Property Service Charges

Justin Madders Excerpts

Thursday 30th October 2025 Commons Chamber

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

I congratulate the hon. Member for Reigate (Rebecca Paul) on her excellent speech and on securing the debate. I state for the record that I am a patron of the Leasehold Knowledge Partnership, which does such good work in advising leaseholders.

It was eight years ago that I stood on the Opposition side of the Chamber and described the use of leasehold in new developments as the payment protection insurance of the house building industry. I am pleased to say that the previous Government eventually started to tackle that, and the current Government will hopefully complete that work soon so that we can finally condemn leasehold to the history books.

It was four years ago that I stood on the Opposition side of the Chamber and warned that estate management fees could replacement leasehold as the new PPI of the house building industry—or, as the indomitable women of the National Leasehold Campaign termed it, “fleecehold.” Now that has come to pass; it seems that just about every new development built in this country adopts the same exploitative model, and the public are rightly asking what we are going to do about it. The Minister has amassed great expertise in this area, and I know he is keen to crack on with reform.

There are a number of legal cases ongoing. I am pleased to see that the bogus argument about human rights has been dispatched by the High Court. However, there are a number of others where well-resourced freeholders are trying to preserve the status quo, and not every court is as wise as the High Court was in the human rights case. The Court of Appeal recently found in the Romney House case that where a tenant goes to the first-tier tribunal to challenge a service charge, the tribunal needs only to consider whether the process was reasonable, and not whether the charges themselves were reasonable. That is absurd, and has had the effect of requiring those leaseholders to pay for the refurbishment of a gym that they do not actually own. It is freeholders with their seemingly limitless resources that can challenge and delay actions by leaseholders to preserve their rotten system at every turn, so the sooner we implement the leasehold Act in full the better.

There is a clear warning here as to why we must crack on with tackling estate management fees more broadly. I look forward to the Government’s response to the consultation. When it comes to stopping any more estates being built in this way, and we must end this practice as a matter of urgency, I suggest, as the hon. Member did, that it will actually be much easier to do this than it has been for ending leasehold. I urge the Minister to send a clear instruction to local authorities that estate management arrangements will no longer be accepted in planning applications, and to legislate to ban them on any new developments if necessary. The longer we put off fixing that, the longer it will take to fix this mess.

I fear the Minister will be told that such a move would have an impact on the ambitious house building plans that we rightly have and would damage the housing market more generally, but were we not faced with the same arguments when we tried to abolish leasehold? After all, these developers do not have to pay a community sum to the local authority—indeed, they have an additional lucrative income stream—but despite those new income sources, it does not seem to have had any impact on the price they charge for people to buy their homes in the first place.

The reality is that an estate management company is nothing more than a calculation on a balance sheet. The developers have zero interest in keeping the verges neat and tidy after they have gone. If they can make the bottom line look more attractive by creating the management company, they will, and they keep getting away with it because we let them.

Of course, we must act to protect those already caught in this trap. It is also clear, as we have heard, that many people are not aware of the implications of an estate management company or how much it will cost them when they buy their home. Often, first-time buyers are excited by the prospect of owning a new home, and they place their trust in the system—the lenders, the developers, the lawyers—and the echoes of the leasehold scandal with this are loud. Glitzy sales staff paint a very different picture. They never set out the reality that, in addition to the significant commitment people are making when they buy a home, they are also agreeing to pay an unspecified sum to often unspecified recipients for as long as they stay in that home.

The mis-selling and failure to properly advise has all the hallmarks of the leasehold scandal. We should not be surprised by that because the same actors are involved in that industry as are involved in these rip-offs. An example of some of the novel ways that this financial trap can be described by sales staff came to my attention when constituents on a recently built estate all had the common explanation given to them that this service charge was for a storm drain, but that it would be paid off in a few years so they did not need to worry about it. Well, they are still paying it 15 years later. They are not even sure if there is a storm drain and, even if there is, who is actually responsible for it, and yet the invoices and threatening letters still come.

We also recently met interested parties on another new development where we were trying to clarify who was responsible for maintaining what and who they were accountable to. Because the estate had been developed over several years by different developers, about 10 different organisations were represented at that meeting. It is little wonder that we struggle for transparency with so many people involved.

The fundamental question from the homeowner is: why are we paying twice for the maintenance of open spaces, once through a management fee and once through council tax? We should start from the basic principle that the local council should be doing all the work and that estate management companies are an unnecessary tax on homeowners. How long will it be before we see a concerted campaign for people to get reductions on their council tax on the basis that they are being taxed twice? In the wrong hands, that sort of campaign could pit communities against one another.

Let us not forget that buying a home is the biggest single purchase people will ever make. We need far greater accountability for what developers say and what they build. Housing is of course a critical part of our infrastructure and a fundamental part of a person’s life, but it has been shown time and again that we cannot rely on the market alone to deliver that in a responsible way. Let us get control over these companies, empower homeowners and legislate if necessary so that this rotten, avaricious model becomes history, just like leasehold eventually will.