Asked by
To ask His Majesty’s Government what plans they have to ensure
leaseholders get the best value for money from services provided
by management companies appointed by freeholders without their
involvement or consent.
(Lab Co-op)
My Lords, I beg leave to ask the Question standing in my name on
the Order Paper. I refer the House to the register of interests
and the fact that I am a leaseholder.
The Parliamentary Under-Secretary of State, Department for
Levelling Up, Housing & Communities () (Con)
My Lords, I declare my interest as a leaseholder. The Leasehold
and Freehold Reform Bill will make long-term changes to improve
home ownership for millions of leaseholders in England and Wales.
Measures to empower leaseholders and improve their consumer
rights, such as better transparency of fees and charges and
improved access to the right to manage, will make management
companies more accountable to leaseholders who pay for their
services.
(Lab Co-op)
Leaseholders are at a complete disadvantage with regard to
service charges, and the Bill before the other place does not
change that fact, nor do the overoptimistic comments of the right
honourable Member for Surrey Heath, which go way beyond what the
legislation proposes. When will we get regulation of property
agents, following the review by the noble Lord, , published in 2019? When will we
get proper control over the system whereby leaseholders pay out
all the money but have no say in the services provided?
(Con)
I am afraid I have to disagree with the noble Lord’s assessment
of the Bill. I can set out a number of ways in which the Bill
will improve the position of leaseholders regarding service
charges. It will require greater transparency of service charges,
so that leaseholders receive key information regularly; we will
rebalance the legal costs regime, giving leaseholders greater
confidence to challenge their service charges; it will replace
the buildings insurance commissions system for managing agents,
so that transparent admission fees are in place; and it will
increase the non-residential limit from 25% to 50% for buying the
freehold or exercising the right to manage, giving leaseholders
greater rights in respect of taking over the freehold of their
property or managing it themselves.
(Con)
My Lords, my noble friend will know that the law of forfeiture
allows a managing agent to take possession of a flat worth, say,
£500,000 if there is a debt of more than £350 outstanding. In
those circumstances, the freeholder pockets the difference
between the value of the flat and the debt. Surely the leasehold
Bill should put a stop to that.
(Con)
My Lords, the Government believe that forfeiture is an extreme
measure and should be used only as a last resort. In practice, it
happens very rarely and is subject to the right to relief.
However, any changes to forfeiture would require a careful
balancing of the rights and responsibilities of landlords and
those of leaseholders. As a first step, we have asked the Law
Commission to update its 2006 report on this matter, given the
passage of time since then, and to take into account the
implications of the reforms currently under way, so that we can
consider what action should be taken.
(Lab)
My Lords, it is not just leaseholders who face these practices.
What response can the Minister give to freeholders who face the
imposition of private management companies charging extortionate
and unregulated yearly fees, instead of having public areas
adopted by local authorities? I believe this practice is known as
“fleecehold”. Effectively, this means freeholders paying twice
for maintenance: once through their council tax and again through
fees to private management companies. What measures will the
Government take to regulate these practices?
(Con)
My Lords, the Bill aims to grant freehold homeowners on private
or mixed-tenure estates the same rights of redress as
leaseholders in this area—equivalent rights to transparency on
estate charges and the ability to challenge those charges at
tribunal. I believe the CMA is also looking into this matter, and
we look forward to receiving its final report.
(LD)
My Lords, some freeholders, although not all, treat their
leaseholders as a cash cow. I have two examples for the Minister.
First, there was a ground rent increase—and there is no value at
all to the leaseholder in a ground rent—of 113% this year, which
was backdated three years, and the sum was demanded to be paid in
full in four weeks. Secondly, there was a 23% increase in service
charges this year. There is no accountability. Transparency there
is, and challenge there can be, but nothing comes of it—and it
seems that nothing in the Bill will change that. Can the Minister
tell me that it will?
(Con)
I can. The Government have consulted on a range of options to
reform existing ground rents, having legislated in 2022 to set
all new ground rents at a peppercorn rate. Following the outcome
of that consultation, we aim to legislate in the current Bill
before Parliament. As I say, not only will we give leaseholders
greater rights to transparency on what service charges are
charged for, to ensure that they are reasonable, but we are
changing the cost regime in the courts so they can challenge
those charges where they think they are unreasonable.
(CB)
My Lords, I have a friend who is trying to sell their flat in
London. The managing agents took so long to respond to the
requirement that they consented that the purchasers went away.
Will this Bill do any good for that situation?
(Con)
The Bill contains both a time limit and cost limit for the
provision of information from freeholders to leaseholders when
they are seeking to sell their properties. I do not know the
exact circumstances of the case the noble and learned Baroness
refers to, but action is being taken in this area.
(Lab)
My Lords, the Minister will be aware that legislation in 2000 and
2004 abolished leasehold in Scotland. Given noble Lords’ concerns
about the current Bill, why on earth can we not be more radical
and abolish leasehold in England and Wales?
(Con)
Following previous Questions I looked at the example of Scotland,
which we do seek to learn from, but the circumstances there are
significantly different. At the time, there were only some 9,000
long leasehold properties in Scotland, compared with around 5
million leasehold properties in England and Wales. The majority
of Scottish leases had ground rents of only £2.50 per year,
whereas the average ground rent in England is £300 per year. It
is more complicated to take reform forward in England, but the
Government are committed to doing this. The Leasehold and
Freehold Reform Bill will take important steps toward delivering
commonhold as an alternative in future.
(CB)
My Lords, there are some very good things in the Leasehold and
Freehold Reform Bill, but the Government have stopped short of
instituting a proper regulator of managing agents, which would
solve many of these problems and difficulties. Why stop short?
Why not do the job properly and have a regulator of property
agents?
(Con)
I welcome the work of the noble Lord on this issue, and I know
that your Lordships will be looking at it further in Committee.
It is already a legal requirement for property agents to belong
to one of two government-approved redress schemes. We also
welcome ongoing work undertaken by the industry itself to raise
professionalism and standards across the sector, which will make
property managing agents more accountable to leaseholders. We
will keep that and the question of further regulation for the
sector under review.
(Lab Co-op)
My Lord, if leaseholders want to change their managing agent,
they need 50% plus one of the residents to vote for change. But
in many modern blocks of, say, 100 flats, perhaps 40% to 50% are
being sublet, and you have no right to know who the people are
who need to vote. How can leaseholders who want to change their
managing agent exercise their right to change? It is impossible,
because they do not have a right to that data.
(Con)
Leaseholders wishing to take forward the right to manage claim
will need to obtain the title documents of their building from
His Majesty’s Land Registry. Those will contain the names and
addresses of leaseholders in the other flats in the building, so
it should be possible to contact them. On the voting threshold of
50% plus one, we agree with the Law Commission’s recommendation
that these existing requirements should not be changed, because
they make sure that a minority of leaseholders cannot impose
changes on the majority.
