It is a pleasure to serve under your chairmanship today, Mr Howarth. I begin by welcoming the Mobile Homes Act 2013, which goes a long way towards rebalancing the rights of park home owners and site owners. Overwhelming evidence of appalling practices made it an imperative to introduce legislation to prevent unscrupulous site owners from blocking residents’ sales on the open market. It was also obvious that greater protection should be made available through enhanced local authority powers and reform of the licensing system. I have spoken at some length on such issues over the years, but I will just touch on them today.
I again congratulate my constituent Sonia McColl, a park home owner who set up the national park home owners’ justice campaign and who has fought tirelessly on park home issues, particularly sale blocking. I also congratulate my hon. Friend the Member for Waveney (Peter Aldous) on successfully leading his private Member’s Bill on mobile homes through to enactment. Different parts of the 2013 Act are being implemented at different times, so it is difficult to make an early, overall judgment on the Act’s impact. What assessment has been made of the effectiveness of the Department for Communities and Local Government’s communication strategy to inform park home owners of their new rights and site owners of their new responsibilities? On one site, a notice has been erected stating that all sales must be carried out through the site owner’s office. How is the new legislation on sale blocking being monitored and enforced?
I congratulate the hon. Lady on all her work. Without her, much of this would not have happened. The Mobile Homes Act 2013 has already made an overnight difference, but a big issue that I have always campaigned about is the 10% charge payable to site owners. Will she say a little about that?
I thank the hon. Lady for her great support throughout our battle to secure legislation. I called this debate in the light of a huge new petition against the up-to 10% commission on the sale of park homes payable to site owners. Sonia McColl has collected signatures from some 30,000 park home residents from 956 parks across the United Kingdom and the petition will be presented to the Government in July. I have always accepted that there needs to be a reasonable return on capital to site owners, but I do not know in detail the justification for particular levels of commission. Given the strength of feeling from park home owners, it is right to put their views forward and to examine how their concerns about being overcharged for the level of service received might be addressed. The answer may lie in more transparency and accountability. Those who have signed the petition are calling for a proper debate on the fairness of the commission payment and they argue that previous inquiries into the charge have been biased and heavily reliant on information provided by park operators, rather than park home owners.
It is interesting to note that the maximum level of commission was reduced in 1983 from 15% to 10%. While there has been no change since then, the dissatisfaction of park home owners with this state of affairs has continued. The arguments for from the site owners and their representative bodies and the arguments against from park home owners and their associations remain much the same. Park home owners argue that as a site owner does nothing to earn the commission, they do not see why he or she should receive it. The argument is reinforced when occupiers highlight how they have increased the value of their homes by adding porches and other improvements at their own expense. Many park home owners claim that there has been little investment in their sites and that essential maintenance has not been carried out. Site owners say that the commission payment is part of the income, along with pitch fees and selling new mobile homes, that they have always expected to receive to make the businesses viable. They say that if the commission was reduced or abolished, they would either have to increase pitch fees accordingly to make up the difference or go out of business.
In March 2007, the Government published the responses to their consultation on the park home commission rate, which outlined options for a more transparent payment system for mobile homes. They concluded that the current level should be retained but that there should be more transparency on the payment within agreements between park home owners and site owners. An option to reduce the rate with no pitch fee increase was rejected, although it unsurprisingly received overwhelming support from park home owners.
I thank my hon. Friend for her intervention. There seems to be a complex and opaque relationship between the pitch fee and the commission payment.
A third option, to scrap the commission on the sale of a park home for new agreements only without a limitation on a compensatory increase in pitch fees, received little support. If pitch fees increase further, I concede that there is a danger for residents on relatively low and often fixed incomes.
In 2012, the Select Committee on Communities and Local Government carried out an inquiry into the park homes industry and undoubtedly contributed to the 2013 Act. It concluded that site owners should continue to receive up to 10% commission from the sale of a park home. However, as well as some oral evidence, it relied heavily on the 2007 conclusions and on an earlier paper from 2002 when reaching its own conclusion. It is misleading to say that we have evidence from as recently as 2012 on the issue.
I sat on the Communities and Local Government Committee and was part of that investigation. It is right that we concluded that any reduction in the 10% rate would lead to an increase in the pitch fees referred to by my hon. Friend the Member for Newton Abbot (Anne Marie Morris). Given that, we need to reconsider the issue and to have another debate. I commend the idea of my hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke) on greater transparency, which should give home owners the confidence that money is being reinvested in site maintenance and upkeep.
I commend my hon. Friend and all members of the Communities and Local Government Committee, because the report was really useful and introduced elements into the 2013 Act that might not otherwise have been there.
Returning to site owners’ incomes, there are at least three elements, including the initial siting of the mobile home, the pitch fees and the commission payment. I have a scenario that outlines the siting of a new unit. Suppose that a site owner purchases a new unit for £60,000. Transport may cost £10,000 and they may have to spend a further £10,000 for connection to services and landscaping. The unit could sell for £160,000. I have no idea how realistic those figures are, but I am trying to illustrate the potential for a significant return. Suppose that the home is sold within a year, the commission clicks in. In another scenario, a park home owner could replace their home, meaning that they will be charged for connections to services and landscaping, which means more potential profit. It is therefore difficult to get into all the payments that are actually made by park home owners.
I must confess that I am totally confused about the respective purposes of the pitch fee and the commission payment, but they are clearly related, if the situation is such that if commission is reduced, pitch fees will have to go up. As ever, I consulted House of Commons Library briefings for clarification. The standard note on the 2013 Act states:
“The pitch fee is the sum paid to the site owner in return for permission to station a mobile home on the pitch and use the common areas of the site. The requirement to pay a pitch fee is an express term in the written agreement. Pitch fees are reviewable annually and can usually only be increased in line with RPI plus the cost of expenditure on improving (rather than maintaining) the site.”
In a recent letter, the Minister said that a commission is not an estate agency charge, but an important income strand for park home businesses, enabling them to ensure that sites are properly managed and maintained. He said that if the commission was reduced or abolished, there would need to be a compensatory increase in pitch fees to cover the shortfall in income. That is where I find it difficult to understand exactly what money is being used for what, and I can see where the questions come from park home owners.
On pitch fees, there should be available for inspection a transparent and audited set of published accounts. I have with me a file of cases from across the country. Residents have supplied evidence that owners of their sites are not properly managing or maintaining their parks, making it harder for residents to sell their homes. They have asked why site owners should receive the 10% commission if they are not supplying the services they are meant to. Park home owners argue that it is they who work hard to make improvements to their property, which helps the site owner market his business.
The 2013 Act will introduce some accountability, with an annual review of pitch fees; an opportunity for park home owners to challenge pitch fees on lack of maintenance or deterioration of the site; and a requirement for site owners to justify increases above the retail prices index. I would be interested to hear how the Minister envisages those provisions working; whether the historical position in which many park home owners find themselves can be addressed; and whether it would be possible to have a clear statement on the issues. I imagine that such a statement could not be made fully today, but if we could have something simple placed in the Library, it would be helpful for park home owners and Members of Parliament to see what the future holds, so that we can check whether anything else needs to be done. I fear that we will not pick up all the historical problems, but I hope that future purchasers will have clarity in their written agreements about all payments and will be clear on the annual reviews. Also, I still come back to this question: is it not reasonable to have audited published accounts on pitch fees and the expenditure out of that?
Research by the National Association of Park Home Residents in November 2013 revealed that monthly pitch fees in 1,075 parks varied from £40 to £382. It seems generally accepted that the average fee is about £150 a month. For someone living on the basic state pension, while the pension is being increased by the consumer prices index, fees are being increased by the RPI. One can see how there are concerns out there.
Park home owners continually identify extra costs that creep in one way or another. Many park home owners referred to people who own flats or other dwellings, who pay a maintenance or service charge and a leasehold charge, but do not generally have to pay another 10%, on top of an estate agent’s fee, when they sell. That is where I feel published accounts would help. Park home owners pointed to providers such as McCarthy and Stone and looked at the many services provided in private sheltered accommodation. I think that there is a pretty good idea in those situations of what someone is paying for and what they are getting.
Park operators have argued that they cannot remain in business without the 10% commission charge. Yet our petitioners have pointed out that it would be foolish for a business to rely on an income that is unpredictable. It is difficult to predict how many new homes will be purchased, or used homes resold, in a year.
Many residents reported feeling trapped in their homes and unable to sell. Due to park rules, many sites are only for people of retirement age. The need to move into a nursing home or some other form of residential care is a real possibility. Having to give the park operator such a high percentage from the sale of their home reduces the amount the seller has to put towards their care.
There are other considerations. The Government acknowledge that the park homes sector plays an important role in the provision of low-cost housing for the elderly and that it frees up under-occupied homes that are much needed as we face a housing crisis. However, with pitch fees, other overheads and the 10% commission, many residents worry that the costs of owning a park home are becoming unviable. The issue of the 10% commission charge is undoubtedly a matter of concern.
I congratulate my hon. Friend on securing this debate and on putting her points across so eloquently. It is important, after what was probably the biggest change to the sector in many years, that we review it from time to time.
Does my hon. Friend agree that the legislation was based on proper and full research and consultation, with the Select Committee report and the consultation conducted by the Department for Communities and Local Government? The new licensing arrangements provide an opportunity for additional accountability, so does she agree that we should let the legislation bed down before reviewing it in, say, two to three years, as indeed the legislation provides for?
Yes, there is an important element of reviewing what is in place or is about to come in in the near future, but not all of that is entirely understood by park home owners. We need a clear statement of what is happening now and what will happen in the future, and we need to try to untangle the pitch fee and the commission to be clear what items we are talking about. For example, is the commission just for contingencies, or just for improvements? I find the issue confusing, and I do not think we have bottomed that out yet. I agree that we cannot make any big moves until we have reviewed the legislation properly, but I think we can move forward by getting more transparency.
Not surprisingly, the petition calls for a reduction in the commission rate. Petitioners are also interested in looking at whether we should consider the difference in value between the purchase and selling prices of the unit when a commission is applied. That might be quite complex if there is deterioration on the unit, but obviously, that is food for thought.
We need a full and frank debate on the issue. We need transparency on what the various payments are being used for, and we need to ensure that there is no further exploitation of park home owners. Exploitation is still going on regarding some of the utility charging. It should all be out in the open, but I am sure that we can all come forward with examples.
I apologise for my discourtesy in arriving late for the debate. As my hon. Friend knows, through the work we have done with the all-party group and the many debates in this Parliament, exploitation is the key point. I agree with her point on pitch fees, about where they go, what they are for and transparency, and she knows I do. However, the point is that the fee is effectively a charge, tax or levy on one group of home owners that would not be and is not accepted for any other form of property ownership. Once again, park home owners are put in a lesser category compared with everyone else we represent. That is the point.
I thank my hon. Friend for his support throughout the campaign. That is a valid point.
We must not just sit back. It is great that we have the legislation, but we need a continuous full and frank debate on the issue. As I said, we need transparency, and equally we need to ensure that the industry is viable and that responsible site owners have a viable business model.
We ought to praise good practice instead of just focusing, as we have to do, on some bad practice. We should praise and look at some good sites and find sites where residents are satisfied. That would be a good approach, and then we can make comparisons.
We have achieved a lot in ending the injustices that were being suffered, but we cannot be complacent until all park home owners are treated fairly. I ask the Minister to be prepared to look deeper into the matter to ensure that we get the right balance for site owners and park home owners.
There will be a lobby, organised by my constituent, at 4 pm on 2 July in Committee Room 10. I very much hope that the Minister will attend simply to set out what is going to happen with the existing legislation as far as pitch fees are concerned. Today, I hope, is the start of a constructive debate.
It is a pleasure to serve under your chairmanship, Mr Howarth. I congratulate my hon. Friend the Member for Mid Dorset and North Poole (Annette Brooke) on securing a debate on this important issue, on which I have also received significant correspondence over the years as an MP. She has campaigned tirelessly for better protection for park home owners, and she was instrumental in securing the passage of the Mobile Homes Act 2013, introduced by my hon. Friend the Member for Waveney (Peter Aldous). She asked a couple of specific questions, which I will answer shortly.
As my hon. Friend the Member for Waveney said, the 2013 Act was the biggest shake-up in park home legislation for 30 years, and the Government were pleased to be able to support it during its passage through both Houses. It marks our commitment to ensuring that park home owners are protected and their rights are respected. One such right is the right to sell a park home without undue interference from the site owner. There was significant evidence that the site operator’s role in approving the purchaser had been abused by a number of unscrupulous individuals to block sales. The 2013 Act removed that opportunity by abolishing the site operator’s right to approve the person to whom a home should or could be sold. Provided that a person meets the relevant site rules, the sale can usually go ahead without the site owner being involved in the process until the purchaser notifies them that the sale has been completed and the pitch agreement has been assigned.
The new system for buying and selling has been in place since last May. It is much fairer than the old system and reduces the opportunity for abuse. As my hon. Friend the Member for Waveney said, it now needs to bed in. To answer the specific point about a review, a body such as the Select Committee might, after a sensible period, want to explore the progress of the Act.
We have put in place safeguards to ensure that the site owner receives the commission. Most importantly, however, they cannot demand it before the home is bought and the pitch agreement is assigned. That means the buyer, not the seller, is responsible for paying the commission. However, it is not payable until following completion, when the site owner provides the buyer, who is now the new home owner, with their bank details. If the new owner does not pay the commission, they will be in breach of the pitch agreement and at risk of losing their home. The maximum commission payable is 10% of the price paid for the home. Thus, when purchasing the home, the buyer pays 90% to the seller and retains 10% to pay as commission to the site operator.
I realise that some home owners object to the commission on the sale of a home. Some will feel aggrieved that they have to give up 10% of the purchase price, which is paid to the site owner, when they may believe they get little or nothing in return. Sometimes they see this charge as some kind of estate agent’s charge, despite the fact that the site owner is no longer involved in the sale process. However unfair home owners feel the commission is, the fact that it is payable should not come as a surprise. It is implied in the terms of the pitch agreement, and people should be aware that it is payable on the sale when they purchase the home.
The maximum rate of commission is 10%, having been reduced from 15% by the Conservative Government in 1983. Commission is a legitimate income stream for park home owners, and there is no evidence that the payment leads to profiteering. That was the finding of the independent report commissioned by the previous Government in 2002. The other income strands are from selling homes and from pitch fees. Income from selling homes is necessarily limited because it requires the availability of new pitches or site development. Changes in pitch fees are regulated, and they are linked to inflation and certain other costs that the operator incurs in running the site.
I will come to that shortly.
There is limited time, but let me add that there was a further review in 2006. The then Government suggested that the commission be reduced to 7.5%. Following significant consultation, they decided there was no case for change, and they maintained the status quo. In spring 2012, the Select Committee did significant work on the operation of park homes and came up with a powerful and significant report, which obviously influenced the 2013 Act.
On the specific issues that have come out of the debate, the Government have spent a significant time shaping our answers to parliamentary questions so that we can give really full answers to the absolutely pertinent questions that Members have asked about the progress that has been made. I am quite prepared to put another document in the Library to provide some clarity and so that any Member who has not asked questions can have access to it. However, we have spent a significant period reviewing our answers to make sure we pick up the issues that have been raised.
In answer to the question from my hon. Friend the Member for Newton Abbot (Anne Marie Morris), I should say that we have worked with trade bodies to make sure we disseminate information, and I hope good councils will also proactively contact local park owners to transmit it. However, this issue has been so significant and has had such a media presence—indeed, it has had significant coverage from Members on both sides of the House—that no site owner could legitimately say that they did not know about the change. In fact, if they failed to comply with the rules in the legislation, it would be a criminal act, and the council could pursue them.
To conclude, the Government do not see a need to review the 10% commission at this time. As my hon. Friend the Member for Waveney said, it is appropriate, after a period, to reflect on what has happened. However, home owners are in a completely different position from the one they were in before the 2013 Act, and significant safety barriers have been put in place to stop unscrupulous individuals from pursuing home owners’ moneys. It is important that we have clarity and transparency on fees. The ability of councils to go on to a site to pursue malpractice or inappropriate maintenance is some safeguard and some comfort for individuals. I hope colleagues will continue to push the issue and to seek to make sure that greater protections are in place. At this time, however, we do not seek to review the commission on park homes.