Written statement on Freehold Estates - Dec 18

Minister for Housing and Planning (Matthew Pennycook): For too many homeowners, the experience of living on a newly developed housing estate has been tainted by the hidden and enduring consequences of unadopted infrastructure. Roads, sewers, drains, green spaces, and other amenities that historically would have been maintained by the local authority or utility companies, are instead now routinely left to be managed by private estate management companies, often with little transparency or accountability.

In many cases, the quality of the amenities on such freehold estates is inferior to those adopted by the relevant public authority and falls far short of what people have a right to expect. Residential freeholders across the country frequently report open spaces not fit for purpose, roads left unsurfaced; and drainage systems which are often little more than open ditches. These issues blight people's lives and with few of the rights to redress found in other markets and no ability to control the management of the estates on which they live, residents feel like they are treated as second-class homeowners.

The Competition and Markets Authority's 2024 Housebuilding Market Study identified significant consumer detriment arising from the private management of unadopted public amenities on housing estates. It concluded that without government intervention, this consumer detriment was likely to increase. This government believes that homeowners living on freehold estates deserve a fair deal. That is why we pledged in our manifesto to act to bring the injustice of ‘fleecehold' private housing estates and unfair maintenance costs to an end.

Our objective is clear. We are determined to reduce the prevalence of private estate management arrangements, which are the root cause of the problems experienced by many residential freeholders. We also want to provide those who currently live on privately managed estates with greater rights and protections so that the fees they pay are fair, transparent, and robustly justified.

That is why we are today launching two comprehensive consultations seeking views on how best to implement new consumer protections for homeowners on freehold estates and the ways in which we might reduce the prevalence of privately managed estates over the coming years.

Enhanced protections for homeowners on freehold estates

The government is already taking action to protect homeowners living on privately managed estates. We are committed to strengthening regulation of managing agents and have consulted on proposals to introduce mandatory professional qualifications for managing agents and estate managers on these estates, protecting homeowners from poor practice and unscrupulous operators.

We also intend for homeowners on privately managed estates to benefit from the proposals we announced on 6 October to transform home buying and selling. These will reduce delays, strengthen upfront information for all homebuyers, and cap unreasonable fees for providing property details.

We have also asked the Law Commission to consider how homeowners on freehold estates might secure greater control over the management of their estates, including whether the existing Right to Manage regime could be adapted for privately managed estates. That programme of work is now live and can be found on the Law Commission website here(opens in a new tab).

However, we know we must do more to protect homeowners already living on freehold estates. That is why this government intends to introduce primary legislation to ban the use of the draconian remedies in sections 121 and 122 of the Law of Property Act 1925 which are available when rentcharges are not paid.

Those remedies include rentcharge owners taking possession of the affected property until arrears are cleared and granting a lease over the property. Currently, these remedies can be used without notice for very small debts. This creates uncertainty for homeowners and lenders and increases home buying and selling costs. We also seek views on whether these remedies should be removed entirely for all types of rentcharges, ensuring that enforcement is proportionate and fair. Additionally, we plan to put in place a free advice service for homeowners on privately managed estates

The first of the two consultations we are publishing today seeks views on how we effectively implement the consumer protection provisions for residential freeholders contained in the Leasehold and Freehold Reform Act 2024. These provisions allow for the creation of a new regulatory framework that will make estate management companies more accountable for how homeowners' money is spent. They will provide homeowners who pay an estate management charge with better access to information they need to understand what they are paying for; the right to challenge the reasonableness at the First-tier Tribunal; and the right to go to the tribunal to appoint a substitute manager.

Implementing these consumer protection provisions requires detailed secondary legislation. To help shape that legislation and ensure we are implementing these new consumer protections effectively and to the benefit of all homeowners, we want to hear from individual homeowners, estate managers and managing agents.

Reducing the prevalence of private estate management arrangements

The second of the two consultations we are publishing today seeks views on how we reduce the prevalence of private estate management arrangements. Building on the recommendations of the Competition and Markets Authority 2024 Housebuilding Market Study, it aims to better understand the root causes and incentives that have led to the rise of unadopted amenities and what credible options for reform exist.

The consultation explores and seeks views on how to remove barriers to adoption and improve processes through common standards for amenities and adoption procedures. It explores how we might remove the perverse incentives that are driving non-adoption to help reduce friction between developers and local authorities and make adoption more straightforward.

It also asks for feedback on whether certain amenities should be subject to mandatory adoption and by whom, to reduce fragmented ownership and improve service delivery. Finally, the consultation also looks at how to improve dispute resolution mechanisms for poor-quality amenities and adoption issues as well as improving transparency, alongside proposals for a new affordability assessment so that maintenance of communal amenities is sustainable for homeowners in the long-term.

We recognise that not all new freehold estates will be adopted, so we need to ensure that we are giving homeowners, or prospective homeowners, greater control. The consultation therefore seeks views on whether to prohibit “embedded” management company arrangements and make resident-controlled management the default where adoption is not feasible.

The options for reform we are exploring through this consultation are far-reaching and have implications for housing supply and local authority budgets, so it is vital that future policy decisions are informed by robust evidence and a wide range of views. Through the consultation, we aim to engage residents, local authorities, developers, and estate management companies to deliver meaningful and lasting solutions.

Together, we want to build a system that works for everyone; one in which estates are well-managed and homeowners are protected, empowered and free from the burdens of hidden and unfair charges.