Leaseholders and Managing Agents

Justin Madders Excerpts

Tuesday 28th February 2023 Westminster Hall

[Justin Madders (Ellesmere Port and Neston) (Lab)]

It is a pleasure to see you in the Chair today, Sir George.

I thank my hon. Friend the Member for Brent North (Barry Gardiner) for introducing the debate and setting out clearly why leaseholders are at the mercy of freehold managing agents who—unsurprisingly—put the interests of the freeholder above all else, from ignoring building defects to rinsing the leaseholders through service charges. That can be done through the padding of bills, the use of preferred contractors, commissions and organising buildings insurance.

I can recall one example in my constituency where the insurance company for a block of flats just happened to operate from the same address as the managing agents and the freeholder. Under what other contract would someone be expected to pay all the costs but not actually be able to see the terms of the contract? Yet that is what we see with these insurance deals. Thankfully, that is being investigated by the Financial Conduct Authority. This may well provide us with yet another payment protection insurance-style scandal.

This is another outrageous example of the way that the dice are loaded against leaseholders, and the fact that anyone can set up as a property manager in this unregulated sector is unacceptable. Although leaseholders have the option, of course, of going to court to dispute charges, they will never get their legal costs back, even if they are successful. There could be the most egregious charges, and they could be thrown out of court as totally unreasonable, but it is still the leaseholder who ends up paying the bill for that legal action.

I also think that estate management companies on new-build estates, whether they are leasehold or not, need to be tackled, because the opportunities to inflate charges exist there almost as much as they do in a block of flats. Much as with leasehold itself, I do not accept that these arrangements are needed at all. The fact that developers choose not to pay a sum to the local authority for the financial commitment that is needed to maintain communal areas, instead saving themselves money by passing on the charge to homeowners, is another example of the rapacious nature of many in this sector. Not only do they make a saving at the start of the development, but they create an additional income stream by charging for communal services.

This situation will not end well. Sooner or later, residents who pay for the same service twice—once through their council tax and once through their service charge—will demand an end to this double-charging. However, as with leasehold, the guilty parties will have long since left town. These residents have even fewer rights than those in leasehold properties, but the central issue is the same: a system that puts power in the hands of those who have no business being involved with these people’s homes at all.

Finally, on leasehold more generally, the linking of ground rents to the retail price index is becoming a real issue, with inflation so high. It even makes some of the outrageous ground rent doubling clauses seem reasonable in comparison, and it is putting people in real hardship.

It is five years since we were promised that this feudal system of ownership would be ended, yet millions of people are still trapped in leasehold. We repeat our plea yet again—I am sure the Minister will hear this time and again today—for the Government to please get on and deliver the work of the Law Commission so that we can say goodbye to leasehold once and for all.