Freehold Estate Fees

Part of the debate – in Westminster Hall at 5:41 pm on 22nd January 2019.

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

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.