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Leaseholders and Property Management Companies

Volume 811: debated on Thursday 29 April 2021


Asked by

To ask Her Majesty’s Government what assessment they have made of the effectiveness of the law in respect of the responsibilities of (1) leaseholders, and (2) property management companies, for the upkeep of communal areas in blocks of flats.

My Lords, I beg leave to ask the Question standing in my name on the Order Paper and, in doing so, I want to say that I am so proud to be able to ask a Question on your last day, Lord Speaker. You have been an exceptional Lord Speaker; thank you so much.

The Government are committed to promoting fairness and transparency for homeowners and ensuring that leaseholders are protected from abuse and poor service. Following Law Commission reports on enfranchisement, right to manage and commonhold, the Government are taking forward a comprehensive programme of reform to end unfair practices in the leasehold market. We are also considering the recommendation from the independent working group on property agents, chaired by the noble Lord, Lord Best.

My Lords, I refer the House to my relevant interests as set out in the register. Does the noble Lord accept that, in many cases, leaseholders are trapped, paying expensive fees to management companies for the care and upkeep of communal areas or the property that they live in, and that the provisions that enable fees to be challenged and management companies to be replaced are not fit for purpose and need to be radically updated to place real control and choice in the hands of the leaseholders?

My Lords, we believe very strongly that any fees and charges should be justifiable, transparent and communicated effectively and that there should be a clear route to challenge or address things if they go wrong. That is why we commissioned the noble Lord, Lord Best, to do his report.

My Lords, on 5 January, when I described leaseholders as

“a relic from a feudal age”,

my noble friend replied:

“There is no doubt that in this country we are unique in having leasehold. We need to focus on reform, which will take this forward to a position similar to that in Scotland or on the continent, where people are co-owners of their property.”—[Official Report, 5/1/21; col. 9.]

Is legislation on its way so that everyone can benefit from my noble friend’s ambition?

My Lords, my noble friend knows that the Government wish to extend the benefits of freehold ownership to more homeowners; that is why we are establishing a commonhold council to prepare homeowners and the market for the widespread take-up of commonhold. We share that same drive and ambition to change things.

My Lords, too many property managers and owners have taken advantage of tenants by imposing unreasonable service charges, and often trading with linked companies, so I appreciate the Government’s commitment to finding a clear route to challenge for leaseholders. But what about people who live in sheltered housing—the vulnerable people who really are not able to look after themselves when confronted with an unreasonable agent making outrageous demands?

My Lords, the Government are considering under what circumstances fees and charges for leaseholders and for people in sheltered housing are justified and whether they should be capped or banned. That will form part of our response to the review by the noble Lord, Lord Best.

My Lords, can the Minister give the House any indication of progress on the leasehold reform issue? The recent White Paper was welcomed by many people, including my friends on the Isles of Scilly who feel that they are very badly treated. How many of the recommendations in that White Paper might appear in legislation soon?

My Lords, we are starting off with a two-step approach to reform. A ground rents Bill will be announced in the Queen’s Speech. It will take approximately a year to prepare the wider reform proposals around enfranchisement, right to manage and other matters covered by the Law Commission.

Last night, the Government refused yet again to amend the Fire Safety Bill to protect leaseholders from charges levied for the replacement of defective fire-resistant cladding. I repeat my noble friend Lady Pinnock’s concluding question:

“if it is not the right Bill, where is the Government’s Bill … that will keep the Government’s pledge that leaseholders would not have to face the unaffordable consequences of fire safety defects?”—[Official Report, 28/4/21; col. 2371.]

That seems already to be a broken promise. How will the Government now stop bankruptcy proceedings and loss of homes?

My Lords, the Government have already put an unprecedented sum of money—over £5 billion—on the table to support the remediation of unsafe cladding. We made it very clear that the steps that we are taking can be covered without statutory intervention.

My Lords, I declare my interests as in the register. If a company knowingly supplies substandard goods and dozens of people die because of it, but the company walks away with billions of pounds of profit without renovating or replacing all the other substandard products that they have already put in place, is that just good business practice?

My Lords, is there evidence that property management companies are more effective than leaseholders in managing the upkeep of communal areas? Does there need to be the same redress route if the freeholder also acts as the property manager? Can the Minister advise whether the Government intend to bring forward legislation to extend the requirement of membership of redress schemes to freeholders where no managing agent is employed?

My noble friend will know that there are various reasons leaseholders may exercise the right to manage, and the Government are committed to simplifying the process. I point out that many right-to-manage companies choose to employ a managing agent. In response to his second point, the Government intend to require freeholders of leasehold properties who do not employ a managing agent to join a redress scheme, and we will bring forward legislation when parliamentary time allows.

My Lords, I declare my interest as listed in the register. Is the Minister aware that, in order to get the necessary certification for electricity, gas or water, for example, landlords are required to get services tested? I have heard many examples of deficiencies being exaggerated, and then quotes being given to remedy the situation that are vastly disproportionate—engineers have proved this later. I worry that many innocent people may not realise this is happening.

My Lords, I am aware that there are sharp practices across the board. But, by law, service charges and other charges have to be reasonable, and costs have to relate to the work or services undertaken, which need to be of a reasonable standard. We will take the noble Lord’s point and advice to see how we can address that issue.

My Lords, the housing complaints resolution service was proudly announced in January 2019 as a portal system to overcome what James Brokenshire, the then Minister for Housing, Communities and Local Government, called the “complicated and bureaucratic system” we have currently. Could the Minister update us on progress? Will this new body have new powers to enforce decisions in court by statute, or will it be a crocodile with rubber teeth?

My Lords, this is clearly a wide-ranging question that raises all kinds of issues. I will have to write to the noble Baroness on the progress of that matter.

My Lords, I declare my interests as set out in the register. Given the growth in short-term lets since the changes in legislation in 2015, most of which are beyond the permitted 90 days per year, could the Minister look at whether landlords and management companies can be given the power to charge more to those letting short-term in order to reflect the additional usage of communal areas, given the high turnover of their short-term let properties, which is otherwise unfairly borne by long-term block residents who do not get any of the benefits from the higher rent?

My Lords, I am not sure that you can charge differentially because of the extent of a letting period. I know managing agents will seek to maximise their percentage within the market structure, but the law means that you have to justify what you charge.

Local authorities have had a tendency to sell off their least desirable, most dilapidated small blocks of flats to private individuals, who then get managing agents and leave tenants in the worst poverty and the worst conditions. Does the Minister have a solution to the conundrum of how impossible it is to ever get those communal areas repaired?

My Lords, we recognise the importance of having an overarching system of regulation and having it reviewed, which is why the noble Lord, Lord Best, is looking at that matter. There is also the Cambridge University review, looking at specific fees and charges, to which the Government will respond, taking into account the very scenario that the noble Lord paints.

As I have finished on time—I know that that is important to the Lord Speaker—I just want to say to him, what an amazing Lord Speaker you have been. In my first year in the House, I have really enjoyed your astute chairmanship.

That is very kind of you; thank you. All supplementary questions have been asked—congratulations to all concerned. We now move to the next Oral Question.