Leaseholders’ Rights (Insurance)

Justin Tomlinson Excerpts

Wednesday 22nd October 2014 Westminster Hall

[Stella Creasy]

I agree with my hon. Friend, whose constituency is to the south-east of mine. I am sure he knows Walthamstow and will be concerned that it is considered such a risk by Freehold Managers. We simply do not know how the company reached this figure of a 40% increase in insurance because Walthamstow might be a place of terrorism. We do not know, for example, whether a gas attack in which people needed to be decontaminated, as opposed to an explosion, would be covered by the policy. We simply have no details.

[Justin Tomlinson (North Swindon) (Con)]

The hon. Lady is making an incredibly important speech. The issue does not affect only her constituency, but constituencies throughout the country. The defence is that there is a right to manage and therefore, in theory, residents are protected and getting value for money, but because of the costs and the inability to get accurate information from decision makers, and the use of section 106 agreements as an excuse, it is almost impossible for people to exercise the right to manage. Residents are being ripped off by organisations such as Countrywide. It is not acceptable.

[Stella Creasy]

The hon. Gentleman has pre-empted my next point. In chasing the company for details for the past four years so that my residents might fairly exercise their rights at the leasehold valuation tribunal, we have been stonewalled at every opportunity and told that the information is commercially sensitive, even though the charges are not part of the original leases.

Section 106 agreements were not around when the Warner flats were built in the Victorian era, but the leasehold agreements were. The company claims that the information is commercially sensitive, and when we have gone to the insurance company, which is directly billing my constituents, it too has said that its client is the freeholder. It is a Kafkaesque nightmare for my constituents, who are trying to resolve why they are being charged an extra 40% on their insurance. They cannot go to a leasehold valuation tribunal to ask whether it is a fair charge and what assessment has been made.

I am sure my colleagues could share similar horror stories about other charges. Freehold Managers is seeking to charge residents of mine up to £10,000 to consent to a loft conversion—not to do the loft conversion, but simply to give consent. It continues to push the boundaries about what is an acceptable service charge and an acceptable fee. It is resolute in the idea that it should not share any accountability. But that is not the view of others in the insurance industry, let alone in the freehold management industry.

Although the Association of British Insurers argues for a terrorism surcharge, it also argues that leaseholders should be given clear and timely information each year about their insurance contracts and that that should take place before the contract is agreed. It says that residents should have details about what shopping around the management company has done to make sure the premium is competitive, and whether there are any significant exclusions. As I said, are we protected in Walthamstow against explosions, but not decontamination fees? The ABI says that the insurance broker should be clear about whether there are any fees involved in the process. Those are all questions that Freehold Managers has simply refused to answer, so the ability of my constituents to seek redress at a leasehold valuation tribunal is hampered as a result. Given the fees involved in going to a leasehold valuation tribunal, it is not fair to expect people to seek such redress without the information to make their case.

I have come here today as a constituency MP but with my other hat on, as a shadow Minister, I have tried to make progress on this matter in the Consumer Rights Bill, to make it clear that a consumer has the right to the details of a policy, product or service that they have directly paid for. Let me stress again: residents are getting direct bills from the insurance company on behalf of a freehold management company. Sadly, the Minister’s colleagues in the Commons rejected the proposals, arguing that it was already explicit that people should be able to access such information. The fact that there are colleagues from other parts of the country—indeed, from other parties—who are saying, “No, we’re seeing the same sorts of problems”, shows that that is simply not the case.

I have a number of questions for the Minister and I want to give him time to answer them, and to answer any questions he may have, because it must seem such a surreal situation to be faced with. First and foremost, does he think it fair that residential properties are being charged a terrorism surcharge on their insurance? If so, what assessment has he made of the likelihood of terrorist incidents across residential areas in this country? My local police or other emergency services are certainly not aware of the likelihood of such an incident.

Secondly, does the Minister think that my constituents have a right to exercise their consumer rights in this instance and know the details of the policy that they are being asked to pay for? If so, where would he see them being able to exercise those rights? Thirdly, will the Minister raise this issue with a leasehold valuation tribunal? Given the persistent failure of the freeholder I have mentioned to provide this information, which would enable my constituents to have their day at the tribunal to see whether the charge being imposed on them is fair and competitive, what action can he take to assist my constituents—and, I suspect, the thousands of other people across the country who are also dealing with recalcitrant freehold management companies?

Finally, can the Minister tell us what action the Government will take to reform leasehold law? I ask that because this issue is clearly not only about insurance charges but about these other charges, and about companies such as Freehold Managers, which see residents such as my constituents in Walthamstow as a cash point. It tries to squeeze them consistently, even threatening them with legal action when they so much as query these charges, challenging them about their right to buy the freehold and imposing excessive charges for simple things such as queries about loft conversions or indeed leasehold extensions. Surely it is time to stop the misery of what is mystery buying, as opposed to mystery selling.