Asked by
To ask Her Majesty’s Government what steps they propose to take
to ensure service charges paid by leaseholders are fair and
reasonable.
(Lab Co-op)
My Lords, I beg leave to ask the Question standing in my name on
the Order Paper. In doing so, I declare my interest as a
leaseholder.
(Con)
My Lords, by law, service charges must be reasonable and, where
costs relate to work or services, the work or services must be of
a reasonable standard. Leaseholders may make an application to
the appropriate tribunal to challenge the reasonableness of their
service charges. We are committed better to protect and empower
leaseholders by giving them more information on what their costs
pay for. This will help them to challenge their landlords more
effectively if they consider their fees unreasonable.
(Lab Co-op)
My Lords, leaseholders are seriously disadvantaged in disputes
with freeholders and management service companies about the
service charges, ground rent or any other aspect of their tenure.
The present arrangements are not fit for purpose. When will the
Government take action on this matter?
(Con)
The Government do indeed recognise that the existing statutory
requirements do not go far enough to enable leaseholders to
identify and challenge unfair costs. The Government have said
that they will take forward further legislation on leaseholds in
the next Session.
(Con)
My Lords, would not the problems mentioned by the noble Lord,
Lord Kennedy, and other problems faced by leaseholders be
addressed by the promised leasehold reform Bill, originally
planned for this Session but now delayed until the next? On 20
June, my noble friend told me that the delay
would be used to draft the Bill. Would it not expedite the
eventual passage of the Bill if it was published in draft and
subjected to scrutiny by this House?
(Con)
I can only agree that it would indeed expedite the eventual
passage of the Bill. I know that my noble friend appreciates that
the former Secretary of State said that it was unlikely, and that
my noble friend also said that a draft
Bill would be ideal but was dependent upon the capacity of
parliamentary counsel. Everyone is looking forward to this
legislation, and it has already been announced for the next
Session. I can only relay to the department the oft-stated
opinion of many Members on all sides of the House that this draft
Bill will be welcomed.
(Non-Afl)
My Lords, what are the Government doing to ensure that not only
experts on these matters in this House but long-suffering
leaseholders and their representative organisations are consulted
prior to any draft Bill being published?
(Con)
A number of consultations have taken place, including that of the
noble Lord, . As to the specific consultation
to which the noble Baroness refers, one may well be happening but
I am not aware of it. I will write with further clarification.
(Lab)
My Lords, management companies are buying up leaseholds in order
to impose exorbitant charges. At what stage does this become a
criminal activity?
(Con)
As I have said, service charges are governed by law and must be
reasonable. I do not think I can go much further in that regard.
(Con)
My Lords, can my noble friend help with a particularly invidious
situation? A leaseholder may feel that he is being charged
extortionate fees for gas and electricity by his supplier, but
the supplier also happens to be his landlord.
(Con)
My noble friend makes a very good point. Tenants who purchase
their gas and electricity from their landlords, including when it
is bundled with other service charges, are protected from
excessive charges by the maximum resale price provisions from the
regulator Ofgem. The provisions prevent landlords reselling
energy to tenants at a higher price than they paid to the
licensed energy supplier. Tenants are entitled to receive a
breakdown of the landlord’s costs, on request. That should
include details of the cost of electricity and/or gas, standing
charges and the VAT paid.
(CB)
My Lords, exorbitant and disproportionate fees, charges and
commissions were a key reason why the Government’s Regulation of
Property Agents Working Group, which I had the pleasure of
chairing and which reported three years ago almost to the day,
wanted there to be a regulator for property agents, including the
managing agents of leasehold property. The Government have
specifically promised this on many occasions. Is somebody within
the Department for Levelling Up, Housing and Communities
specifically working on the creation of a regulator for property
agents? If someone is, I live in hope. If not, I go away very
frustrated.
(Con)
The noble Lord asks a very good question. I am not sure whether
somebody is working on that specific point, but there is a large
group within that department that works on all ways of raising
professionalism. We are looking at the report of the noble Lord
and his working group on the regulation of property agents and
are continuing to work with industry to improve best practice. I
will take his plea for a regulator back to the department.
(LD)
The report of the working group chaired by the noble Lord, , provided significant evidence of
what I call the theft of moneys from leaseholders. These same
companies are about to be handed huge sums, as they are
responsible for the remediation of vast numbers of blocks of
flats post-Grenfell. This area is ripe for exploitation and
dubious practices, as outlined in the report of the noble Lord,
. Does the Minister share my
concerns and those of that working group? If so, what needs to be
done about it? Does she agree with me that this is white-collar
crime affecting tens of thousands of ordinary leaseholders?
(Con)
My Lords, this is one of the reasons why the Government have
brought forward a suite of legislation: to stop these sorts of
practices, regulate agents and landlords more effectively and
help leaseholders manage large one-off major bills which may be a
source of corruption when they are given to a company associated
with the freeholder. The existing Section 20 consultation process
in the Landlord and Tenant Act 1985 means that where leaseholders
are contributing to the upkeep and maintenance of a building,
they have sufficient input into how their money is spent. The
report by the noble Lord, , set out proposals for improving
the existing processes, and we are considering those
recommendations.
(Lab) [V]
My Lords, is not the reluctance of some freeholders and their
agents to provide information to leaseholders about their
identity, along with their refusal to discuss leasehold and wider
services charge issues, a flaw in the system? Why cannot the law
be amended to allow greater transparency over freehold, leasehold
and sublease title ownership issues, going further than the
proposed Bill mentioned by the noble Lord, ? Without greater
access to such information, leaseholders lack leverage and are
often powerless to influence service charges.
(Con)
I commend the noble Lord on his often interesting suggestions for
the department, particularly on leasehold. I note that in the
last series of questions, he suggested rolling up unaffordable
services charges for vulnerable groups, and I undertake to take
the idea of a debenture against property title back to the
department if it has not already been considered. As for his
question today, there are a number of existing ways in which
leaseholders can obtain details of their landlord. A written
statement of the landlord’s name and address must be given on
request under the Landlord and Tenant Act 1985. Failure to comply
with the request is an offence. In respect of information about
service charges, any ground rent or service charge demand must
include the name and address of the landlord. If that address is
not in England and Wales, it must include an address in England
and Wales at which notice may be served on the landlord by the
tenant. Her Majesty’s Land Registry can also provide a copy of
the relevant lease for a property for a fee.
(Con)
My Lords, does it concern the Minister that there is evidence
that some insurance companies are charging excessive and
non-transparent commissions?
(Con)
It does indeed concern the Government, which is why we have
renewed our guidance on insurance. We are aware that some
buildings are currently unable to secure adequate and affordable
building insurance. The department has called on the Financial
Conduct Authority and the CMA to review buildings insurance
premiums. The FCA published an interim report on the buildings
insurance review on 10 May, and we are exploring all possible
interventions to resolve the crisis in the building insurance
sector which is affecting a large number of leaseholders.
(Non-Afl)
My Lords, the Minister has said several times that service
charges must be governed by law and must not be unreasonable, but
they are unreasonable. They are going up exponentially and
leaseholders are tearing their hair out. To give the Government
credit, some real progress was made under the noble Lord, , and when he was the Secretary of
State, but leaseholders now feel abandoned. At the very least,
could the Minister assure leaseholders from the Dispatch Box that
they have not been forgotten? Platitudes saying that service
charges are reasonable and within the law do not work.
Leaseholders are now having to pay far beyond their means.
(Con)
I can of course give that reassurance, and I shall try not to
take the noble Baroness’s comments personally; I endeavour to
take issues such as this back to the department. By law, if
leaseholders feel that their service charges are unreasonable,
they can take their case to the appropriate tribunal, which is
the First-tier Tribunal (Property Chamber) in England and the
Leasehold Valuation Tribunal in Wales. Even if they have already
paid their service charge, they can still make an application to
that tribunal. Of course, the problem is that the lease will
often dictate that if a leaseholder takes a case against their
freeholder, the leaseholder is still liable to pay the
freeholder’s fees even if they win the case. Again, we are
looking to legislate against that.
