abuses perpetrated by freeholders in the current feudal system. My hon. Friend the Member for Bishop Auckland gave an excellent explanation of the issues in the management of such properties, and after listening to it, I believe that there are many parallels between the two measures.

Regulation is long overdue. Homeowners have been subjected to unjustified extra costs and there is a distinct lack of transparency. It is clearly another example of homeowners falling foul of greedy developers and the more insidious practices that they have adopted in recent years. We have seen that happen with ground rents and consent fees for leasehold properties, whether flats or houses, where developers have become ever more adept at squeezing cash out of homeowners for the provision of grounds maintenance and other communal services.

As my hon. Friend the Member for Bishop Auckland highlighted, we now see “fleecehold” estate fees. Freeholders and residents on private housing developments find themselves facing escalating costs when the developers from which they purchased their homes in good faith sell off the grounds maintenance to private providers. In blocks of flats, the practice of spurious service charges has developed. In my constituency, a management company that managed only four flats in a block suddenly increased the service charge from around £50 a year to £911 a year. Many of those charges were questionable and the insurance charge in particular stood out, because the insurer seemed to be very well connected and had the same name as the management company. That would simply not be allowed for any other consumer purchase, so why it is allowed in this instance?

As hon. Members have said, the idea of the developer paying the local authority a commuted sum to cut the grass and maintain the common parts has had its day. I am unclear whether the blame for that lies with cash-strapped local authorities asking for too much or with developers being unprepared to cough up more funds in advance. The net effect of that is that more and more homeowners are being asked to pay twice for the maintenance of open spaces: once through a management fee and once through their council tax.

Council tax pays for lots of things, but something as visible and obvious as grounds maintenance leads people to ask a pertinent question: why are they facing a double whammy? My suspicion is that developers will always be tempted to save themselves the expense of paying an upfront sum to the local authority by instead letting their customers pay further down the line, long after they have fled the scene. Of course, someone buying their first home—probably with Help to Buy—will, in reality, have nowhere else to go and will have to accept those arrangements whether or not they genuinely consent to them.

What is wrong with just building and selling family homes? Why are buyers being subjected to covert efforts to squirrel in extra income? Is the sector so avaricious that it has to squeeze every last penny out of young families who have to scrimp and save just to get on the housing ladder? As with ground rent, consent fees and leaseholds, our plc house builders have had £8 billion of help through the Help to Buy scheme. They have trousered that assistance to rip off customers in their own schemes. Developers simply cannot be trusted to play fair with their customers, or with us, as wider taxpayers.

We have a huge shortage of housing. There are significant barriers to buyers getting on to the housing ladder, and a handful of huge companies is responsible for the vast majority of housing delivery. That reliance on a small group of developers has been a very poor deal for the taxpayer, and was the backdrop against which the leasehold scandal emerged.

It cannot be right that the companies that are guilty of the industrial-scale rip-offs that we have heard about regarding both leaseholds and the issue being discussed today are the same ones that we end up relying on to get out of our very real and damaging housing crisis. There is an over-reliance on the market—a market that, to me, is broken—to deliver the new homes that we desperately need.

The net effect is that there is little protection for homeowners. People deserve far more protection than they currently get. Sadly, I have seen very little evidence to suggest that developers will act responsibly and adopt fair and reasonable practices on a voluntary basis. The whole system needs a shake-up, and it needs it now.

Photo of Julie Elliott Julie Elliott Labour, Sunderland Central 6:10, 22 January 2019

As ever, it is a pleasure to serve under your chairmanship, Mr Hollobone. I, too, thank my hon. Friend Helen Goodman, who is a close neighbour, for securing this debate on such an important issue, which affects every constituency in the country, and certainly many of my constituents in Sunderland Central.

In my years as an MP, numerous constituents have come to me about the subject of freehold properties and management costs. They come with real issues regarding the environment around their properties and the lack of care by companies. They often pay large sums of money that increase without much notice or any relation to cost. They are paying the money—often hundreds of pounds a year—that they agreed to and not getting the services or the maintenance that they are paying for. In an area such as Sunderland, which is a low-wage area, it is often a large proportion of the money coming into people’s homes every week. They are keeping their side of the contract, but the companies are not keeping theirs.

I would like to highlight a couple of things that have happened to my constituents. A light in a communal area took six months to get fixed, and when it was fixed the light was unsuitable for the job it had to do, and was not to the standard of the one before. That led to all sorts of issues to do with safety and all the other problems, including antisocial behaviour, that come when areas are not lighted.

Another example was people coming to do a grounds maintenance job sitting in the van all day because there was nobody to direct them or instruct them about what to do. Not only is paying people to sit in a van not knowing what to do an absolute waste of the company’s resources, it wastes the hard-earned money of my constituents, who pay fees for a job that should be done.

I endorse the points that have been made by my colleagues, and I will not repeat them. Sadly in the current climate, many people would like local authorities to take over maintenance issues, but in Sunderland we have had cuts to our local authority budgets of some £250 million since 2010, so financially it is simply not an option. Councils are struggling to maintain their frontline services, and they do not have the funds to put aside to take over that responsibility.

Effective and intelligent regulation can ensure that this does not happen again. Transparency needs to be brought into the system, and the Government need to act. It is not good enough simply to act in future on new properties; we have had many years of problems building up. In some cases, it is making houses unsellable, which needs to be addressed. The Government need to look very carefully at what they can do to mitigate the problems of people who already live in and own their own properties, and are paying these very unscrupulous, completely not transparent fees.

Photo of Sarah Jones Sarah Jones Shadow Minister (Housing, Communities and Local Government) (Housing) 6:14, 22 January 2019

It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend Helen Goodman for securing the debate and for her substantial work on the topic.

As we have heard, homeowners on private estates across the country are being fleeced through a system of spiralling fees, shoddy service, lack of choice and zero accountability. We know it is an issue that affects up to 1.3 million households and it is a problem that mirrors the exorbitant service charges and draconian standards facing leaseholders. It is a problem that the Government have had years to fix, but they have yet to do so.

We heard in colleagues’ eloquent speeches just how obscure some of the charges are. My right hon. Friend Mark Tami told us about the fence that would be looked at but not actually fixed. My hon. Friend Julie Elliott told us about the light that took six months to replace, but which was not replaced correctly. My hon. Friend Preet Kaur Gill spoke powerfully about people’s sense of feeling helpless and powerless. We heard from my hon. Friend Justin Madders about how developers are finding additional ways to fleece people and charge more and more. The Government have failed on a number of levels. I hope that today we can take a positive approach to the issues and take action on them.

My hon. Friend the Member for Bishop Auckland made some very good suggestions. Homeowners have been raising the issue for a while. In 2016, the HomeOwners Alliance said that

“this new model has crept in without democratic scrutiny or discussion and over the past 10 years or so has become the industry standard.”

Back in 2017, the Government said that this was a problem and that they would introduce changes to the law. It is not enough to accept that there is a problem—we need to act.

The second problem is that, as discussed, when the Government published proposals to fix the problem, they did not go far enough. The Government say that they will give freeholders the right to challenge the reasonableness of charges or appoint a new manager, via tribunal, in the same way as leaseholders currently can. We know from the Government’s own repeated consultations on fixing the leasehold sector that the system currently in place for leaseholders is not working. People are not going to trial because they fear the complexity and potential cost of the process. Property companies turning up with teams of lawyers make an imbalance and a mockery of the system.

My hon. Friend Jim Fitzpatrick has previously calculated that the overcharging of leaseholders through extortionate service charges is up to £1.4 billion per year. Why are the Government presenting access to tribunals as the solution when that has abjectly failed to stop abuses in the leasehold sector? The Government admit that failure and in April last year they accepted that managing agents needed independent regulations. I understand that a working group under Lord Best is designing the new regulatory regime to cover aspects such as leaseholder service charges. Will the Minister confirm whether freehold estate management will be covered by the new independent regulator, and if not, why not?

The proposals set out by my hon. Friend the Member for Bishop Auckland are much more likely to tackle the abuse of homeowners, with caps on estate charges, minimum standards and powers for residents to take over management of communal areas. That last proposal would mirror the system of commonhold for shared residential property. I hope the working group currently designing the regulatory system will consider those proposals.

The third failure of Government is that they have let a system develop whereby roads, green spaces and other public spaces are effectively privatised. Even those who are not being ripped off are effectively paying twice, as has been pointed out. They pay council tax, which contributes to maintaining communal areas under council control, and then they pay again for the private maintenance of their own areas. The Government could stop that all together—they should act. We have discussed who is at fault; I do not think we can blame councils, because of the 50% cuts in local authority funding under this Government and the £7.8 billion predicted black hole in local services by 2024-25.

Overall, the Government have been too slow, too weak and lacking in ambition. Today’s debate shows that the Opposition could do better across the board. The Government talk a lot about their credentials on home ownership, but today’s debate is just another example of their failing people who have worked hard to buy their own home. Eight years of Conservative failure on home ownership is exacerbated by this very contentious issue, which affects many people and on which the Government could act.

I want to end by quoting the hon. Member for Bishop Auckland, who said that housing is being seen as an abstract investment rather than as the foundation of our families and communities. Homeowners want action and they want it now, and I very much agree with them.

Photo of Kit Malthouse Kit Malthouse Minister of State (Housing, Communities and Local Government) 6:20, 22 January 2019

It is a great pleasure to serve under your wise and sanguine chairmanship once again, Mr Hollobone. Helen Goodman and I shared many thrilling meetings of the Select Committee on the Treasury, and I congratulate her on securing this debate. I know that she is promoting a ten-minute rule Bill, and I thank her for the opportunity to debate an issue that affects not only her constituents but mine.

This Government are committed to making the housing market work. We aim to increase house building to an average of 300,000 net new homes a year by the mid-2020s. It is vital that as housing supply increases, the quality of new developments continues to improve. We expect all housing developers to deliver good quality housing and estate facilities, to deliver it on time, and to treat house buyers fairly. Fairness includes making house buyers aware of arrangements for the upkeep of communal facilities and any fees for which they may liable.

As hon. Members have pointed out, many freeholders must pay charges towards the maintenance or upkeep of communal areas on an estate. The obligation to pay these charges might be provided by a deed of covenant or through an estate rent charge that forms part of the purchase contract. These charges can include contributions towards the upkeep of open spaces on an estate, or for the maintenance of roads and other infrastructure that is not adopted by the relevant authorities. Hon. Members have quite rightly raised concerns about the lack of redress should a freeholder disagree with these charges, and there have been disputes about who should be responsible for, and control, the maintenance of communal areas. In many cases, contracts do not specify, limit or cap those freeholder charges. This lack of transparency leaves homeowners in a vulnerable position.

Leaseholders have a whole suite of protections and rights that enable them to hold management companies to account. Freeholders have no such equivalent, even though they might be paying for the same or similar services. The current situation is unfair to freeholders, and we are committed to introducing legislation to plug that gap. We set out our proposed approach to implementing these measures in the recent leasehold reform consultation, which closed on 26 November. We intend to create a new statutory regime for freeholders that is based on the rights enjoyed by leaseholders. This would ensure that maintenance charges must be reasonably incurred and that services provided are of an acceptable standard, and it includes a right to challenge the reasonableness of charges at the property tribunal.

Photo of Mark Tami Mark Tami Opposition Pairing Whip (Commons)

As with leaseholders, it should be relatively easy to sort out the problem. The issue is that people are already in these arrangements. We should ensure that they can do something about it, so that they do not feel that they are not covered or that no one cares about them.

Photo of Kit Malthouse Kit Malthouse Minister of State (Housing, Communities and Local Government)

The right hon. Gentleman raises a valid point. We are also considering whether freeholders should have a right to change the provider of maintenance services by applying to the tribunal for the appointment of a new manager, which might be useful for existing freeholders if they are dissatisfied with the service they receive. The Government intend to introduce legislation to implement the changes as soon as parliamentary time allows. Sarah Jones quite rightly challenged us on when that might be; she will know that we have an exciting and packed legislative timetable at the moment, but our aspiration is that the legislation will be introduced within the next 12 months. I realise that there are many impatient freeholders out there, but we have to deal with the small matter of national destiny before we get on to equally pressing matters on the domestic agenda. I assure her that we will give it our attention as soon as we can.

It is absolutely right that consumers should have fair, quick and easy ways to get things put right when they have problems. In October we announced our intention to introduce legislation to require all developers to belong to a new homes ombudsman. Last year, we consulted on how we could improve redress for residents across all housing sectors, and we will publish our response to that consultation shortly.

It has been argued that local authorities should be compelled to adopt all communal facilities on a new estate. At this point it is worth pausing to consider planning arrangements and how they support new developments. When a new development is granted planning permission, local authorities can use conditions, or a section 106 planning obligation, to secure a commitment from developers to provide and maintain open and communal space. This means that the local authority does not have to adopt or maintain the land at its own expense.

It is up to developers and the local planning authority to agree appropriate funding arrangements as part of those commitments. Conditions and planning obligations cannot, however, currently be used to compel local authorities to do something. The local authority has powers to ensure that developers build and maintain communal facilities to the standards and quality set out in the planning permission. In terms of roads, local highways authorities are responsible for the maintenance of local public roads in England. A decision on whether to adopt a road is a matter for the local highway authority and the Government have no direct role in that process.

It has been suggested that freeholders who pay these charges should receive a rebate in their council tax. We think that argument is misplaced. The amount of council tax due from each of us is not adjusted to reflect the specific level of services we receive as residents of the area. Instead, the level of council tax helps the authority to deliver a broad range of services to the wider community in its area. It is open to local authorities to offer council tax discounts to individuals or groups of taxpayers. This is an entirely local decision.

In the end, all these matters have to be paid for. There is only so much money that can be extracted from a particular housing development. It is therefore at the discretion of local authorities to decide the balance of 106, the cost to them of adopting measures, and where and when maintenance should fall on residents rather than on the local authority.

It should always be clear to potential purchasers what the arrangements are for the upkeep of open space and the maintenance of roads. However, we do not think that requiring local authorities to adopt all communal facilities on new developments is the right approach. It removes local flexibility and, in our view, sends the wrong message to developers about their responsibilities.

I do agree with the hon. Member for Bishop Auckland regarding respect of redress. Consumers must have effective ways to get things put right when they have a problem with their housing. That is why we are committed to legislate, so that freeholders have a right to challenge the reasonableness of any maintenance charges for which they are liable. That is why we will establish a new homes ombudsman to protect the interests of homebuyers and hold developers to account when things go wrong.

The hon. Member for Croydon Central asked four specific questions. First, I am certainly willing to consider the suggestion to use Help to Buy as a lever to improve standards. Secondly, on mis-selling, it is open to any hon. Member to make a reference to the regulatory authorities, whether that be the FCA or the Senior Salaries Review Body. Is the hon. Member for Bishop Auckland still on the Treasury Committee?

Photo of Kit Malthouse Kit Malthouse Minister of State (Housing, Communities and Local Government)

Well, the hon. Lady knows the FCA well, so if she wants to make a reference, then by all means she should. She asked me about the legislative timetable. Our aspiration is for some time in the next 12 months. The terms of reference have not been decided for Lord Best’s review of leasehold and whether those lessons could be transferred across the field. We will certainly consider that suggestion as part of the process.

In conclusion, it is certainly the case that as a constituency MP I have experience of exactly the issues that have been raised, and I have been in discussion, shall we say, with the developers concerned in my own constituency, so I am well aware of the issues that have been aired this afternoon. I am grateful to the hon. Lady for bringing such focus to the matter. I assure her that we will take action as soon as we can.

Photo of Helen Goodman Helen Goodman Shadow Minister (Foreign and Commonwealth Affairs) 6:28, 22 January 2019

We have had an important and worthwhile debate. I am grateful to all my colleagues for their contributions. I was overwhelmed with offers for sponsorship from across the House when I introduced the ten-minute rule Bill.

I think we are creeping forward—or, rather, the Minister is. There will be legislation—perhaps in 2019, perhaps not. He has accepted that we need a new right of redress. He has not, however, agreed to any system for regulating the fees or ensuring transparency. I think that will be a disappointment to many of my constituents. However, I shall do as he suggests and take it up with the Financial Conduct Authority. That will be the next act in my campaign, to make some progress. It is clear that the issue affects hundreds of thousands of people and we need change fast.

Question put and agreed to.


That this House
has considered freehold estate fees.

Sitting adjourned.