Lord Sharma
Main Page: Lord Sharma (Conservative - Life peer)
Annette Brooke
My hon. Friend makes a valid point. It is difficult to think of anybody in a leasehold property who would have to pay such an additional charge. We need to look at what the money is used for, and I shall expand on that later.
Alok Sharma (Reading West) (Con)
I have had representations from residents of Garston Park caravan park about their concern that 10% is indeed a very high figure. The Mobile Homes Act says that the charge on the sale of a home can be up to 10%. Does the right hon. Lady have any statistics—or perhaps the Minister can give them when he responds—on how many park home owners are charging 10% as opposed to a lower figure?
Annette Brooke
I think we will have to rely on the Minister being informed of that number. It has not been drawn to my attention that anybody charges less than the maximum, as is usually the case when a maximum is set.
In July, over 200 park home owners travelled to London to lobby their MPs. That is an amazing number given the distance and the age of many park home owners. It is important to note that their campaign has no funding whatsoever.
There are at least three elements to a site owner’s income, including the initial siting of the mobile home, the pitch fees, and the commission payment. On the siting of a new home, a site owner may purchase a new unit at a wholesale price and will incur further costs such as transportation and connection to services. However, it is reasonable to assume that the final selling price will exceed all costs incurred, and perhaps produce a significant return. As soon as the home is re-sold, the commission clicks in. In another scenario, a park home owner could replace their home, meaning that they will be charged for connections to services and landscaping, leading to more potential profit through re-charging—and again, when the unit is sold, the commission will click in.
On pitch fees, research by the National Association of Park Home Residents in November 2013 revealed that monthly pitch fees in 1,075 parks varied from £40 to £382, with an average of about £150 per month—quite a lot for people on fixed incomes. The 2013 Act will introduce some accountability, with an annual review of pitch fees, an opportunity for park home owners to challenge pitch fees on the basis of lack of maintenance or deterioration of the site, and a requirement for site owners to justify increases above the retail prices index. I hope that there will also be fully published audited accounts for these transactions.
On the commission itself, it is sometimes argued that this payment provides an important income stream to the site owner, and it is equally argued that the payment is essential for site improvements. A case is also put forward that it is not in the interests of park home owners, who are often on low incomes, to pay higher pitch fees out of current income, as would be required without this sales commission. In that sense, it might be seen as a deferred payment. I do not want to create unintended consequences, and hence I am not following the wording of the petition in asking that the commission be scrapped or reduced, but calling for a review. I think we need some facts.
Alok Sharma
The right hon. Lady makes an interesting point about transparency. A lot of these park homes are owned by individuals and private companies, so there is not the level of transparency in the accounts that one would expect. Does she agree that as part of a review, we should ask park owners to be a little more open to demonstrate whether a reduction in the 10% charge would really hit their bottom line as much as they say?
Annette Brooke
I absolutely agree. Transparency is the key to finding the right answer for everybody in this scenario.
Obviously, a site owner must get a reasonable return on capital, and we want to encourage good site owners to remain in the industry. Park homes are an important part of the housing supply and should be encouraged. The Government acknowledge that the park homes sector plays an important role in the provision of low-cost housing for the elderly, and that it frees up under-occupied homes that are much needed as we face a housing crisis. However, with pitch fees, other overheads and the 10% commission, many residents worry that the costs of owning a park home are becoming unviable. The 10% commission charge is undoubtedly a matter of concern. Although it is now paid by the purchaser, it does reduce the sum of money paid to the seller.
Park operators have argued that they cannot remain in business without the 10% commission charge, yet our petitioners have pointed out that it would be foolish for a business to rely on an income that is unpredictable. It is difficult to predict how many new homes will be purchased, or used homes re-sold, in a year. Many residents reported feeling trapped in their homes and unable to sell. Owing to park rules, many sites are only for people of retirement age, and so the need to move into a nursing home or some other form of residential care is a real possibility. Having to give the park operator such a high percentage from the sale of their home reduces the amount the seller has to put towards their care.
Park home owners feel discriminated against and ask, “In what other leasehold property arrangement would a payment be made to the leaseholder on the sale of the property?” They cite examples of poorly maintained sites and no real improvements over time, and a perception of a luxury lifestyle for some site owners. Clearly, there are counter-examples of exemplary site owners, which I welcome, and I would like them to showcase their best practice. Transparency and published accounts would be helpful, to encourage all site owners to follow best practice.
Park home owners also point out that the value of the property is influenced by their contribution to the home’s value via its upkeep and maintenance, and argue, “Why should the site owner benefit from this contribution?” That is a good point.