Leasehold Reform

Jim Fitzpatrick Excerpts

Wednesday 4th December 2013 Westminster Hall

[Jim Fitzpatrick (Poplar and Limehouse) (Lab)]

Mr Turner, it is a pleasure to see you presiding over this debate this afternoon. I am also very pleased to see the Minister here in Westminster Hall and the hon. Member for Worthing West (Sir Peter Bottomley), who has led on this issue in this House for a number of years now. I know that he wants to make a contribution to the debate before the Minister responds, so I am very happy to see that he is here.

This is a growing issue. I have had a number of cases in my constituency of Poplar and Limehouse in the past 16 years involving people in very expensive properties; professional and qualified individuals, residents who paid large sums of money for the homes that they inhabit. They are being ripped off and exploited by unscrupulous property management companies and individuals who have spawned these management companies.

That is my own local perspective. However, this is a national issue. As I understand it, about 5 million people are in leasehold tenure in the United Kingdom and only one other country has that degree of tenure. A note on the statutory instrument that we debated last week in Committee—the Redress Schemes for Lettings Agency Work and Property Management Work (Approval and Designation of Schemes) (England) Order 2013—said that 40% of all new properties are under leasehold tenure. East London, where we have massive regeneration and lots of new properties and conversions, is I think one of the areas with the biggest number of properties under leasehold tenure. This is not a situation that will go away. It has been growing for years and will continue to grow.

When we were in government, I know that we tried to address the issue to a certain extent. We had a number of stabs at it, but sadly we did not cover it. I am very hopeful that the Minister will be able to say that the coalition is still very interested in the subject and want to address it.

It is not just leasehold tenure that is an issue. I have to declare that I live on an estate that was previously managed by Peverel, which was previously owned by the Tchenguiz brothers, who were quite notorious. An Office of Fair Trading report is due out this Friday; I will mention that later. I am a freeholder, but because I am on an estate that is run by a property management company I have a covenant and therefore I am included and have a role to play. I want to put that on record, so that I am not accused of any conflict of interest.

Despite the reforms in the statutory instrument, there are still specific problems, including unfair charges for repairs, insurance and electricity supply, and complex procedures for residents to seek redress; those procedures are supposed to be informal. When residents get to land valuation tribunals—I know that the structure of those tribunals is itself being reformed—property management companies turn up with heavyweight legal teams, including barristers, and put people under massive pressure. One other difficulty is that, even where residents win their legal cases, the legal costs incurred by the property management companies, which were supposed to be capped at £5,000 but are not, suddenly appear on the bills of the residents for the following year as part of their service charges. That is grossly unfair and adds insult to injury.

[Mr Andrew Smith (Oxford East) (Lab)]

I congratulate my hon. Friend on raising this very important issue. Does he agree that these problems are a particular nightmare for elderly residents who simply cannot cope with the pressure that they are put under and the extent of the rise in costs?

[Jim Fitzpatrick]

My right hon. Friend anticipates a point that I will make later, namely that these problems are not restricted by class, age or geography. They relate to properties ranging from pensioner and retirement flats that have a value of only £50,000 through to million-pound properties in my part of east London. However, when we are talking about pensioners in their retirement homes and other such communities, the trauma and the stress caused by these issues is even greater. Although there are some restrictions in the legislation about the fees that these property management companies can charge, and measures dealing with the ability of local authorities to prosecute these companies when they see that there is a transgression, local authorities appear to be unwilling or unable to respond legally.

I know of a number of cases. In my constituency, I have two high-profile cases running at the moment: one on the Canary Riverside development and one on the West India Quay development. Both involve companies owned by the Yianis Group and are operated by Octagon Assets. They are in major disputes with residents, who have real problems in getting their situations resolved. The right to manage estate ballots procedure is very complex, especially where there are absentee owners who are sub-letting, and it is also very expensive. At the Kingsmere development in Brighton, it cost residents £30,000 to take action and they failed to secure the right to manage their own properties. An individual in Battersea, Mr Dennis Jackson, entered a dispute with his property management company about £7,000. He incurred legal costs of £76,000 and nearly lost his £800,000 flat, which he now has to sell to pay for his legal fees. That example shows the level of professional individuals we are talking about. They have to relocate to deal with the problems they have had to face.

We have had predators such as the Tchenguiz brothers and Peverel, the largest property management company in England, with many complaints from pensioners and others about onerous and unnecessary maintenance work and about exacting fees; my right hon. Friend the Member for Oxford East (Mr Smith) mentioned the pressures on pensioners. There is no requirement on these property management companies to demonstrate value for money, or to ensure quality of service.

I would be grateful if the Minister, when he responds to the debate, brought us up to speed on the OFT investigation into Peverel and on the leasehold inquiry, which I believe has been announced. I know that he will not be able to say too much without compromising embargoes and so on, but I know that there have been announcements, so it would be good to put on the record today exactly what is happening.

I congratulate the Leasehold Knowledge Partnership both in respect of the full OFT investigation into residential leasehold and the securing of the OFT report into the Peverel-Cirrus price-fixing racket, which involved warden call and electronic door systems in retirement leases. Again, that relates to the point that my right hon. Friend made about pensioners. I believe that the report is due out this Friday, but I would be grateful if the Minister confirmed that.

I thank the LKP and Carlex for their briefings and the information that they have given me, particularly the information about repayments to residents: £1 million to residents at St George Wharf; £500,000 to residents at Charter Quay; and £400,000 to residents at Chelsea Bridge Wharf. Those are huge sums, and they demonstrate that something has gone badly wrong in this sector.

We have had the statutory instrument and the redress scheme. I asked the Minister’s colleague—the Under-Secretary of State for Communities and Local Government, the hon. Member for Keighley (Kris Hopkins), who presided over the statutory instrument—about the redress scheme. He was able to say that the scheme, which has now been extended, means that, if someone is not in the scheme they will not be able to operate. Perhaps the Minister could say a little more about how the scheme will make it simpler for residents and tenants to be treated fairly. Also, can he give any information about the OFT inquiry, its duration and the liaison between his Department and colleagues in the Department for Business, Innovation and Skills about that?

The fundamental question is whether the Government accept that this issue must be addressed, with solutions in due course—

--- Later in debate ---

On resuming—

[Jim Fitzpatrick]

Do the Government accept that this growing issue will not go away and that action is needed? Certainly, the OFT announcement suggests that the authorities recognise that, although whether that is because the Government have told them, I am not entirely sure. It would be good to hear the Minister’s view on that.

Returning to my right hon. Friend’s intervention, leasehold crosses class and age boundaries, and includes everything from expensive lofts and expensive apartments to retirement bungalows and flats, and it is not geographically limited, either. The issue affects the whole country.

On the Delegated Legislation Committee, the Minister’s colleague, the Housing Minister said that he is prepared and happy to meet me, the hon. Member for Worthing West and other colleagues with an interest. I would be grateful if the Minister confirmed that meeting. Obviously, the OFT inquiry means that things will be happening in parallel, but it would be good to put that directly to the Housing Minister and the Department at some time in the future.