Over the last three years of our campaign, there have been plenty of references to problems with the private estate model in parliamentary debates. We are sharing a few quotes taken from Hansard in this article. It is abundantly clear that MPs of all parties have heard from their constituents, and have pressed the government to act. Sadly there has only been consultations and promises of measures based on the already broken leasehold system. Regulation of property agents and redress through the first tier Lands Tribunal are measures which we do not feel tackle the poor quality of new build estates, or the fundamental unfairness of estate residents subsidising leisure facilities for the whole community. We also do not believe they will achieve the government’s stated aim of ensuring fairness and value for money.
It is clear to us that this government is more interested in supporting the construction industry than in ensuring quality developments and a fair deal for home buyers.
As we have heard, home owners on private estates across the country are being fleeced through a system of spiralling fees, shoddy service, lack of choice and zero accountability. We know it is an issue that affects up to 1.3 million households and it is a problem that mirrors the exorbitant service charges and draconian standards facing leaseholders. It is a problem that the Government have had years to fix, but they have yet to do so.
This is a scandal. There has clearly been mis-selling. The public perception of freehold is deliberately exploited by the property companies in their sales materials. Many homebuyers are not made aware of the arrangements for the management of open spaces until the completion of the sale. One of my constituents reported that the first they had heard of their management company, which was Greenbelt, was a threatening late payment letter. They had not received a bill, let alone a welcome pack.
In many cases, contracts do not specify, limit or cap those freeholder charges. This lack of transparency leaves home owners in a vulnerable position.
Freeholders buy their properties with a covenant—many covenants in some cases—that contain unquantified and unspecified obligations relating particularly to the common parts of their
estate. When pressed, the smart salespeople in the smart furnished flat or house on the estate often say, “Well, it’s only a small amount. It will amount to a few hundred pounds.” However, when the buyer gets their first bill, they suddenly realise what they are locked into. In some cases, the charges are so high, as they can be with leaseholds, that the properties are effectively made unsaleable.
Another constituent is caught in what is known as the “fleecehold” situation. She is a freehold owner of a new build house but has received an invoice for service charges from the estate management company on behalf of the developer. She was a first-time buyer and vaguely remembers something being mentioned about a rentcharge. When she queried it, she was told that she was buying the freehold and that that was an estate management charge towards the upkeep of the estate. She paid the amount via her solicitor for the first year and heard nothing about it after that, until she received an invoice a couple of months ago.
My constituents trapped in rip-off leasehold houses now look forward to swift action from the Government following the consultation that has just closed. Turning to this statement, more and more new estates are subject to management fees because developers are not transferring responsibility for common parts to local authorities, meaning that many home owners are effectively paying twice for the same services. Will the new consultation examine ways of requiring developers to pass on those maintenance functions, which should properly be the responsibility of councils?
I welcome the Minister’s statement. Will the Department also consider what steps can be taken to protect the consumer rights of freeholders who pay management fees on new-build estates where managing agents are failing to deliver value for money, such as in Lawley Village in Telford?
Of course this is just a sample, there are many more, easily found if you search Hansard with the terms estate service charge.