Freehold Properties (Management Charges and Shared Facilities)

1st reading: House of Commons
Wednesday 14th November 2018 Commons Chamber

Motion for leave to bring in a Bill (Standing Order No. 23)

13:01

[Helen Goodman (Bishop Auckland) (Lab)]

I beg to move,

That leave be given to bring in a Bill to make provision for the regulation of fees charged by management companies to freeholders of residential properties; to make provision for self-management of shared facilities by such freeholders; to require management companies to ensure shared facilities are of an adequate standard; and for connected purposes.

A couple of years ago, I had a trickle of complaints about the poor upkeep of new estates and unfair fees being charged to homeowners on them. It then turned into a torrent, and latterly into a flood. Constituents of mine who live at Hazelbank, Burton Woods, Durham Gate and Middridge Vale, and now at Castle Vale and Startforth Park, have all been affected. I am grateful to them for alerting me to what I have now discovered is a national problem. I also wish to thank Cathy Priestley, who is sitting in the Gallery. She has set up the national pressure group the Homeowners Rights Network, fondly known as HorNet. She has been campaigning on behalf of homeowners and really understands the problems.

The first issue is that the public spaces are not made up to a proper standard. One man I met is still living on an unmade road after eight years. Promises of green areas, woodland, play facilities and even street lighting are broken. As it happens, County Durham has miles of unadopted roads of terraced housing that were built by mine owners in the late 19th century. Now, we have property developers with the same exploitative disregard for homeowners. We are building the 21st century blight.

Secondly, fees are high, rising, uncapped and unregulated. One constituent told me that their fee had risen from £60 to £134 in four years. At that rate, in 16 years’ time it will be £3,316 a year. Another constituent faced a 50% rise in one year. On the Middridge Vale estate, the total payments were £27,000—and that was just for grass cutting. There is a total lack of transparency about the way the fees are made up. Management charges usually exceed upkeep costs, with items such as company admin fees, accountancy, dormant account fees and transfers appearing to be plucked from the air. On one small estate, the actual maintenance costs were less than a fifth of the fees charged. On another, the homeowners found a gardener who would do the work for £400, and the agent promptly added a £400 admin fee. Extra sums are charged for installing TV aerials, and residents have been tied to E.ON as their electricity provider. It all looks like just another way for property developers to screw more money out of hard-pressed households. It is really a private new build tax, so the news that Persimmon boss Jeff Fairburn received a £75 million bonus was greeted with outrage.

The third problem is that when challenged by residents about the fees or upkeep, the management companies adopt an ultra-aggressive stance. My constituents have been bullied with threats of High Court action, or even the bailiffs. This is going on throughout the country: we estimate that 1.3 million households are currently affected. The Government’s response to HorNet—that people should take up their issues with developers, or that the Government will legislate at some point in the future to give a right of challenge through the first-tier tribunal—is wholly inadequate. Individual citizens cannot challenge multibillion-pound corporations, because the underlying problem is the legal structure, which my Bill would change.

The large property developers, such as Persimmon, Barratt and Taylor Wimpey, are scamming people from the start. Purchasers are offered solicitors who are not truly independent and appear to be contracted by the developers, which the Law Society surely ought to address. Many people feel that they were mis-sold their homes, and this is increasingly looking like another PPI scandal. People are worried that the situation will make it very difficult for them to sell their houses in future, so they have an asset of uncertain value.

The open spaces are initially owned by the property developers, who sell them and the right to manage them on to agents. The same names crop up over and over again: Greenbelt and Gateway. Indeed, one Antony John Dean is the director of 130 such companies. This monopolistic position gives the managing agents the opportunity to mismanage and overcharge with impunity. Some of my constituents have discovered that the land has been put into trusts or covenanted to avoid liability and control its use. The residents are powerless to appoint new agents or influence their behaviour.

Unlike leaseholders, who have access to a dedicated ombudsman service, freeholders have no legal recourse in the event of a dispute. Using old law—in particular section 121 of the Law of Property Act 1925—the agents can place charges on the property if residents are late with payments. It is an incredibly one-sided contract. Homeowners do not have the power to ask for justification of costs, but the management company can legally send in bailiffs or threaten repossession of the home if a resident does not pay on time. This is why people are coining the terms “fleecehold” and “fake freehold”. Indeed, there is no point in the Government legislating to give leaseholders the right to buy their freeholds unless they strengthen the legal position of freeholders.

My Bill would tackle the problem. To prevent more people from being caught in this trap in future, developers should be required to make up their public spaces to adoptable standards on a reasonable timescale. For existing homeowners, a different approach is obviously needed. First, the Bill would cap and regulate estate maintenance fees to give people the security of knowing that prices cannot increase indefinitely. Secondly, it would introduce measures to ensure that shared facilities are maintained to an adequate standard, to end the “money for nothing” culture of property companies. Finally, it would make provision for the transfer to genuine self-management, to end the stranglehold of managing agents.

The overwhelmingly positive response that I have had from colleagues across all parties demonstrates that this is a national problem. Currently, we estimate that 1.3 million households are affected; given the Government’s ambitions for house building, many more soon will be. We need to grip this problem and act fast.

Question put and agreed to.

Ordered,

That Helen Goodman, Faisal Rashid, Justin Madders, Louise Haigh, Ian Austin, Sir Peter Bottomley, Ian Mearns, Mr William Wragg, Fiona Bruce, Catherine McKinnell, Jim Fitzpatrick and Mary Glindon present the Bill.

Helen Goodman accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 25 January 2019, and to be printed (Bill 289).

[Mr Speaker]

I had been given to understand that there would be some points of order now, but I do not see any. If anybody wants to raise a point of order, he or she can do so. [Interruption.] I was told less than five minutes ago that there would be some points of order, but there are not, and that is absolutely fine. I am simply responding to what I have been told.