Redress Schemes for Lettings Agency Work and Property Management Work (Approval and Designation of Schemes) (England) Order 2013

Baroness Gardner of Parkes Excerpts

Tuesday 26th November 2013 Grand Committee

[Baroness Gardner of Parkes (Con)]

My Lords, I find this an interesting order. I read the Explanatory Memorandum, but nothing really explains anything very clearly. I ask the Minister to confirm that this is just a sort of preliminary paper and that we will have to await the next step before we know what on earth it is about, because so much here is unclear. My personal interest is declared in the register of interests. I have leasehold property, which I let.

Nowhere does the order bring out the importance of transparency and how much we want to see that. Paragraph 7.14 of the Explanatory Memorandum states that the order,

“requires individuals responsible for running approved schemes … to provide such information on the operation of the scheme as the Secretary of State may reasonably require”.

However, I am not concerned about what the Secretary of State wants to know; I am more concerned about all the millions of people in leasehold properties who want to know what this is all about. Unless we have complete transparency, a lot of redress will be demanded by people, as they will all find it unsatisfactory that they never get straight answers to anything. I am speaking wildly and widely: this generalisation may catch people who are 100% reliable as managing agents, but there are far too many who are not. That is why we want this scheme to work and to work well.

Paragraph 7.12 says that there will be,

“publication of an annual report”.

I am not clear about who will make that annual report, and I should like to know what that is about. Is it is a report by the ombudsman or by each person who deals with the schemes? It is clear that there could be more than one scheme. Multiple schemes could be approved by the Government. It is not clear what exactly you have to do in order to be approved because, again, everything is shrouded in those wonderful words that now enable the Secretary of State to do pretty well anything. Therefore, until we see the next stage, we will not know what it is really talking about.

If there are, say, four approved schemes, will we have four annual reports, or will the Government or the ombudsman produce one report? I am mystified by the reporting process. Reporting is interesting and satisfactory up to a certain point, but what people really want is action. They want to know where they stand, and it is only fair and right that they should. There are currently a lot of cowboy practices, whereby some invisible person collects insurance from all the leaseholders, who find that they are paying a grossly inflated amount because someone is raking off money in the background. There are many points such as that which we need to look into.

It might be that we will need to have some clear definition of which parts of a building will be the responsibility of a communal system and in which parts the owners of individual flats will be responsible for work themselves. Regarding knowing what the responsibilities are, it is no answer to say “Well, it will all be in the terms of the lease”, because a lot of those leases are pretty woolly. No one is quite sure what happens with them.

That takes me to the point that any of your Lordships who read your Sunday paper must have seen: the story of this man named Jackson, who has just lost his flat. He went to the leasehold valuation tribunal but was foolish because he should have paid the £300 which was the original dispute, as far as I can see, and then gone to the tribunal. He ended up going to the tribunal when the maximum that he would have to pay was £500. Your Lordships will all have heard before, and I know that it is on record in Hansard, that I participated in Committee when the Bill was passed in 1996 that set a maximum of £500 that would be payable by any applicant. Now the whole tribunal system has changed, and however bad and expensive it has been, that is nothing to what it will be in future.

A lot of articles now are asking whether anyone will be able to afford to go to the leasehold valuation tribunal any more, even to go into the first stage. It was always acknowledged that if it went on appeal up to the second tier of the Lands Tribunal, that was where people who had big money would be at an advantage. No one ever foresaw the point where even if you were only liable for that £500 maximum, the other party could bring against you QCs and enormously expensive people who would charge the earth and then you, as a leaseholder, would find that it was billed back to you. The bill was not being taken on by the head lessee or the freeholder but came back on the person who had the cause for complaint. Will the redress schemes set out here cover that sort of issue, or will the situation be simply as it was for people such as that man?

This is exactly what happened to him. It started off as a minor dispute and he thought that he would be paying just £500. Eventually, after it had moved on, his legal bill was £76,000. I presume that everyone else in the block of flats had a share of that bill, too. He waited for the work to happen. A new company took over; again, that is rather typical of what happens. Indeed, I have had what I describe as wonderful whitewash letters saying, “We have been bad in the past but we are angels now. Everything is going to be all right and no one will have any cause for worry at all”.

Interestingly, at the meeting we had at the department, the person who is now running it was there. She claims to have had a whitewash and was very much in favour of the redress scheme. Perhaps the companies are reformed but we must wait and see. The problem is where it may end up. This man received bills to meet all these charges for three years, but no work was done in that time. That is very unsatisfactory and I feel very sympathetic towards him. For anyone to think that they are going into a minor thing, designed for ordinary people, only to find instead that they lose their home over it is a tragic situation.

I therefore have great hopes for this redress scheme, but we have an enormous number of problems to look at. When I look at the document in front of us, for example, there is nothing set out yet in Article 3(1). It states only:

“An application to the Secretary of State for approval of a redress scheme must … (a) be made in such a manner as the Secretary of State may determine; and (b) be accompanied by such information as the Secretary of State may require”.

There is nothing there to tell you what you would actually get out of it at all. This may be a formality but it is very important. Whatever we do on the matter, this is just the first step, and we have such a long way to go to make life fair for people in these properties.

These are all technicalities, and everything has taken a long time. Was it not in the summer that we passed this amendment? Now we are pretty well at the end of the year and this is the first bit we have—this draft statutory instrument, which does not even look as if it goes very far.

I am concerned about arbitration. I spoke here when the issue of changing the whole tribunal system came up before. That is a retrograde step. The tribunals were intended to be handled so that any ordinary person could go to them. The way the system has changed now has taken us right back to the battles we fought in 1996 against all these prohibitive charges. It will be very worrying for many people who now will not dare to complain about things. Unless the redress scheme is good, well thought through, carefully planned and honestly implemented with transparency, I worry about what the future will hold.

Of course, I am a great believer—as I am sure everyone knows—in commonhold, the system we have in Australia. There, no one is dependent on an intermediate landlord and you all share the rights to your own property. Here, the law demands that if you want to change to that system, you need 100% of the leaseholders of the block of flats to agree. Everyone knows that all you need is one crooked landlord willing to pay someone to be the 1% that will not pass something and that will never happen. The Government should—and I believe will in future—look at changing that law so that it could be either a simple majority or a possible one. There are people living overseas, not resident in the place and not even knowing what is going on or caring—sometimes they have so much money it does not matter to them. Unless we can really change this and make it fair, it will remain a great injustice that people living in a place will find that they do not have the rights and control to which they should be entitled. I have said more than enough and am sorry to burden the Committee with even more on this issue.

[Baroness Hanham (Con)]

My Lords, I took an interest in this matter a little while ago when we considered it. I have a couple of questions as a result of this order coming forward. I agree with my noble friend Lady Gardner that it seems terribly short on detail as to implementation. I am not much reassured by the fact that I am not sure whether what I have here is an Explanatory Note or just guidance on how the scheme will be carried out. I am not very reassured by the idea that there will have to be a board for each of these schemes. It is not at all clear of whom such a board would be made up. The board is there to appoint the scheme administrator, but there is nothing else about what the board is meant to do. The only thing it says is that if you are under a complaint investigation you can sit on this board although you cannot particularly make up the majority of it.

My noble friend Lady Gardner, who has been absolutely remorseless in getting all this right, pointed out that it is the detail of the implementation that will matter. There is nothing very much about the scheme administrator except that he can be appointed for three years. The next thing that will happen is that we will talk about the ombudsman. There is nothing in between to suggest that the scheme administrator and the ombudsman will be different, or whether the ombudsman will fit into how the scheme will run. After all, the ombudsman probably will be one of the most important aspects of it.

Another quite trivial thing comes up later on. There is an awful confusion between “consumers” and “clients”. It would be helpful if we could decide which word will be used. I will give the example:

“Taking special care when dealing with consumers who might be disadvantaged”.

It might be clients who are disadvantaged. Anywhere else, all the way down, the text is about responding to “clients” in an appropriate time. Everything else is about clients. In the interests of clarity, let us decide who it is we are talking about.

There needs to be much more explanation of how many schemes are likely to be approved and how many would be too many. You might get 25, all of them absolutely perfect, but might actually need to have not more than about four or five because that is how they are made up. There must be much more clarity about who the ombudsman is and how the access to the ombudsman will work through this scheme.

Other than that, even though there are some holes and flaws and things that need to be taken further, this has moved at astonishing speed, by governmental standards, and I am grateful for that because it is long-overdue legislation.