Freehold Estate Fees

Justin Madders Excerpts

Tuesday 22nd January 2019 Westminster Hall

[Helen Goodman]

Yes, of course. There needs to be more transparency and a system of redress, as my hon. Friend says. There also need to be some rules of the game about the standard to which the estates are built in the first instance. The management companies charge residents an inflated annual fee—in exchange, apparently, for tending to grassy areas, shrubs and other facilities on the estate. That is on top of their council tax.

This is a scandal. There has clearly been mis-selling. The public perception of freehold is deliberately exploited by the property companies in their sales materials. Many homebuyers are not made aware of the arrangements for the management of open spaces until the completion of the sale. One of my constituents reported that the first they had heard of their management company, which was Greenbelt, was a threatening late payment letter. They had not received a bill, let alone a welcome pack.

There is no room in the glossy brochure for an outline of the legal arrangements, but there always seems to be plenty of space for images of parks, playgrounds and woodland areas, backed up by verbal assurances from the sales rep that they are planned for the estate. Those promises are then broken and the land is passed or sold on to the maintenance company.

For example, at DurhamGate, a large housing development in Spennymoor in my constituency, the plans promised a “green spine” running through the centre of the site. Several years in, and with the site still under construction, residents are being hit with a full-price fee of £120 a year. Another of my constituents reported receiving a maintenance bill for a parking area that did not exist. The fees charged to residents for the maintenance of their estates are high, rising, uncapped and completely unregulated.

In Bishop Auckland, the annual fee for each household is somewhere between £100 and £200 a year, depending on the site. At first that does not sound too onerous, but when we consider that 278 neighbours on the estate are also paying the fee, it is obviously a grossly excessive £30,000 just for mowing some grass. In other parts of the country, in line with higher house prices, fees can be up to £400 or £600; I have even heard of fees of £800 a year. There is no limit to price increases and residents frequently report an annual leap in the fee. As my hon. Friends have said, there is no transparency and little accountability.

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

I thank my hon. Friend for securing the debate. I draw a comparison between the fees that councils ordinarily charge for communal services and the kind of fees she is talking about. Does she agree that if councils were so opaque and unreasonable, they would rightly be held to task by their electorate?

[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.

--- Later in debate ---

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

It is a pleasure to serve under your chairmanship once again, Mr Hollobone. I am delighted to follow my constituency neighbour, my hon. Friend the Member for Alyn and Deeside (Mark Tami). We may be on separate sides of national boundaries, but our constituents clearly have many issues in common, not least the terrible way that exploitation has seeped into what should be a well-regulated and secure investment.

I congratulate my hon. Friend the Member for Bishop Auckland (Helen Goodman) on securing the debate and on her work to address these issues through her private Member’s Bill. Hon. Members will be aware that I have also introduced my own Bill, to usher in a fairer, more streamlined and transparent system to enable the purchase of freeholds by leaseholders. On many occasions, both in this Chamber and the main Chamber, I have listed the abuses perpetrated by freeholders in the current feudal system. My hon. Friend the Member for Bishop Auckland gave an excellent explanation of the issues in the management of such properties, and after listening to it, I believe that there are many parallels between the two measures.

Regulation is long overdue. Homeowners have been subjected to unjustified extra costs and there is a distinct lack of transparency. It is clearly another example of homeowners falling foul of greedy developers and the more insidious practices that they have adopted in recent years. We have seen that happen with ground rents and consent fees for leasehold properties, whether flats or houses, where developers have become ever more adept at squeezing cash out of homeowners for the provision of grounds maintenance and other communal services.

As my hon. Friend the Member for Bishop Auckland highlighted, we now see “fleecehold” estate fees. Freeholders and residents on private housing developments find themselves facing escalating costs when the developers from which they purchased their homes in good faith sell off the grounds maintenance to private providers. In blocks of flats, the practice of spurious service charges has developed. In my constituency, a management company that managed only four flats in a block suddenly increased the service charge from around £50 a year to £911 a year. Many of those charges were questionable and the insurance charge in particular stood out, because the insurer seemed to be very well connected and had the same name as the management company. That would simply not be allowed for any other consumer purchase, so why it is allowed in this instance?

As hon. Members have said, the idea of the developer paying the local authority a commuted sum to cut the grass and maintain the common parts has had its day. I am unclear whether the blame for that lies with cash-strapped local authorities asking for too much or with developers being unprepared to cough up more funds in advance. The net effect of that is that more and more homeowners are being asked to pay twice for the maintenance of open spaces: once through a management fee and once through their council tax.

Council tax pays for lots of things, but something as visible and obvious as grounds maintenance leads people to ask a pertinent question: why are they facing a double whammy? My suspicion is that developers will always be tempted to save themselves the expense of paying an up-front sum to the local authority by instead letting their customers pay further down the line, long after they have fled the scene. Of course, someone buying their first home—probably with Help to Buy—will, in reality, have nowhere else to go and will have to accept those arrangements whether or not they genuinely consent to them.

What is wrong with just building and selling family homes? Why are buyers being subjected to covert efforts to squirrel in extra income? Is the sector so avaricious that it has to squeeze every last penny out of young families who have to scrimp and save just to get on the housing ladder? As with ground rent, consent fees and leaseholds, our plc house builders have had £8 billion of help through the Help to Buy scheme. They have trousered that assistance to rip off customers in their own schemes. Developers simply cannot be trusted to play fair with their customers, or with us, as wider taxpayers.

We have a huge shortage of housing. There are significant barriers to buyers getting on to the housing ladder, and a handful of huge companies are responsible for the vast majority of housing delivery. That reliance on a small group of developers has been a very poor deal for the taxpayer, and was the backdrop against which the leasehold scandal emerged.

It cannot be right that the companies that are guilty of the industrial-scale rip-offs that we have heard about regarding both leaseholds and the issue being discussed today are the same ones that we end up relying on to get out of our very real and damaging housing crisis. There is an over-reliance on the market—a market that, to me, is broken—to deliver the new homes that we desperately need.

The net effect is that there is little protection for homeowners. People deserve far more protection than they currently get. Sadly, I have seen very little evidence to suggest that developers will act responsibly and adopt fair and reasonable practices on a voluntary basis. The whole system needs a shake-up, and it needs it now.

Protection for Homebuyers

Justin Madders Excerpts

Thursday 13th December 2018 Westminster Hall

[Kate Green]

I am grateful to my hon. Friend for making that point. The issues of protections through statute and of information to purchasers will be among the many points that I hope to draw to the Minister’s attention during the remainder of my speech.

A couple of weeks ago, the BBC’s “5 live Investigates” reported on the shocking experience of a couple who had moved into a new Bovis home in Worcestershire. During that programme, homebuyer Craig read out a list of a staggering 354 defects in their new house. Last week, the “Victoria Derbyshire” programme reported on homebuyers who found that the mortar in the walls of their new Barratt and Taylor Wimpey homes was crumbling. Buyers report that once they have decided to buy a house, they are placed under considerable pressure to complete the purchase speedily, so that the developer is paid and managers meet their sales targets. Quality is clearly being compromised as a result of those pressures.

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

The pressure that buyers are put under to conclude purchases quickly is something I hope to talk about later on. Is my hon. Friend aware of issues with developers insisting that particular solicitors complete the transactions?

[Kate Green]

Indeed I am, and that too is a point to which I hope to return in the course of my remarks.

--- Later in debate ---

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

It is a pleasure to serve under your chairmanship, Ms Ryan. I congratulate my hon. Friend the Member for Stretford and Urmston (Kate Green) on securing this extremely important debate and on the way she managed to cover a whole range of issues. There are many aspects to this issue. As my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) said, I am vice-chairman of the all-party parliamentary group on leasehold and commonhold reform. I pay tribute to him and the hon. Member for Worthing West (Sir Peter Bottomley) for the work they have done, ably aided by the Leasehold Knowledge Partnership, in raising the many issues in many debates here.

The title of the debate is “Protection for Homebuyers”. The truth, as we have heard, is that there is little protection, if any. We have a system based on the historic principle of caveat emptor—buyer beware—which is a principle I often hear quoted back at me when I raise concerns about some of the more insidious practices developers have adopted over recent years. Buyers should beware, because caveat emptor relies on a buyer and a seller having equal bargaining power, and that is simply not the reality in 2018. We have a huge shortage of housing, there are significant barriers for buyers in getting on the housing ladder and there are a handful of huge companies responsible for the vast majority of housing delivery.

The situation has been exacerbated by the Help to Buy equity loan scheme, which offered support to first-time buyers for new-build homes only. That led to an effective monopoly being held by some developers. If someone wanted to purchase their first home in the area where they grew up, the only choice would have been to visit the sales office of an individual supplier.

[Kate Green]

Does my hon. Friend agree that it is not just individual homebuyers who are being ripped off by some developers, but the taxpayer, because it is public money, through the Government’s Help to Buy scheme, that is helping to boost their profits?

[Justin Madders]

I absolutely agree. The reliance on this small group of developers has been a very poor deal for the taxpayer, and it is against that backdrop that the leasehold scandal has emerged. Once-trusted household names such as Bellway, Persimmon, Redrow, Taylor Wimpey and Countrywide acted in, I believe, a deliberate way to exploit the circumstances and rip off thousands of people around the country—and the taxpayer, in the process.

For no other reason than profiteering, houses in many areas gradually began to be sold on a leasehold rather than a freehold basis. Punitive permission fees—where a leaseholder is forced to pay a significant sum for everything from putting up a shed to changing a carpet—were hidden in the small print of the leases. Service or maintenance charges were then added, charging leaseholders for the same services that they are already paying council tax for. If that was not enough, the developers then added onerous clauses, causing the ground rent in many cases to periodically double, taking them from an initial modest sum to thousands of pounds after a few decades, rendering the properties unmortgageable and unsellable in the future. The ground rent is, of course, being levied for absolutely nothing in return.

When purchasers query the leases on the properties, they are offered a range of scripted reassurances, being told that the properties are “virtually freehold” and that they would have first refusal to buy out the lease. In almost every case, the lease is then sold without the knowledge of the person actually living in the home, to become an income stream for a network of opaque investment companies. People are then told they can purchase the freehold of their own home only if they are prepared to offer tens of thousands of pounds.

As we have heard, purchases of these properties take place in an extremely tight and completely artificial timescale, imposed by the developer through a hard-sell approach. To compound the unequal relationship between the parties to the transaction, a variety of pressure and incentives are used by developers to encourage the use of a solicitor on their own panel. While the solicitor of course has a duty to act in the interests of the purchaser, the reality is that when hundreds of cases are being provided by the developer, that independence is inevitably put under some strain.

My constituent, Katie Kendrick, has helped to lead an incredible campaign on behalf of leaseholders around the country against this scandal, and I pay tribute to her for everything she has done to bring it to the attention of the public. Her own case is a textbook example of the kind of issues we have talked about. In July 2014, with her husband, she bought what transpired to be only the lease to her home from Bellway, a company with a revenue of more than £2.5 billion last year. It was bought through the Help to Buy scheme, and they had only 28 days to complete the purchase following payment of the £500 deposit to reserve the plot. Because of this developer-imposed and completely arbitrary timeframe, Katie and her husband were pressured into using the Bellway-recommended solicitors.

They were informed during the process that, after two years, they would have the right to buy their freehold without any problems and that it would cost in the region of £2,000 to £4,000. Less than two years later, in February 2016, they received notification that the freehold to their home had been unilaterally sold to Adriatic Land 4 (GR1) Ltd. When they inquired whether they could purchase the freehold, they were quoted an amount of £13,350.

I have concluded that Katie’s experience was deliberately manufactured, because it is simply not feasible for the exact same actions to have become standard practice across a range of developers throughout the country. If this situation, as I believe, was deliberately manufactured to exploit thousands of people up and down the country, what is the Minister going to do about it?

If the situation is so serious and inequitable that it should be banned from ever occurring in the future, as is the Government’s apparent policy, how can she justify taking no action to help those people who have already been affected? What examination has been undertaken of the Government’s role in the leasehold scandal? Does she accept that Help to Buy—a scheme created with good intentions—not only helped to create a monopoly position that was exploited, but has also subsidised the perpetrators? What is going to be done about that?

The Housing, Communities and Local Government Committee investigation into these issues is extremely welcome, and I would urge anyone who has not yet done so to look at the evidence provided to date. Some of the responses from developers are completely incredible, in the literal sense. All the developers were unanimous in their support for ending the leasehold scheme that they have already inflicted on thousands of people around the country. Taylor Wimpey told the Committee that when the doubling ground rent issue

“came to our attention...we made a very quick decision to convert the homes that we sell to freehold.”

That implies that until that point they were unaware of the basis on which they were selling their homes.

When Bellway was asked why it sold the freehold off to a third party rather than to the people actually living in the property, their chief executive, Jason Honeyman, replied:

“It is how we have always operated as a business. I am sure that is not the answer you want.”

A member of the Committee pressed him further on this point:

“I am asking why your customers do not get the chance to exercise the opportunity to buy their freehold. You are selling the freehold out from under them without their knowledge.”

His response was simply:

“Yes, we are.”

We know from many Bellway customers that they were specifically told by the sales staff they would be able to buy the freehold, yet here is the chief executive admitting that they have always sold them on to third parties. That, more than anything, shows that when I first called this scandal the payment protection insurance of the housebuilding industry, I was right to do so.

Although the initial response to this emerging scandal from the Government was the right one and was positively received by leaseholders, there is a huge amount of frustration at what are perceived as broken promises. Leasehold houses are no longer to be completely banned, as was promised by the Government. Ground rents will not be reduced to a peppercorn, but to £10, which creates an asset and again amounts to a broken promise by the Government. Will the Minister explain why there has been this backtracking from removing ground rents altogether to having a minimum cost? For all those people already trapped in leasehold properties more than two years on from the scandal coming to public attention, we have little more than warm words from the Government, and no action.

One of the reasons for people’s anger is that, although obscene bonuses have been awarded to Persimmon executives, the bulk of the profits have come from the taxpayer through the Help to Buy scheme. The Government need to accept that they are not simply a bystander, but a financer of the scandal. They cannot simply watch from the sidelines as our constituents continue to be ripped off while a handful of predators generate profits. It cannot be right that the companies that are guilty of this industrial-scale rip-off are the very same ones that we will end up relying on to get us out of the country’s very real, very damaging housing crisis. There seems to be an over-reliance on the market to deliver the new homes that we desperately need. I have seen very little evidence to suggest that developers will act responsibly.

As the leasehold scandal shows, developers have become ever more adept at squeezing cash out of homeowners. Another way of doing that is through the provision of grounds maintenance and other communal services. It seems that the idea of the developer paying the local authority a commuted sum to cut the grass and maintain common paths has had its day. I am not clear whether the blame for that lies with local authorities for asking for too much or with developers that are not prepared to cough up enough funds in advance. I am sure they will always blame each other. The net effect is that more and more homeowners now have, in effect, to pay twice for the maintenance of open spaces—once through the management fee and once through their council tax.

Of course, council tax pays for lots of things, but something as visible and obvious as grounds maintenance leads people to ask why they face a double-whammy. My suspicion is that developers will always be tempted to save themselves the expense of an up-front payment to the local authority by letting their customers pay further down the line long after they have fled the scene. It is not only a double payment; it is also inefficient and lacks accountability. If the grass is not cut on the verges in most parts of my constituency, either I or a local councillor will hear about it and respond. It is not that easy to get a response from a management company.

I want to say a few words about the difficulty in getting developers to comply with their legal obligations once they have completed the bulk of the work. Yet again, the name Bellway crops up. Although it finished building the properties on an estate several years ago, the roads have yet to be adopted by the local authority, because they are not yet up to highway standards. Years of wrangling and paperwork followed the work. We all know about the significant cuts in funding that local authorities have experienced, and yet they have to waste their precious resources chasing developers that are reluctant to face up to their responsibilities.

Another example of that in my constituency is in the Mostyn House development in Parkgate. Originally, it was a boarding school in a listed building. Once the school shut, the site was an attractive one for developers. It is now an impressive mix of new builds and apartments woven into the fabric of the old school, but it suffers from one major disadvantage: although some people have lived there for five years, it still does not have planning permission. The reason for that is that the revised plans were submitted halfway through the redevelopment. Despite the best efforts of the local authority enforcement officers, the developer, PJ Livesey, continually dragged its heels, and as a result there is still an outstanding long list of works.

Our Front-Bench spokesman, the hon. Member for Great Grimsby (Melanie Onn), is not someone who goes around fishing for compliments, but she and the shadow housing team are very engaged on these issues. I hope they continue to develop a full suite of important policies that will tackle many of the injustices we have heard about.

The net effect of all this is that there is no protection for homeowners. Once the developers have left town, they show little interest in keeping to their legal responsibilities. Worse, they continue to market their properties as a revenue stream for third parties.

As my hon. Friend the Member for Stretford and Urmston said earlier, why can we not have a retention scheme for snagging? Part of the purchase price could be held by an independent third party, only to be released when everyone was satisfied that things had been resolved. We do that with deposits for tenancies, and we are talking about something much more significant—sometimes a once-in-a-lifetime investment. People deserve more protection than they currently get. The cowboys in the developer sector need to be consigned to the history books.

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[Mrs Wheeler]

There are discussions going on about commonhold. I will be happy to talk to my hon. Friend about this offline.

Our technical consultation on how to improve the leasehold market and make it fairer for consumers has now closed, and we are analysing the responses. We want to see developers support everyone who has onerous ground rents, including second-hand buyers, and for customers to be proactively contacted. We are helping existing leaseholders by making it easier and quicker for leaseholders to form residents’ and tenants’ associations. We are proposing a single, mandatory and legally enforceable code of practice covering letting and managing agents, giving people a clearer and simpler route to redress. We are publishing a how-to-lease guide for consumers and looking carefully at how we currently give support and advice to leaseholders.

The hon. Member for Washington and Sunderland West (Mrs Hodgson) was very interested in educating leaseholders. We are publishing the how-to-lease guide, which will educate leaseholders. We have also held workshops with the industry to develop the how-to-buy and how-to-sell guides, which will be published in 2019.

The hon. Member for Poplar and Limehouse asked about leasehold reforms. LEASE, the group that we use to help give information, is unambiguously on the side of leaseholders. LEASE no longer pursues any commercial interests and it does not advise leasehold professionals. [Hon. Members: “Good.”] Yay—I just had a good. Get that in Hansard—sorry, I shouldn’t say that.

The hon. Member for Washington and Sunderland West asked about permission fees. Lord Best has a working group that is considering permission fees and whether they are reasonable or they should be banned in total.

The hon. Member for Ellesmere Port and Neston (Justin Madders) mentioned the £10 ground rent. For a peppercorn to exist there must be a consideration of exchange of money. We are concerned that peppercorn could be open to abuse and therefore we have considered that an amount should be specified in statute. We have chosen £10 because that is the annual amount used for right to buys.[Official Report, 21 January 2019, Vol. 653, c. 1MC.]

[Justin Madders]

It is helpful to have that explanation, because I have been mystified about what led to that situation. Obviously, peppercorns have been around for centuries; I do not know whether there is some legal advice that the Minister may be able to share, even confidentially, about why we still have to have a financial figure rather than a peppercorn.

[Mrs Wheeler]

Given the previous week’s history of sharing legal advice, I might skip over that one, if the hon. Gentleman does not mind. Perhaps he and I could have a cup of tea. The £10 peppercorn ground rent was part of our recent leasehold consultation and we will be considering our approach in light of the responses to the consultation.

Oral Answers to Questions

Justin Madders Excerpts

Monday 10th December 2018 Commons Chamber

[James Brokenshire]

Yes, local authorities have had to bear a cost and have made some incredible efficiencies and savings as a consequence of the need to deal with the problems that we inherited from the previous Labour Government. I say to the hon. Gentleman that, when we come to the discussion over the settlement, he will see that our work will ensure that local councils have a real-terms increase in their funding and services and therefore what we are doing to ensure that councils are viable and have a positive future.

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

3. When his Department plans to publish a response to its consultation on implementing reforms to the leasehold system.

[The Secretary of State for Housing, Communities and Local Government (James Brokenshire)]

The Department’s consultation on implementing reforms to the leasehold system closed on 26 November with almost 1,300 responses. It set out how the Government intend to tackle excessive and unjustifiable practices in the leasehold system. We are currently analysing responses and plan to publish the Government response in due course.

[Justin Madders]

I know that the Secretary of State has, on numerous occasions, met developers, freeholders and other industry stakeholders as part of the consultation process, but he has not met representatives of the National Leasehold Campaign, the very people most affected by this scandal. Is it not time that he did so?

[James Brokenshire]

I certainly recognise some of the appalling practices that have taken place in the leasehold market, which is why we have made it clear that anyone with doubled ground rent should be able to get it changed to one linked to inflation. I look forward to engaging with leaseholders and everyone across the sector to see that reform happens.

Shale Gas Development

Justin Madders Excerpts

Wednesday 31st October 2018 Westminster Hall

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

It is a pleasure to serve under your chairmanship, Mr Hollobone. People from many different communities and, as we have seen today, from different political persuasions have been united by the proposals. In my area, Labour, Conservative and independent councillors have voted unanimously to oppose the Government’s approach on fracking. We have an application in my area from IGas that has been rejected by the council and is going to review and appeal, but at least in that case there was a local process and local people had a say. The Government seem to have decided that in future, local people will have no voice at all.

Is there not real concern about the level of seismic events in Blackpool from just one well? Imagine how many events we would have if hundreds of wells were coming through that local people had no say about. Is that not a real concern? Local people should have an opportunity to have their concerns dealt with in a legitimate, open and transparent process. If we are truly going to take back control, that should mean a genuine democratic procedure, not a stitch-up that benefits private interests.

Oral Answers to Questions

Justin Madders Excerpts

Monday 23rd July 2018 Commons Chamber

[Nigel Adams]

My hon. Friend raises an absolutely important issue. Leaseholders are facing massive bills over cladding following Grenfell. Families are going to lose their homes and are faced with enormous bills; we should be helping them and are determined to do so. In the private sector, remediation costs will fall naturally to the freeholder. Where they do not, we have urged those with responsibility to follow the lead from the social sector, and private companies are already beginning to do the right thing. They should not be passing on these costs to leaseholders.

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

In response to my written questions, various Ministers in the Department have confirmed that the majority of developers have agreed not to use Help to Buy loans to finance the purchase of leasehold properties in future. However, they have admitted that not all developers have agreed to do that, so what are the Government going to do to stop any taxpayers’ money being used in this way?

[Nigel Adams]

Of course, certain contractual obligations are already in train. We have made it absolutely clear that no more public money will be used in such a way.

Housing and Homes

Justin Madders Excerpts

Tuesday 15th May 2018 Commons Chamber

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

We are facing a situation in which, for the first time, children can expect to earn less than their parents, and, after decades in which the number of houses built has failed to keep up with demand, we have reached a crunch point at which home ownership is so impossibly expensive that it appears out of reach to a whole generation. The only solution is a long-term, sustainable programme of council house building, along with the provision of genuinely affordable homes.

As we have only a limited time in which to speak, I want to talk about the lucky few who have already realised the dream of buying their homes, but have found that it is all not quite as nice as they expected. As we already heard, 69% of houses built in the north-west in recent years have been leasehold, and as we know, leasehold is a can of worms. I hoped that the new Secretary of State would be present to hear for himself just how rancid the whole business is.

According to research in my constituency, of those who purchased a leasehold property using a solicitor recommended by the developer, a staggering 92% said they were not fully informed of the ground rent terms when they bought their home. The result is that they have been unable to sell on their property. The illusion of home ownership is very real to them. The true owner of their property is likely to be an unaccountable, faceless investment company based offshore.

This matters because many of these accidental tenants have found that some of the terms in their lease, particularly in relation to ground rent, are so onerous that they cannot sell on their property. In one sense they are on the property ladder, but it is a ladder that only has one rung, and it is a rung that they are trapped on. If they find they are unable to move, they might want instead to improve their home and build an extension, but the permission fees for doing so, which are also in the lease, are so outrageous that it is not a realistic option. The term “fleecehold” has been created to describe these practices; the term sums up the avaricious nature of these freeholders quite nicely.

We all remain hopeful that there will be a satisfactory legislative solution to achieve a straightforward, efficient and fair process of enfranchisement either through Government legislation or my private Member’s Bill, but many thorny problems remain, particularly with covenants that involve fees and charges being levied on the home owner even after the freehold has been bought. And of course we need a thorough sort out of the fees that apply in the lease so that those who are not in a position to purchase the freehold are given confidence that those fees are reasonable.

In terms of fees that lie with the property regardless of the tenure, I refer to Gleeson Homes. It proudly proclaims to sell only freehold properties but it has a huge number of covenants that come with the land, and it is those that come with a fee that I am most interested in. Permission fees are levied for extensions and so on even if people just want to put a shed in. It says charges start at £200, but it does not say what they can rise to, and perhaps most ominously it says retrospective fees can be expensive. I really do not know why Gleeson wants to put itself in the position of a planning authority, but the key issue is that there are numerous ways in which developers can choose to earn funds but it does not always have to be through a series of opaque charges that are not always apparent to the home owner at the time of purchase.

We need developers to come clean with a full audit of everything that comes with the property that has an ongoing cost implication. The best way to do that is to undertake a Select Committee inquiry into the whole leasehold scandal so that we can have full transparency. There are many questions a Select Committee ought to ask. Why did developers decide to embark on this industrial-scale scam? What is the extent of ongoing charges that attach to properties? What were developers reporting to shareholders at the time they opened up this additional revenue stream? How did the lenders and the lawyers miss the fact that these leases might render the homes unsellable? What did those running Help to Buy think they were helping people to buy? And who exactly are the beneficiaries of those leases now?

If we are serious about meeting the housing needs of this country, we have to get a full understanding of how the cowboys, the spivs and the speculators were allowed to hijack this vital element of national infrastructure so that it is never allowed to happen again.

National Planning Policy Framework

Justin Madders Excerpts

Monday 5th March 2018 Commons Chamber

[Sajid Javid]

The draft reforms will give extra protection to local authorities that temporarily fall below their five-year land supply because they have plans for larger developments that have yet to come online. That case was made to me by a number of people during the consultation. It is a sensible case and it will help in exactly the kind of circumstances my hon. Friend outlines.

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

There are some laudable aims in the Secretary of State’s statement today, but I fear they will not succeed because we are still relying on the same cabal of developers who brought us the leasehold scandal and whose profits have gone up nearly 400% in the past five years. Surely the answer is to give more powers and finances to local authorities and, instead of setting an arbitrary figure centrally, to work with each individual council to see what their plans and borrowing capacity can actually be?

[Sajid Javid]

What the hon. Gentleman highlights, I think, is the need for more competition in the market: having more people involved and not just some large developers who tend to dominate the market in some areas. I therefore hope he will welcome the measures in the draft planning code to encourage smaller builders and the support we provide through the home building fund.

Housing, Planning and the Green Belt

Justin Madders Excerpts

Tuesday 6th February 2018 Commons Chamber

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

The profits of the top five UK house builders have risen by 388% in the last five years, sometimes at the expense of the people we are trying to help on to the housing ladder. One area in which developers’ profits have come first is commuted sums for grounds maintenance and other communal services. It seems that the idea of a developer paying the local authority a commuted sum to cut the grass and maintain common parts has had its day, and I am not clear whether the blame for that lies with local authorities asking for too much money, or developers not being prepared to cough up the funds in advance. I suspect they would blame each other.

The net effect is that more and more homeowners are having to pay twice for the maintenance of open spaces: once through a management fee; and once through their council tax. Of course, council tax pays for a lot of things, but something as visible and obvious as grounds maintenance leads people to ask why they face a double whammy. My suspicion is that if developers can save themselves half a million pounds, they have a big temptation to cash that and let the customer pay further down the line.

Not only is there a double payment, but the system is inefficient and lacks accountability. If the grass does not get cut on the verges in most parts of my constituency, either a local councillor or I will hear about it and respond, but it is not so easy to get a response when dealing with a private company.

The most high-profile example of how developers shift costs on to consumers is the leasehold scandal. How much have developers pocketed over recent years by selling the freeholds for new estates to investment companies? I hope the message is now getting through to them that that racket has to stop and that they will be ultimately be responsible for their misdemeanours. I am pleased that Ministers have indicated a willingness to act, although I am sure that they are aware of the frustration felt by many who are trapped in unsellable homes, for whom the Law Commission report feels like a lifetime away.

I know that developers have effectively been put on notice that they should not sell any more houses on a leasehold basis, but there are reports that that is still happening. Can the Government issue supplementary planning guidance to local authorities to say that selling properties on a leasehold basis unnecessarily would be a reasonable ground for refusing planning permission?

Members will have heard countless stories about leasehold and an industry that is out of control. Now is not the time to recount those, but suffice it to say that although there are some positive examples of responsible developers, I have little confidence overall that the industry has the right moral structures in place to deliver the houses that we so desperately need. We need answers to how these feudalistic practices were allowed to start in the first place.

[Theresa Villiers (Chipping Barnet) (Con)]

One of my constituents suggested to me that breaking up some of the bigger house builders might improve competition in the market, deliver a better deal for people buying homes and enable us to deliver more homes. I would be interested to hear the hon. Gentleman’s views about that suggestion.

[Justin Madders]

That is an interesting point. Over recent years, the number of developers has contracted. The sums involved and the years of advance planning needed to build some of these developments tend to favour the bigger builders. I am not sure how we would go about achieving that, but it needs to be looked at.

The Communities and Local Government Committee should also consider this issue because developers—big and small—must explain how their duping of customers was allowed to start in the first place, how much profit they have made from this scam, who drew up the leases that nobody will now sign, how many properties were made leasehold needlessly, what role lenders and solicitors played in allowing through leases that nobody will now sign, and exactly who the beneficiaries of these leases are? Until we know the answers to these questions, we cannot be sure that the new homes we need will by owned with no strings attached by the people who buy them.

I want to say a few words about enforcement, because the rules of the planning system have value only if they can be effectively enforced. The significant funding cuts that local authorities have experienced in recent years are bound to have had an impact on the number and extent of enforcement activities that a council can undertake.

The classic example is the Mostyn House development in Parkgate in my constituency. Originally, the site was a boarding school in a listed building, but once the school ceased, the site was certainly an attractive one for developers to consider—and so they did. The site is now an impressive mix of new builds and apartments woven into the fabric of the old school, but it suffers from one major disadvantage. Despite some people having lived there for over four years, there is still no planning permission in place.

The reason for that is that revised plans were submitted halfway through the redevelopment, and despite the best efforts of the local authority enforcement officers, the developer, P. J. Livesey, constantly drags its heels, with the result that there is a list of outstanding works as long as your arm. From what I understand, the developer has a similar patchy record elsewhere in the country, but it seems to be able to get away with it, because there just is no capacity to follow through enforcement consistently.

As Mostyn House is a listed building, it is a pretty technical job to keep on top of it all. Fortunately, however, some of the residents have a surveying background, so they have been meticulous in logging the issues. Despite that, P. J. Livesey has still not met the required standards, and I wonder where we would be if we did not have such proactive and knowledgeable residents.

What about bringing roads up to an acceptable standard, so that they can be adopted by a local authority? There is an estate in my constituency that people started moving into almost a decade ago, and the developer—in this case, Bellway—still has not done the necessary works that would enable the local authority to adopt the roads. I do not blame the local authority. It has set out what needs to be done, but it does not have the resources or the time to constantly chase the developer, which has now sold the homes and moved on. What is the incentive for the developer to go back and complete the work it should have done?

I am pleased to say that, after many years of stagnation, there is a significant amount of house building in my constituency, particularly on brownfield sites, but very little of that housing is affordable. That is because the permissions were all granted some time ago, and the developers used the coalition Government’s rules on viability assessments to argue that it was not cost-effective for them to keep to their affordable housing obligations on individual sites. They plead poverty as they tell us that the requirement to build affordable homes means they cannot maintain their 20% profit margins.

As a result, no affordable housing is currently being built on just about every development site. Most developers sought release from their obligations three or four years ago, and many have only started building in the past six to 12 months, so it is quite clear that the affordable housing requirements were not stopping developments from proceeding. There is more than a suspicion that developers have played the system to maximise profit and had no intention of proceeding with their buildings previously. We have had empty sites for three or four years longer than needed, and an opportunity to build much-needed affordable housing has been lost.

[Mr Richard Bacon (South Norfolk) (Con)]

It should come as no surprise to anyone that private sector house builders build when—and only when—it is sufficiently profitable to do so. That ought to be an axiom, and I am sure the hon. Gentleman agrees with that. Does he therefore agree that part of the solution ought to be to provide a much wider range of genuine choice to potential consumers—people who want somewhere to live in the affordable space and homeless people, as well as those in the purchasing market—so that private sector developers cannot exercise an oligopoly, as they currently do?

[Justin Madders]

That is an interesting point. At the moment, developers will build at the time that suits them best and will build the types of property that suit them best, but that is not necessarily what suits the demand best. That is something I hear regularly in my surgery, and it is probably still the No. 1 issue raised there. I am pleased that my local authority, Cheshire West and Chester Council, is now building some council housing, because there is huge demand for it in my constituency. This is the first it has built for nearly 40 years, although, unfortunately, that has taken the borrowing limits under the housing revenue account to the limit, so we need that cap to be lifted.

Most disappointingly, once those properties are built, we will still have less council housing in my constituency than we did a couple of years ago. That is due to the huge increase in right to buy applications in recent times—who can blame people for taking advantage of 70% discounts?—but that policy is short term in the extreme. It is the Government’s stated aim that every council property sold under right to buy should be replaced, but the reality is that that one-for-one replacement is actually running at a rate of about one replacement for every five properties sold.

Is there any wonder? Recently, a three-bedroom semi in my constituency was sold under right to buy for £27,000, and do not forget that the council will get only a third of that money to replace the house it has just lost. The average cost of a semi-detached house in my constituency is about £148,000, so Members can do the maths and see that this policy is completely unrealistic and needs to be changed.

To conclude—a number of Members have talked along these lines today—I would like much greater political direction and oversight over the house building industry. After all, those involved are the people who will build the homes that we all need. At the moment, they quite understandably organise their affairs to maximise their profits, but housing is part of our infrastructure and a roof over our head is a fundamental right. We cannot just rely on the market unfettered to deliver that.

[Several hon. Members rose—]