Property Management Company Fees

Nigel Huddleston Excerpts

Tuesday 7th November 2017 Westminster Hall

[Kelly Tolhurst]

I agree with the hon. Lady. I will come to some more examples from my constituency where charges are not transparent, but this debate is about leaseholders and freeholders in particular, as opposed to people who are renting their properties. That is what I am talking about today.

To give another example, one of my constituents reported that in the past financial year, their estimated service charge increased from £85 a month to £128 a month. If that was not already bad enough, the housing association, Hyde Housing, failed to get its figures ready for the April payment. As a result, the charge the individual paid in May increased by more than 100%.

The breakdown of Hyde’s figures makes for astounding reading. For example, there is a charge for “Fire safety, including servicing and inspections” of £34 a month. The building in question consists of a block of 24 flats. If all properties are charged similar amounts, the charge brings in more than £800 a month. However, the actual inspection takes just 15 minutes, in addition to the time taken for paperwork, and only occurs annually. I understand there are fire extinguishers and a sprinkler system to maintain over the years, but £800 a month seems excessive to many of the families and individuals. In addition, there are charges of around £90 a month for grounds maintenance. I am familiar with the plots around the block, and it is clear that any maintenance is minimal, and certainly worth nowhere near a value of £90 a flat a month. My constituent’s block is also paying nearly £250 a month collectively for unspecified provisions that many residents do not understand, and those provisions are not disclosed by the association.

[Nigel Huddleston (Mid Worcestershire) (Con)]

I congratulate my hon. Friend on securing this debate. She raised the issues of uncertainty and hidden fees. Does she agree that those are exactly what frustrates our constituents? If the fees were abolished and there was a higher up-front cost in terms of the house purchase price, that would be preferable, because at least people would then know with certainty what they had got themselves into.

[Kelly Tolhurst]

I thank my hon. Friend for his intervention. I completely agree. When I speak to my constituents, they say they want to be clear about the costs when buying a house or a lease on a property. Some of the management charges that are levied bring people into difficult situations. My hon. Friend is absolutely right: people would much rather have that up-front cost than the threat of the charges changing over time.

To return to the example I was discussing, it is regularly reported that simple repairs on things such as faulty lighting are not carried out and communication with energy suppliers seems to be non-existent. For instance, residents were issued a letter from E.ON informing them that the electricity for the building would be switched off. That would bring everything in the block to a complete standstill, and Hyde did not rush to the rescue. In that instance, my constituent took Hyde Housing to the Lands Tribunal, but unfortunately they met technical stumbling blocks when presenting the case, in particular around providing alternative quotations for the work involved, which no lay person can comprehend.

I will give one final example, which involves London and Quadrant Housing. It was given the right to levy service charges on all properties on the estate, which was formerly part of the Ministry of Defence land at Lodge Hill. I am sure the Minister will know it well. Another constituent has brought a grievance case to me on London and Quadrant’s totalling of the amounts charged. The final figure for each property is based on expenditure and the management fee across the estate, which is divided by the number of houses. However, residents have argued on a number of occasions that the wording in the schedule relating to the original sale of the land only gives it a right to levy a service charge where there is a benefit to the parties involved.

All bar one of the items for which charges were levied related exclusively to older properties that predated the sale of the land—for example, the blocks of flats. However, London and Quadrant tried to charge for street lamps and street cleaning, which were both undertaken by the local authority, Medway Council. Similarly, charges around sewage collection—later deemed to be out of the association’s remit—were also questioned. In fact, of the full list of initial charges, the only one that could vaguely be charged to the houses built in 2001 and 2002 was the play park on the estate, but given it is always in such a poor condition, it is rarely used.

What, then, is the management company there for, and how can residents be certain that they are paying fairly for the correct things? In that last example, some residents were so fed up that they refused to pay charges any more, and apart from their yearly statements there was no attempt to collect the money. I wonder whether that was simply incompetence or, more likely, because they knew full well that the charges were unjustified, and they would probably lose if challenged in court.

Those examples are from my constituency alone and I could, of course, go on, but it shows that something needs to change. This is an industry with too much room to rip off those with few options. The room for manoeuvre that leaseholders have to take back some control remains limited, and such action is not viable for a number of families and individuals. Ultimately, the best way to proceed if someone is having issues with their property management company is to buy the freehold. However, that may not be possible for a number of reasons, such as not having the minimum number of leaseholders in the block of flats to take over the management of the block, not to mention collective action challenges. Furthermore, as I have already outlined, the issue does not only affect leaseholders; it affects freeholders as well.

Some families and households are already struggling with rising bills and the like, which makes purchasing a freehold a more remote possibility. Those families and households are trapped under the direction and reliance of property management companies. We need a recognition of the flaws in the property management company sector when it comes to service charges. We are talking about people’s livelihoods, and in too many circumstances they are being ripped off by a service that does not respect value.

Serviced residences throughout the country are being subjected to this unregulated scandal, and with the ongoing increase in house building, more and more people will be subject to the unfair will of private companies without any course of redress. I hope the Minister has heard enough to see that regulation is needed to protect families and individuals, many of whom work hard to put a roof over their heads. This Government have a proud record of standing up for fairness when it comes to families and workers, and I hope that we can lead the way in this area.

In my constituency of Rochester and Strood, in the local authority of Medway, we face high numbers of new homes being built over the next 15 years—something that I suggest is slightly unrealistic. However, if large numbers of houses are to be built under the current model, where people can buy freehold properties and leasehold properties on large estates that are run by property management companies, the problem that we are talking about today will only become greater for people in my constituency, and all those who want to buy homes across the United Kingdom.