Freehold Estate Fees

Debate between Helen Goodman and Mary Glindon

Tuesday 22nd January 2019 Westminster Hall

[Helen Goodman]

My hon. Friend makes a very good point. We need more transparency and greater accountability, and I will come on to how we might secure those things. One of the things that homeowners have noted is their frustration that they do not have any control over who the managing agent is. The relationship between the big builders and their favourite management companies and the processes for acquiring these communal spaces are shrouded in mystery. The fees appear to be plucked from thin air. In some cases, a vague “administration” category accounts for up to 70% of the total bill.

What do homeowners get in exchange for their fee? Of the 200 people who completed my survey, only one indicated a very good standard of maintenance. That was perhaps an optimistic assessment. The person went on to explain that

“the grass is cut regularly, but…we were promised a play park and village green with a pond. None have materialised.”

Others complained of dead or dying trees, poorly maintained shrubberies, wastelands, fly-tipping, broken or absent street lighting, playgrounds awaiting repair and a general absence of the management company, aside from requests for payment. Specific complaints included how Greenbelt was using a strimmer within a dedicated nature park set up to protect newts; in another case, a community hedgerow project was destroyed.

Homeowners in freehold properties currently have no way to challenge unfair fees or poor service; the power is almost entirely in the hands of the management company. My constituents have faced threats to block the on-sale of their properties, and they have been threatened with bailiffs and court action if they do not adhere to the demands of the management company.

[Mary Glindon (North Tyneside) (Lab)]

I congratulate my hon. Friend, as everyone else has, on securing this really important debate. Something that really frightened me about the case of one of my constituents was that she did not realise that if she defaults on her rent charge, the rent charge owner can repossess her property and enjoy the same rights as if she had never had the transfer of the freehold in the first place. I am sure my hon. Friend will agree that that is petrifying.

[Helen Goodman]

What my hon. Friend says is absolutely right. That is a misuse of the Law of Property Act 1925. That is why we are looking to the Government to make some legal changes. This is not just bad behaviour; this is clearly a deliberate strategy and the company has obviously taken very expensive legal advice in order to develop that strategy. To stop them, we will need some legal change.

I heard from somebody who lives in the west midlands—I do not know whether it was a constituent of my hon. Friend the Member for West Bromwich West (Mr Bailey)—who said that he had had a 17-year battle with Greenbelt and that he was charged legal fees of £25,000. Obviously, the ordinary homeowner cannot afford to shell out on legal fees like that.

Despite their name, property management companies appear to have no interest in actively managing the land they acquire. On the website of London and Economic Properties Ltd, a Wiltshire-based firm that manages the Middridge Vale development in Shildon in my constituency, property is listed under its “investments” section. The company boasts of its

“enviable track record, investing across the property spectrum to deliver profits for shareholders.”

There is no mention of homeowners. It says of the land at Shildon that it

“benefits from grant income from the Forestry Commission as well as a housing levy from the adjacent housing development which…will provide an annual payment in perpetuity of £100 from each of the 278 houses”.

There is no mention of the company’s obligations as the caretaker for the site. Ultimately, that is the problem: these extortionate fees and poor service are the result of a culture that sees housing as an abstract investment, rather than the foundations of our families and communities.

This is a massive scam. The House of Commons Library gave me figures that suggest that perhaps half a million people have been affected by this problem in the last 10 years. That means that somebody or some people are coining in about £100 million a year.

What change is needed? The Government have outlined their commitment to reform the process for those buying a new build home to obtain redress. They intend to bring forward legislation to require all developers to belong to a new homes ombudsman. They have also said that they hope to offer freeholders the same rights as leaseholders to challenge the reasonableness of charges at a property tribunal. Can the Minister say when that will be done? When will he bring forward these measures?

Legislation to improve access to dispute resolution is helpful, but it does not tackle the root problem. The Freehold Properties (Management Charges and Shared Facilities) Bill, which I introduced in November, recommended three changes for homeowners who are already caught in this trap. First, it would cap and regulate estate maintenance fees, to give homeowners financial stability and allow them to buy and sell their homes knowing that costs cannot increase indefinitely. Secondly, it would introduce measures to ensure that shared spaces are maintained to a proper standard, perhaps through something similar to the new homes ombudsman. Thirdly, it would contain provisions for residents if they chose to opt out of their management company and to self-manage, if that was what they wanted to do.

For estates yet to be built, the planning regulations need to be tightened, to require them to be built to an adoptable standard. Local authorities are currently often willing to adopt spaces in exchange for an agreed sum from the developer to cover upkeep for a fixed period. For example, Durham County Council asked for 15 years’ worth. That is a reasonable ask of an industry that can afford to pay its chief executive officer bonuses of £75 million.

Many of these estates were built with support from the Government’s Help to Buy scheme, financed by taxpayers. I would like the Minister to tell us this afternoon that the Government are going to stop providing support to any development using that model. Will the Minister also refer the mis-selling aspect of this to the Financial Conduct Authority to investigate, and to the Law Society, to strike off lawyers who have worked unethically in the interests of property dealers while taking fees and purporting to work for homebuyers?

A situation has arisen whereby the private estates model is rapidly becoming the norm for new developments, with those who have saved hard for their homes bearing an unfair burden and builders treating them as a cash cow. Homeowners do not want sympathy and understanding. They want action, and they would like to see action now. I hope the Minister will be able to make a clear, timetabled commitment this afternoon. I am looking forward to hearing his response.

Oral Answers to Questions

Debate between Helen Goodman and Mary Glindon

Wednesday 5th September 2012 Commons Chamber

[Mrs Mary Glindon (North Tyneside) (Lab)]

6. What estimate he has made of the total reduction in funding to the voluntary sector in 2011-12.

[Helen Goodman (Bishop Auckland) (Lab)]

9. What estimate he has made of the total reduction in funding to the voluntary sector in 2011-12.

Economic Development (North-East)

Debate between Helen Goodman and Mary Glindon

Tuesday 15th February 2011 Commons Chamber

[Helen Goodman (Bishop Auckland) (Lab)]

First, I congratulate my right hon. Friend the Member for Newcastle upon Tyne East (Mr Brown) on securing the debate, and on having been such an excellent regional Minister, defending the interests of all our constituents when he had that responsibility. I want to reinforce his central point about regional economic development being operated through consensus in our region, and how valuable that consensus and those partnerships have been.

When the global recession hit our region, manufacturing suffered in particular, and it seemed deeply unfair that our constituents in engineering, for example, were losing jobs because of the foolishness of bankers in London—but thanks to the action that the Labour Government took at both macro and micro level, we saw a number of improvements in 2010. For example, the future jobs fund produced 500 jobs in Durham. There was also the investment and support for Nissan, which other Members have mentioned. That had a knock-on effect throughout the automotive sector supply chain in the region.

There was also the work of the regional development agency, and I press the Minister to take to heart its important role in securing inward investment. That is not a power that local enterprise partnerships have; it has been taken back to Victoria street. I urge him to ask his officials to have a proper presence in the north-east on inward investment, because we are not confident that when sitting in Victoria street they have a clear picture of the nature of the region and its differences.

Thanks to the previous Government’s work, a brand-new Thorn electric light bulb factory has opened in my constituency, which has secured 700 jobs. It works in partnership with Durham university and other private sector partners, and makes a huge difference. Things improved throughout 2010, to the extent that a £45 million retail development site was opened in the constituency, and manufacturing is clearly past the bottom of the recession, now that customers have stopped de-stocking and things seem to be improving. I visited the Berco factory in my constituency, for example, which opened only last Friday.

However, just as things seem to have turned around thanks to all the efforts of the Labour Government, our region is facing deep spending cuts. I want to draw to the Minister’s attention the impact that the cuts will have not only on the public sector, but on the private sector. In my constituency alone, Building Schools for the Future cuts amount to £100 million, which would have been £100 million-worth of business for the local construction industry. The same is true with cuts in the Home Office and Ministry of Justice capital programmes. All that will have a knock-on effect on firms in my constituency, and I could take him to those firms to show him the jobs that are likely to be lost as a result. In addition, cuts in benefits and working tax credits will have an impact on the retail sector. Cuts in tax credits will have an impact on small businesses such as those involved in child care. Those will all have knock-on effects that Ministers must take into account.

[Mrs Mary Glindon (North Tyneside) (Lab)]

Will my hon. Friend give way?

[Helen Goodman]

In a moment.

The pathetic little tweak to national insurance contributions owed far more to politics than it did to economics. Everyone knows that the big barrier to small businesses is securing equity. That is what they need, not a little reduction in their national insurance contributions. It is not surprising that that initiative did not succeed, and I support wholeheartedly the Federation of Small Businesses, which wants it to apply to all new jobs and not just to wholly new businesses.

Ultimately, this is really a question of values. In my constituency, the Decent Homes programme has another 1,000 homes to complete, and for that it needs only £5 million—as much as one banker’s bonus. We know that the Government have failed to tackle the banks and bankers’ bonuses properly, which has an impact in our constituencies. In the week when Barclays announced yet again massive billion-pound profits, it has closed a branch in Shildon in my constituency.