Freehold Estate Fees

Mark Tami Excerpts

Tuesday 22nd January 2019 Westminster Hall

[Mark Tami (Alyn and Deeside) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. I congratulate my hon. Friend the Member for Bishop Auckland (Helen Goodman) on securing this debate.

I am old enough to remember when developers would build estates that were brought up to adoptable standards, a bond was put down and the council would adopt and take responsibility for generally doing what we all expect to be done around our homes. A lot has changed. Councils now do not have much money and are probably keen to pass that responsibility on. As my hon. Friend the Member for Bishop Auckland said, developers have found another money-making exercise—a bit like leasehold, really—to squeeze even more money out of their sales.

In my own area, companies such as Persimmon in Buckley, Taylor Wimpey in Penyffordd and Bloor Homes in Broughton have passed that maintenance requirement on to maintenance companies: my hon. Friend has mentioned Greenbelt, and Trinity is another one of the big players. A person needs only to look on the internet and Google those companies to see what the average resident thinks of the service they are providing.

When people move in, perhaps the charge is only £100 a year at first; it does not seem too much and people are not that bothered about it. The lawyers have perhaps not pointed it out because, as my hon. Friend the Member for Bishop Auckland has said, they may well be close to the people selling the properties.

By year two, that charge may have risen to £200, and by year three, it may be £300 and so on. There is very little explanation of exactly what the charge is for, or indeed what the tendering process is for the people supposedly doing the work, when the work is actually done in the first place. These are not luxury London developments that have a swimming pool, a gym, and perhaps someone sitting on the front desk. The charge is for cutting the grass and, in some cases, maintaining a play area and maybe a nature area as well.

On top of the standard charge, there are things that are not covered—a very vague category. Greenbelt, in its nice, glossy little brochure showing happy, smiling people who are no doubt delighted to be paying the fees that the company charges, has a list of services. One of those is fencing, and under “What is covered?” it says “Fences will be checked as part of the routine supervisory inspections. The condition of the fence will be monitored and any repairs instructed as and when required.”

If we move on to things that are not covered but are chargeable, we find “fencing works”, which “will be identified as part of the routine supervisory inspections. The conditions of the fence will be monitored and any works instructed as and when required.” Now, to the ordinary person, those sound very similar, yet people are being charged extra for the work that is not covered.

Indeed, the list of things that can be charged for in these circumstances is a very open one; as I have said, residents in many cases are not aware of what they are being charged for. When people move in, certainly in their first year, there does not appear to be any breakdown of the charges. As my hon. Friend the Member for Bishop Auckland said, when a breakdown is provided, it appears that half of that charge—if not more—is the management fee. In my experience, that management fee is never broken down, and it is never explained exactly how that large sum of money comes about.

[Catherine McKinnell]

I see a lot of similarities in the speech that my hon. Friend is making. Does he agree that there is frustration not only about the charges being levied, but about the fact that the standards being maintained are often not as good as they would be had those estates been adopted? I know of some cases in which children have practically lived in a home, left that home and gone to university before they have the basics, such as pavements, on their estates.

[Mark Tami]

My hon. Friend is right. The issue of how estates are left is a broader one: quite often, the moment the last house is sold, the developer does not want to know. As for the standard of work that is being carried out by the maintenance companies, I have heard from loads of people who say that they go out themselves and cut the grass in the communal areas, because those are left in such a terrible state.

Many people have described the charges as like a second council tax. They are now reaching a level that is not the £100 that people started off with; it is a much higher figure, particularly for something that most people thought was covered by the council tax that they pay in the first place. Freeholders who face those charges are now coming to me and saying they are increasingly worried that they could affect the saleability of their property in the future, just as leaseholders are telling me that sales are falling through because people look at a property and say, “I am not going to buy that.” That is just not acceptable.

At the moment, there are effectively no legal protections for people. Leaseholders have some, but they are very weak. My constituency has a lot of mixed estates where, between two houses next to one another—often both exactly the same—one is leasehold and one is freehold. What they have in common is that they both have to pay management charges.

I will summarise because I know other hon. Members wish to speak. People feel abandoned. They feel that the law does not actually protect them and that they do not have any redress. I welcome what the Government have said about leaseholds. My concern is that that relates only to people building houses, selling them and moving on. What about the people already affected by the arrangements, just as leaseholders are? We need to look after them and ensure that they have fair redress against unfair charges. Residents should have the ability—where they want to—to form their own management companies, run their own maintenance and put out tenders. The council might want to tender for some of that work and could provide it at a considerably cheaper cost. The charges are unfair. We really need to get to grips with the issue because otherwise we will store up huge problems for people in the future.

--- Later in debate ---

[The Minister for Housing (Kit Malthouse)]

It is a great pleasure to serve under your wise and sanguine chairmanship once again, Mr Hollobone. The hon. Member for Bishop Auckland (Helen Goodman) and I shared many thrilling meetings of the Select Committee on the Treasury, and I congratulate her on securing this debate. I know that she is promoting a ten-minute rule Bill, and I thank her for the opportunity to debate an issue that affects not only her constituents but mine.

This Government are committed to making the housing market work. We aim to increase house building to an average of 300,000 net new homes a year by the mid-2020s. It is vital that as housing supply increases, the quality of new developments continues to improve. We expect all housing developers to deliver good-quality housing and estate facilities, to deliver it on time, and to treat house buyers fairly. Fairness includes making house buyers aware of arrangements for the upkeep of communal facilities and any fees for which they may be liable.

As hon. Members have pointed out, many freeholders must pay charges towards the maintenance or upkeep of communal areas on an estate. The obligation to pay these charges might be provided by a deed of covenant or through an estate rent charge that forms part of the purchase contract. These charges can include contributions towards the upkeep of open spaces on an estate, or for the maintenance of roads and other infrastructure that is not adopted by the relevant authorities. Hon. Members have quite rightly raised concerns about the lack of redress should a freeholder disagree with these charges, and there have been disputes about who should be responsible for, and control, the maintenance of communal areas. In many cases, contracts do not specify, limit or cap those freeholder charges. This lack of transparency leaves homeowners in a vulnerable position.

Leaseholders have a whole suite of protections and rights that enable them to hold management companies to account. Freeholders have no such equivalent, even though they might be paying for the same or similar services. The current situation is unfair to freeholders, and we are committed to introducing legislation to plug that gap. We set out our proposed approach to implementing these measures in the recent leasehold reform consultation, which closed on 26 November. We intend to create a new statutory regime for freeholders that is based on the rights enjoyed by leaseholders. This would ensure that maintenance charges must be reasonably incurred and that services provided are of an acceptable standard, and it includes a right to challenge the reasonableness of charges at the property tribunal.

[Mark Tami]

As with leaseholders, it should be relatively easy to sort out the problem. The issue is that people are already in these arrangements. We should ensure that they can do something about it, so that they do not feel that they are not covered or that no one cares about them.

[Kit Malthouse]

The right hon. Gentleman raises a valid point. We are also considering whether freeholders should have a right to change the provider of maintenance services by applying to the tribunal for the appointment of a new manager, which might be useful for existing freeholders if they are dissatisfied with the service they receive. The Government intend to introduce legislation to implement the changes as soon as parliamentary time allows. The hon. Member for Croydon Central (Sarah Jones) quite rightly challenged us on when that might be; she will know that we have an exciting and packed legislative timetable at the moment, but our aspiration is that the legislation will be introduced within the next 12 months. I realise that there are many impatient freeholders out there, but we have to deal with the small matter of national destiny before we get on to equally pressing matters on the domestic agenda. I assure her that we will give it our attention as soon as we can.

It is absolutely right that consumers should have fair, quick and easy ways to get things put right when they have problems. In October we announced our intention to introduce legislation to require all developers to belong to a new homes ombudsman. Last year, we consulted on how we could improve redress for residents across all housing sectors, and we will publish our response to that consultation shortly.

It has been argued that local authorities should be compelled to adopt all communal facilities on a new estate. At this point it is worth pausing to consider planning arrangements and how they support new developments. When a new development is granted planning permission, local authorities can use conditions, or a section 106 planning obligation, to secure a commitment from developers to provide and maintain open and communal space. This means that the local authority does not have to adopt or maintain the land at its own expense.

It is up to developers and the local planning authority to agree appropriate funding arrangements as part of those commitments. Conditions and planning obligations cannot, however, currently be used to compel local authorities to do something. The local authority has powers to ensure that developers build and maintain communal facilities to the standards and quality set out in the planning permission. In terms of roads, local highways authorities are responsible for the maintenance of local public roads in England. A decision on whether to adopt a road is a matter for the local highway authority and the Government have no direct role in that process.

It has been suggested that freeholders who pay these charges should receive a rebate in their council tax. We think that argument is misplaced. The amount of council tax due from each of us is not adjusted to reflect the specific level of services we receive as residents of the area. Instead, the level of council tax helps the authority to deliver a broad range of services to the wider community in its area. It is open to local authorities to offer council tax discounts to individuals or groups of taxpayers. This is an entirely local decision.

In the end, all these matters have to be paid for. There is only so much money that can be extracted from a particular housing development. It is therefore at the discretion of local authorities to decide the balance of 106, the cost to them of adopting measures, and where and when maintenance should fall on residents rather than on the local authority.

It should always be clear to potential purchasers what the arrangements are for the upkeep of open space and the maintenance of roads. However, we do not think that requiring local authorities to adopt all communal facilities on new developments is the right approach. It removes local flexibility and, in our view, sends the wrong message to developers about their responsibilities.

I do agree with the hon. Member for Bishop Auckland regarding redress. Consumers must have effective ways to get things put right when they have a problem with their housing. That is why we are committed to legislate, so that freeholders have a right to challenge the reasonableness of any maintenance charges for which they are liable. That is why we will establish a new homes ombudsman to protect the interests of homebuyers and hold developers to account when things go wrong.

The hon. Member for Croydon Central asked four specific questions. First, I am certainly willing to consider the suggestion to use Help to Buy as a lever to improve standards. Secondly, on mis-selling, it is open to any hon. Member to make a reference to the regulatory authorities, whether that be the FCA or the Senior Salaries Review Body. Is the hon. Member for Bishop Auckland still on the Treasury Committee?