Baroness Gardner of Parkes
Main Page: Baroness Gardner of Parkes (Conservative - Life peer)Housing: Flats
Baroness Gardner of Parkes Excerpts
Baroness Gardner of Parkes
To ask Her Majesty’s Government what proposals they have with regard to residential service charges and other matters affecting leasehold blocks of flats.
Baroness Gardner of Parkes
My Lords, I have declared my interest in the register as a long-standing leaseholder. Having always seen the leasehold situation from a personal point of view and how I have been affected by changes, I had not appreciated that it is a vast subject which affects over 2 million people in the UK—half a million in the capital alone pay more than half a billion pounds annually in service charges. This March, the London Assembly produced Highly Charged, an 80-page report on residential leasehold service charges in London. The foreword states,
“the complexity of the service charges regime comes as a shock”,
and looks, in particular,
“at the way the transparency of service charges can be improved and leaseholders can be given greater control over the way services to their homes are provided”.
I urge your Lordships to study this report and the Lords Library briefing pack, most capably prepared by our Library staff, in detail.
There are many different issues in leasehold. Here is a brief list of some of the key ones: simplification of the law—a consolidation Act; regulation of managing bodies; transparency—complaints processes; closing loopholes—protecting leaseholders’ rights; easier change to commonhold; right to manage—tenants’ associations; standard of services—value for money; exit or transfer fees; and financing home ownership.
Regarding simplification of the law, many people who buy leasehold property have no idea what is involved. They are looking for somewhere they can afford to live and, generally, their focus is on buying the flat. They look at the service charge for that year but many will not be looking at this going up or at large capital outlay in the future for block repairs—these are often nasty surprises. They expect to be able to rely on managing agents—normally appointed by the freeholder or some other tier of landlord—to act fairly on their behalf. The leaseholder is always at the bottom of the pile.
As Act after Act has constantly altered sections in earlier Acts, ordinary leaseholders—and even lawyers—find it difficult to navigate through the morass of legislation covering leasehold in England and Wales. There is real need for a Consolidation Act and I support the views of the Federation of Private Residents’ Associations as set out in their paper Forgotten Leaseholders.
There is a strong call for regulation of managing bodies. I am ambivalent on the point as the necessary changes in the law are far greater and a Consolidation Act which could clarify and simplify would be better. Regulation may be a helpful first step. The Government do not seem to have sufficient data on the working of leasehold law. For instance, in 2009, the British Property Federation wrote to the then Government stating that it fully supported better regulation, yet it is often quoted by Ministers as opposing regulation. Sections 152 and 154 of the 2002 Act were due to be in force by now but the Government have not implemented these protective clauses. Residential tenants’ deposits are protected by the law but the much larger amount, the leaseholders’ money held by managing agents, has no protection.
Transparency, a major news topic in recent weeks, is vital in the matter of service charges, works and repairs. Leaseholders are entitled to know how their money is spent and to be confident that they are getting what they have paid for. Shocking cases of massive overcharging have appeared in the press. In 2011, the Daily Telegraph on 3 December and the Mail on Sunday on 11 December published reports. There was a September case settled almost on the doorstep of the leasehold valuation tribunal where residents of St George Wharf, opposite Parliament, had received a refund of £1 million after a battle that went on for some years.
In the Charter Quay case against the same landlord, Mr Tchenguiz, in December, the leasehold valuation tribunal found that many interconnected companies were entering into contracts with other Tchenguiz family-owned companies and in that case received an excessive commission of 23.5 per cent for insurance. The chairman said:
“The result of entering these contracts has been extremely damaging financially, because the break clauses are so onerous”.
Peverel, the management company owned until recently by the Tchenguiz family, had a very poor record of dealings with its leaseholders.
There are too many cases where intermediate landlords or management responsible for arranging services such as insurance have agreed contracts which mean that they are pocketing money themselves to the detriment of their tenants. Transparency is necessary to reveal these situations and stop this abuse. The organisation Leasehold Knowledge Partnership is actively working to ensure good practice.
Easier change to commonhold was included in the 2002 Act and it is sad that so little commonhold has been developed since. It is so clearly in the interest of the resident. It gives people real ownership of the home in which they live. It should become government policy to facilitate commonhold. The 2002 Act allows leaseholders to convert to commonhold, but only if they are 100 per cent in agreement on the matter. That is an almost impossible percentage—just one flat can thwart it. Reduction to a simple majority would make a great difference. When residents see the benefits, as I have myself in my homeland, they would appreciate the great advantages of such a system. I support the views in favour of commonhold held by CARL, the Campaign for the Abolition of Residential Leasehold.
The right to manage and tenants’ associations can each be very beneficial. The difficulty arises in getting sufficient leaseholders in a block to agree on any option. This is particularly difficult in cosmopolitan areas where many tenants live only part time or property is in foreign ownership. At least some residents have to be willing to take on the work of handling contact with the relevant landlord or managing agent and this takes time and effort. There is no right to manage available if more than 25 per cent of the building is in commercial use. Procedures and percentages merit reconsideration.
My housing experience in GLC days showed me that the number of people willing to take on such a role on a voluntary, unpaid basis is very small and the work can be very demanding. A reputable managing agent has sent me interesting views about the need to train leaseholders to improve their knowledge of the system and obtain certification for this. He favours advisory bodies, alternative dispute resolution and mediation. He states that,
“many disputes could be avoided through early consultation”.
In an ideal world, he would be right, but many leaseholders find that whatever attempts they make fail to produce any response or necessary action from their managing agents. Agents change but are no better. Where routine inspections and long-term maintenance planning used to be the norm, little, if anything, is done now.
As regards loopholes, there is evidently a defect in the leasehold Acts. Some process exists whereby a landlord can avoid the obligation of offering their interest to the leaseholders in a block, by setting up what I think is called a sister company. In my block this has produced a very bad result for leaseholders who would, I believe, have wanted to buy in that head lease. It is wrong that we did not have the opportunity.
Exit or transfer fees have a very adverse effect on older people who wish to move to a retirement village home and when the time comes to move, perhaps to a care home. They find themselves faced with quite a high charge. This is often money that they need. If they have died, their family find that the property might be almost impossible to sell because of the high charges. This certainly needs to be looked at. It has a doubly bad effect in housing terms. Older people living in a house too large for them and who are keen to move to a sheltered housing facility are deterred from doing so because they have such a financial disincentive. This means that a large property is underoccupied and unavailable for a family in need of that size of accommodation. I support the Campaign Against Retirement Leasehold Exploitation—CARLEX.
As to financing home ownership, bridging finance—so common years ago—was short-term money advanced by a bank or building society to enable you to secure the home you wished to move to, and to give you time to sell your present home. This enabled people to move up or down in accommodation size or location, and it worked well. Today, lenders are clear that no such type of finance is available at all.
After a recent housing debate, the noble Lord, Lord Best, told me that Hanover Housing Association, of which he is the chairman, offers an older person the right to move into appropriate accommodation and gives them two years within which to decide whether they are happy and want to buy and stay, or to return to their original home. I find this a marvellous system. It should be more available.
Recently, I was involved in trying to help someone who wanted to buy a flat in a high-rise former council block—
The Deputy Chairman of Committees (Lord Geddes)
With apologies to the noble Baroness, a Division has been called in the Chamber. The Grand Committee stands adjourned until 4.51 pm.
Baroness Gardner of Parkes
I will repeat the first sentence of my paragraph: otherwise, it will not hang together. Recently, I was involved in trying to help someone who wanted to buy a flat in a former council block that had been bought under the right to buy. Application for a mortgage with a high-percentage deposit was approved in principle by the bank, and a valuation fee paid. The valuation report attached a zero value to the flat. Thinking that this must be an aberration, the prospective buyer went through the same process with another bank and got exactly the same response: the value was listed as nil. A valuer’s note said that no one was willing to lend on blocks that had a past or present connection with a local authority, particularly if they were high-rise. The two banks had been willing to offer terms, but neither would do so with a zero on the valuation report. Several other banks said that they would not offer mortgages on any high-rise blocks. The policy of Barclays is not to lend on property above four floors, with the exception of expensive new buildings such as One Hyde Park—and, I suppose, the Shard.
The implications of this are wide, particularly at a time when the Government are keen for more people to buy the flat in which they live. I sent details of the case to the Minister for Housing on 8 March, pointing out that people need to be able to move on if their circumstances change and they need larger or different accommodation, and asking who would want to buy if they were locking themselves in to a totally illiquid asset. His reply of 30 March stated that he had,
“contacted HM Treasury and they have agreed to accept responsibility for this correspondence”.
The acknowledgement card from the Treasury was dated 28 March. I await a reply. I hope that my response will be swifter than that to the consumer group Which? It has not yet had a reply from the Minister for Housing to its letter on leasehold property charges sent last October. I received the Which? article only today. I have no time to comment on it but I hope that other noble Lords may do so.
As I followed up on the high-rise case I was most impressed by how well blocks were managed by the local borough—a point made in the London Assembly report. The standard of consultation with tenants and of explanation of the work done was very clear, and far above anything that I had seen in private blocks. There are lessons to be learnt.
My brief time has run out. All I have been able to do is list some of the issues. They are complex and far-reaching, and affect many people. We all want to live in a fair and just society. We do not want to spend hours and days trying to get things done that should be done routinely and correctly. Having to complain, let alone having to do it formally through tribunal proceedings, is a slow and laborious process. Life does not need complication but simplification, and above all clarity. The issues need to be studied in detail for the benefit of all. I hope that the Government will consider the many points that I am sure your Lordships will raise today.