Lord McKenzie of Luton
Main Page: Lord McKenzie of Luton (Labour - Life peer)
Lord McKenzie of Luton
My Lords, like other speakers, I thank the noble Baroness, Lady Gardner of Parkes, for the opportunity to reflect on a particular aspect of housing policy and I am grateful for the briefings that we have had. I start by declaring an interest because I am, jointly with my wife, a long leaseholder of a flat in London. This debate has, if nothing else, spurred me to be more diligent in reviewing the paperwork.
As others have said, issues of residential leaseholders touch on a particularly complex area of legislation. The noble Baroness has previously sought a view from the Government about whether they will consolidate landlord and tenant legislation and was told, back in November, that there were no plans to do so. However, that exchange at Question Time brought forward suggestions that the matter might be referred to the Law Commission. Has anything been taken forward in this respect? In the same exchange, the Minister indicated that a wide range of housing regulations were being looked at as part of the red tape challenge. How is that progressing, which particular regulations are being reviewed and what areas are being looked at? In a further exchange on 17 January, the noble Baroness, Lady Hanham, reaffirmed that there were no plans for a wide ranging review of leasehold law, but indicated that the Government were keeping a watching brief and would not rule out making changes. Have any changes currently been ruled in?
Issues of leaseholders are just one part of the housing problems facing our country and, to be frank, are not the most pressing. House building has fallen by 11 per cent in the first 18 months of the coalition Government, private sector rents have risen and are unaffordable for too many and home ownership has declined as people struggle to get mortgages. We know that the Government have set their face against further regulation, scrapping Labour’s plans for a national register of landlords and regulation of letting and managing agents. This is at a time when some of the most vulnerable are having their housing benefit cut and are being directed to the cheaper and shabbier end of the private rented sector. Nevertheless, the issue raised by the noble Baroness is important and, as others have said, is likely to be of increasing significance if more blocks of flats are built, shared ownership schemes are promoted and—as the noble Baroness, Lady Maddock, mentioned—the Government attempt to reinvigorate the right-to-buy programme.
It is not just private sector freeholders and landlords who are involved with leaseholders. Some quite outdated ARMA data from 1998-99 suggests that 20 per cent of landlords are social landlords. The same survey suggested that less than half of leasehold flats were using a managing agent. Can the Minister update us on those data? I do not have time to cover it today, but there were issues about social landlords, leaseholders and the implications for decent home standards where a lot of money was being applied by local authorities to upgrade their stock and the implications of that for people who had bought a flat.
It must be acknowledged that this area is not entirely unregulated. The law requires consultation with leaseholders before works above a certain value can be carried out; demands for service charges must be in writing; there is an expectation under the law that service charges are reasonable and there is a right for landlords and leaseholders to seek a determination from a leasehold valuation tribunal. Leaseholders are entitled to a summary of service accounts and to inspect documents. Service charge funds are deemed to be held on trust but do not have to be held in separate trust accounts: thereby hangs a problem. However, as I understand it, where there is a residents’ management company or a right-to-manage company, service charge moneys are subject to a statutory trust.
Apart from the law, managing agents who are members of RICS or ARMA—the Association of Residential Managing Agents—are required to adhere to the RICS code of conduct on service charges for residential management. There is a separate code for retirement housing managers. New best practice guidance has been introduced by the RICS in co-operation with the accountancy bodies, in the face of the Government’s refusal to implement what was previously proposed. Is that considered fit for purpose, and will the Government reconsider giving it some statutory backing?
Despite the voluntary code, as we have heard and seen from our briefings, difficulties abound. Barriers to the managing agent industry are low; and not all managing agents belong to the RICS or ARMA schemes and are therefore not bound by the code. There are no ombudsman arrangements to which all managing agents are required to adhere, and the noble Lord, Lord Best, made a powerful argument to change that. It has been suggested that some of the difficulties arise from the essential imbalance of power between freeholders and landlords on the one hand and leaseholders on the other—the David and Goliath syndrome. Notwithstanding this, it would seem that some of the conflicts arise because insufficient attention is paid when a lease is entered into or required in the first place.
The London Assembly report suggests a requirement for more specific advice at the point of agreement. Estimates of service charges for the next five years, I think, were suggested in that case. It was interesting to hear the experience of the noble Baroness, Lady Miller, currently. The concerns around service charges are inflated prices, not having to achieve value for money, undisclosed commissions, awards of contracts to related companies of managing agents, and the lack of security for leaseholder moneys. The report prepared by the London Assembly also raised issues concerning the leasehold valuation tribunal, suggesting that the process was getting increasingly complex, with an impact on cost. There was difficulty in getting information from landlords, who were increasingly employing counsel, reflecting on-costs. What is the Government’s assessment of how the tribunal is currently working?
There is a case for more regulation—if not by government, by industry bodies—but this must be effective. We have a policy review under way, and in this connection the principles that we would deploy to address this issue require ensuring good practice is promoted, improving transparency, supporting a register of competitive tendering processes for services, and having systems, perhaps mandatory, for the resolution of disputes.
The Deputy Chairman (Lord Geddes)
The noble Lord times it quite beautifully. A Division has been called in the Chamber. The Grand Committee stands adjourned until 5.37 pm.