Freehold Properties (Management Charges)

Preet Kaur Gill Excerpts

1st reading: House of Commons
Wednesday 5th June 2019 Commons Chamber

[Preet Kaur Gill (Birmingham, Edgbaston) (Lab/Co-op)]

I beg to move,

That leave be given to bring in a Bill to require landlords to provide accounts of management charges payable under section 19 of the Leasehold Reform Act 1967 to freehold property owners, and for connected purposes.

These payable management charges are usually known as estate management schemes. As the name suggests, estate management schemes allow the landlord or scheme manager to collect money in relation to the retention of some degree of management control on the land that had been sold to the leaseholders. This often also includes control over amenities and common areas related to the freehold dwelling houses. The rationale of the original legislation was to allow the landlord to collect, retain and spend the fees for the general good of the area.

In my constituency I have Calthorpe’s Edgbaston estate, which covers a 2.5 square mile area. I read directly from Calthorpe’s website:

“We introduced the Scheme of Management under Section 19 of the Leasehold Reform Act 1967 to ensure that the original character of individual properties and the uniqueness of our residential developments are retained. Under the Scheme it places obligations on freehold occupiers to ensure they adhere to a number of requirements.”

Under section 19 of the 1967 Act freehold occupiers must adhere to a range of requirements by virtue of the scheme of management. For Calthorpe estate residents these can range from not building without permission to not hanging or laying out washing to dry on Sundays. So there are the obligations on freeholders but section 19 does not contain any obligations on the landlord, and that is why I have today brought forward this ten-minute rule Bill.

As it stands, the management scheme is only enforceable by landlords. Freeholders of individual dwellings have no right to know where their money is being spent. These residents have no rights of redress and no rights to enforce action when breaches of the scheme occur. We need transparency for residents to be able to hold their landlord or scheme manager to account. This Bill would create a requirement for the landlord or scheme manager to provide transparent accounts outlining the management charges received and the nature of the expenditure.

The Government have spoken at length about legislating to give freeholders the same rights as leaseholders when it comes to service charges. I quote from one of their letters I received from the Minster for housing and homelessness, the hon. Member for South Derbyshire (Mrs Wheeler), regarding this issue:

“I believe very strongly that service charges should be transparent, communicated effectively and that there should be a clear route to redress or challenge if things go wrong.”

I want to be clear: the management charges to which this Bill pertains apply to freeholders and are distinct from services charges. I am asking that the fees related to estate management schemes are not forgotten. It is clear to me that currently the balance of power is neither fair nor appropriate. Management companies can, by law, use enforcement agents to collect the management charges but individual dwelling freeholders are unable even to obtain details of where the money they have been charged goes or has gone.

I thank the Calthorpe Residents Society for its work on this. These residents, and others around the country who face similar predicaments as a result of their management schemes, have made repeated representations to their landlords asking for an account of the expenditure to see how the management fee that they pay is being spent. To date, no accounts have been made available for the Calthorpe residents. This means residents have no way of knowing how their annual fees are being spent by the landlords or scheme managers in maintaining a high quality across the estate. Residents who own their own homes as freeholders are left feeling helpless as they try to find out how much is left in the scheme, and they are rightly aggrieved that, despite their payment into the said fund, the opaqueness of it makes them powerless to try to enforce the responsibilities of the landlord or management scheme manager.

Today I ask the Government to strengthen the legal position of all freeholders to ensure that they have the right to know how the money that they must pay to the landlord or scheme manager under section 19 of the Leasehold Reform Act 1967 is being spent.

Question put and agreed to.

Ordered,

That Preet Kaur Gill, Jack Dromey, Kate Osamor, Helen Goodman, Jo Platt, Maria Caulfield, Ruth George, Caroline Lucas, Mr Virendra Sharma, Jeremy Lefroy, Huw Merriman and Kevin Hollinrake present the Bill.

Preet Kaur Gill accordingly presented the Bill.

Bill read the First time; to be read a Second time tomorrow, and to be printed (Bill 396).