Leasehold Properties: Managing Agents

Monday 17th July 2023 Lords Chamber

Question

15:09

Asked by

[Lord Kennedy of Southwark]

To ask His Majesty’s Government what plans they have to regulate managing agents who manage leasehold properties on behalf of freeholders while being paid by leaseholders.

[Lord Kennedy of Southwark (Lab Co-op)]

My Lords, in begging leave to ask the Question standing in my name on the Order Paper, I refer the House to the register of interests and the fact that I am a leaseholder.

[The Parliamentary Under-Secretary of State, Department for Levelling Up, Housing & Communities (Baroness Scott of Bybrook) (Con)]

My Lords, we are committed to raising standards and professionalism within the property management sector. Managing agents in England and Wales must belong to one of the two government-approved redress schemes. Leaseholders can also apply to the First-tier Tribunal to appoint a manager where there is significant management failure. We will continue to work with the industry on improving best practice, including in relation to the codes of practice. Announcements will be set out in the usual way.

[Lord Kennedy of Southwark (Lab Co-op)]

I thank the Minister for that response. There is a desperate need for a regulator with real teeth to ensure that managing agents treat leaseholders fairly and are open about their charges; that there is a proper redress scheme in place, with real powers to take remedial action against those who rip people off; and that, in the worst cases, they can be removed from the industry. Does the Minister agree with me that that is the way forward?

[Baroness Scott of Bybrook (Con)]

I agree with the noble Lord. That is exactly what we are doing. The commitment includes raising professionalism and standards among property agents. As I am sure the noble Lord knows, the noble Baroness, Lady Hayter, and RICS, which she is working with, will meet the Housing Minister to discuss a code of practice for property agents. I thank the noble Baroness for all the work she is doing on this, and I welcome her excellent stewardship of the independent steering group as we strive to promote best practice among property agents in future.

[Lord Young of Cookham (Con)]

My Lords, the Building Safety Act has given leaseholders very welcome protection against the costs of making their buildings safe, following the Grenfell tragedy. But the legislation has an important defect, in that if any leaseholder subsequently extends his or her lease, they lose all their protection. I think my noble friend is aware of this oversight in the legislation, but when will she put it right and will it be retrospective?

[Baroness Scott of Bybrook (Con)]

My Lords, we are well aware of the significant issue concerning leaseholder protections where leases are extended or varied. A change to primary legislation is necessary to ensure the continuation of protection. We are looking to bring forward the necessary legislation as soon as parliamentary time allows. Obviously, compensation will be part of that discussion, I am sure.

[Viscount Hanworth (Lab)]

Is the Minister not aware that freeholders are frequently motivated to consolidate the ownership of their properties by driving the leaseholders into unsustainable debt, by dint of exorbitant service charges?

[Baroness Scott of Bybrook (Con)]

I thought the noble Viscount was going to go on further with that question; it was nice and quick. He is absolutely right; I get more letters about service charges, particularly at this time, than ever before. We believe very strongly that service charges need to be more transparent and communicated more effectively by freeholders, because there should be a clear route to challenging them, or to redress if things go wrong. We are working to make sure that we get further changes to leaseholder legislation to ensure that transparency.

[Lord Best (CB)]

My Lords, the noble Lord, Lord Kennedy of Southwark, raised the regulation of managing agents of leaseholder properties. Does the Minister recall that the working group the Government set up looked at estate agents and letting agents as well, grouping them all together as property agents and requiring a regulator that covered all three sectors together? This makes a lot of sense because some people do all three jobs.

[Baroness Scott of Bybrook (Con)]

The noble Lord is right, and I thank him for the work he has done on this. I assure him that we are still looking at his review. We are also working with National Trading Standards to improve particularly the disclosure of material information in property listings, and with estate agents to ensure that they are offering an appropriate service to consumers all the time. We will continue to work with the sector to make sure that it is behaving appropriately and ensuring that people who go to agents are treated with the respect that they deserve.

[Baroness Thornhill (LD)]

My Lords, over the years that this has been a major issue we have had seven Secretaries of State and nine Housing Ministers. In the meantime, the building safety crisis and surging inflation are causing even more financial hardship to tens of thousands of leaseholders. Can the Minister assure us that managing agent reform—I use that word deliberately—and regulation specifically will be a plank of any new legislation? Will it be given the necessary time to ensure that it receives Royal Assent before the end of the next Parliament?

[Baroness Scott of Bybrook (Con)]

My Lords, I have said many times at the Dispatch Box that I cannot say that. I cannot tell noble Lords when the leaseholder protection Bill will come through and what it will contain because that would pre-empt the King’s Speech. However, I can assure noble Lords, as I have said before, that it was in our manifesto and that we intend to deliver before the end of the Parliament.

[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, would it not be better if leaseholders were enabled more easily to take over the management of their flats themselves? At present, this is particularly difficult and can be easily frustrated. What will the Government do to make it easier?

[Baroness Scott of Bybrook (Con)]

My Lords, the Government agree with the noble Lord. We should wait until we have further leasehold reform.

[Baroness Fox of Buckley (Non-Afl)]

My Lords, the estate agents Hamptons estimates that England’s leaseholders will collectively pay a crippling £7.6 billion in service charges this year. The Minister will have heard from the individuals. Although it is tempting to say that the case is therefore for statutory regulation of managing agents, could she comment on the real solution, which is that leaseholders should have the right easily to hire and fire managing agents themselves, as suggested by Commonhold Now, and that they should have some control over their own properties?

[Baroness Scott of Bybrook (Con)]

The noble Baroness is right. That is exactly why we are looking at a code of conduct, which will have teeth, and the role more widely of leaseholders when we look to the leasehold Bill that will come through.

[Lord Kirkhope of Harrogate (Con)]

My Lords, my noble friend refers to leasehold, but is it not correct that all the other professionals involved in residential property transactions—I declare an interest as a solicitor—are very tightly controlled indeed in respect of fees and their conduct, bearing in mind the extra responsibilities, such as sales and purchases, now placed on professionals? Why are we not more determined to ensure that estate agents are equally controlled?

[Baroness Scott of Bybrook (Con)]

My Lords, estate agents are regulated through the Estate Agents Act 1979. As I said, that is currently enforced through the National Trading Standards estate and letting agency team, which makes it very clear that estate agents are expected to exercise due diligence and check whether the information on anything they are selling is correct. The Government expect all property agents to ensure that customers are aware of anything to do with the property that they are negotiating on and to work within those trading standards rules and regulations.

[Baroness Taylor of Stevenage (Lab)]

My Lords, we keep getting vague promises about action being taken on leaseholder reform. For all leaseholders, the prospect of hikes in their service charges hangs over them like a sword of Damocles. It is about time that this was sorted out. The present provisions are too opaque and leave leaseholders at the mercy of unscrupulous managing agents. If we are to have transparency of service charges, when will this reform come forward? Please can we have a bit more clarity about when the Government will tackle it?

[Baroness Scott of Bybrook (Con)]

The noble Baroness is absolutely right: leaseholders need that transparency to better understand what they are paying for and for it to be harder for landlords to hide any unreasonable charges. As I said, we are looking at it. We will bring forward legislation later in this Parliament.

[Lord Hunt of Kings Heath (Lab)]

My Lords, on that very important point, does the Minister envisage that the outcome of this will be models to insist that agents set out information in a way that is very simple and easy to understand? Unless we have that, it will be so easy for agents to hide behind the jargon used in the industry about what exactly service charges cover.

[Baroness Scott of Bybrook (Con)]

I cannot say what will be in the proposed Bill, but what the noble Lord has said is absolutely right. Leaseholders should be absolutely clear about what to expect from their landlord.