CMA Recommends Adoption

The CMA have produced their year long study on the housebuilding market, one part of which relates to privately managed estates. They acknowledge what we have been saying all along that we are being fleeced and recommend to government adoption as the default going forward. They also suggest that government considers adoption for existing privately managed estates and this point is what we need to hammer home in our lobbying.

You can read their full output (and there is a lot of it!) on their housebuilding page.

Below are some relevant sections from the summary document:

Their summary findings:

Finally, we have identified significant consumer detriment arising from the private

management of public amenities on housing estates. We conclude that, as a result

of the proliferation of this model, households face detriment in the form of:

● the charges they pay,

● the quality of amenities available to them,

● the quality of management services they receive,

● the potential for disproportionate sanctions to be applied for outstanding

charges, and

● the significant efforts that households sometimes have to make to achieve a

satisfactory outcome.

We consider that if the status quo is maintained, aggregate detriment is likely to

worsen over time.

We have also observed a growing trend towards private management of public

amenities on housing estates. These arrangements often come with inadequate

protections for consumers and create significant detriment for households over an

extended period. These raise a number of concerns from the perspective of

consumers:

(a) Homebuyers may be poorly informed about important details about those

arrangements and their long-term implications.

(b) Unadopted amenities may not be constructed to an acceptable quality or may

not be maintained to a satisfactory standard by the management company.

Homebuyers attempting to resolve issues may face poor levels of customer

service. It may also be unclear who is responsible for maintenance.

(c) It is often very difficult for households to switch management companies and,

in some cases, there appears to be no feasible way for them to do this.

(d) Bills can be large, with a high proportion relating to administration or

management fees, and future bills unpredictable and potentially very high as

amenities degrade over time.

51. The root cause of detriment for such households is the reduction in levels of

adoption, meaning that households end up paying for amenities which are used

by the public. This has resulted in a proliferation of private management

arrangements in which estate management companies may possess significant

market power and face limited competitive constraints to deliver services at a

reasonable price or to an acceptable level of quality.

We are making recommendations to governments in those areas where

we see opportunities to improve market outcomes within the current broad

market framework and which do not involve significant trade-offs with other

policy objectives which are outside the scope of the CMA’s study and which

would involve wider political choices, specifically:

(i) The private management of public amenities on housing estates. We

have observed a growing trend towards the private management model

and that these arrangements often come with inadequate protection

and create significant detriment for consumers. Our recommendations

to the UK, Scottish, and Welsh governments are aimed at preventing

the proliferation of private management arrangements on new housing

estates and providing greater protection to households living under

private management arrangements. We also invite these governments

to consider options to support the adoption of public amenities on

estates currently under private management arrangements;

These are just selected paragraphs fro m our initial reading – watch this space for more to come!!


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Progress!

We were invited to give evidence to the commons committee stage of the Leasehold and Freehold Reform Bill on 16th January 2024. We shared the time slot with leasehold campaigners but feel we got our major message across: STOP THE ROT ADOPT THE LOT!

This is the first time there has been any real acknowledgement that regulation alone isn’t the answer. We made the point that there is a risk of legitimising a model which should be scrapped for estates which are not truly private gated communities.

The bottom line is that we were able to introduce the underlying problem of lack of adoption and describe the effects of the current system on unsuspecting home buyers.

Halima vividly described the effect of estate charges and lack of adoption in her case.

It appears that this time they listened and heard. In a later session Richard Fuller MP grilled CMA representatives and gave them “homework”. He asked for them to write to the committee ahead of their Market Study report with ideas about how the Bill could include measures for more adoption.

There is some uncertainty about this Bill being the vehicle for more adoption – it may need legislation of it’s own, but we feel that the acknowledgement of the lack of adoption as the problem to be tackled is a big move forward. We hope the next big step will come from the CMA’s Market Study at the end of February.

If you prefer to read the transcript you can do so here.


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Political Manoeuvrings

Thanks to all who have written to the Competition and Markets Authority in response to their working paper – we gave it our best shot.

Below is a link to our email on behalf of the group – you may think the language is quite moderate, but the Competition and Markets Authority have worked hard, listened, investigated and they got it. They have correctly identified that lack of adoption is the underlying problem on publicly accessible estates.

We had thought it would be a matter now of waiting for their recommendations in February, but lo and behold, the government has, after 4 years, suddenly found parliamentary time to introduce its Leasehold and Freehold Reform Bill! It feels like a race to get something on the statute book now regardless of whether the act will deliver anything like the changes needed for either leasehold or estate charges to ensure fairness to home/lease buyers. In our view both should be abolished, not polished.

For us, the fundamental mistake (??) government makes is to look to ensure parity between leaseholders and estate charge payers. A dodge which means we will be treated like leaseholders – big deal! Actually it’s a smack in the eye, as it legitimises a model which should be scrapped. We seek parity with other home buyers, not leaseholders who are an even more disadvantaged group than us.

We do not want or need estate charges on developments open to the public. They may be appropriate on gated private estates, but this is not the case for us.

If the government think they can catch any votes with this bill they have another think coming. Like so many government actions, it supports big business, not the voting public.

We are working with the NLC to pull together a way forward and will post again soon on this.


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Call To Action!

The CMA are asking for comments on their recently published working paper about their current thinking on estate charges.

Its a long read, nearly 90 pages but worth going through. The bottom line is they do see (most of) the problems and offer two potential solutions:

  1. More adoption
  2. and/or more regulation of management and leaseholder type rights.

In the past we have surveyed and polled our supporters as well as just listening to their views in our social media group, web comments and emails. The overwhelming majority want full adoption of their estates rather than regulation and self management for many reasons including but not exclusively:

Regulation will not remove the fundamental unfairness of a sub set of people paying for up keep of pubic spaces/amenities.

This unfair way of managing public spaces divides communities, whereas adoption does not.

Estates which are un adopted are not built up to adoption standards. This leads to long term blight as well as higher charges for residents than for public bodies.

Private management is expensive and cumbersome with up to 50% of costs just going on management rather than service provision. Having a company for each development is unnecessarily complex and inefficient. Councils have established means of keeping track of house moves and collecting council tax as well as economies of scale in delivering services.

Regulation and redress schemes for leasehold service charges also have a power imbalance which is detrimental to the consumer. We do not see how applying this to fleecehold will work any better for estate charge challenges – especially since estate charges are of a lower order than block service charges.

Estate residents do not have the skills to manage or oversee managing agents in the increasingly complex matter of land and facilities management.

There are delays and extra expenses when selling a home with estate charges and there is no doubt that property values have been affected adversely. More regulation of managing agents will not in our view cause a recovery in value or saleability. The word is out and can’t be retrieved.

We are very concerned that residents trapped in this model will suffer an even greater loss of value and saleability should mandatory adoption not be applied retrospectively. Whilst we advocate adoption as the only solution which addresses all of the problems it must be universal to avoid further detriment to a sub set of estates.

Many of our supporters have said they are willing to pay more for their houses to be on adopted estates and also in local taxes for upkeep such as a precept for all open spaces in the area. They just don’t want to be ripped off by unaccountable private agents.

We supported this petition to parliament asking for mandatory adoption and succeeded in reaching the threshold for a response in spite of a fairly short timescale.

In section 5 of their document, the CMA are asking for comments on their thinking to be submitted by email by 24th November. If you can write to them to support their conclusions, with reference to the issues you have faced, that would be great. HorNet will be responding for the group as well, but the more the better. We do feel that the government may press ahead with their regulation agenda unless there is a firm recommendation against from the CMA. It’s our best chance to STOP THE ROT ADOPT THE LOT and it probably won’t come round again for many years, so please do email them.


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A Ray of Light from the CMA

Our campaign to abolish private management of public areas/amenities on new build estates has been going now for 7 years. During that time we have had 8 housing ministers, a private members bill and numerous press articles, mostly on regional networks. There have been some promises from the government which have stood for 4 years without action. Since these only covered regulating an existing exploitative system we feel perhaps this has been a blessing in disguise as the CMA (Competition and Markets Authority) have stepped in with a Market Study which is looking at private estate management as part of its work. The study began in March and a progress report has just (25/08/23) been posted along with a press release. They are now looking at investigating the area in greater depth. This is hopeful news and we are confident that they will find anticompetitive practices which impact adversely on many new build home buyers. Thanks to all HorNet supporters have worked hard to submit evidence to the CMA. Also thank you NLC (National Leasehold Campaign) – we know you raise the issue of estate charges whenever the opportunity arises.

The CMA are considering looking into private estate management via their more formal in depth legal process (Market Investigation Referral) and we feel we should encourage them to do so as it looks to see if competition law has been broken. This may be the only way current victims could ultimately get compensated for their predicament . The down side is time – another 18 months plus, but we hope it would be worth it. Our understanding is that it wouldn’t necessarily preclude the CMA from making recommendations to the government for policy changes which could stop current practices in future. To take a look at their August 25th Update click here. It’s worth spending some time reading this 70 page document – the section near the end gives more explanation of the measures they can take.

Continue reading “A Ray of Light from the CMA”
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