Baroness Maddock
Main Page: Baroness Maddock (Liberal Democrat - Life peer)
Baroness Maddock
My Lords, I should declare an interest: I am a vice-president of the Local Government Association. We should all be very grateful to the noble Baroness, Lady Gardner, for securing this debate on this very important subject. I am only sorry that it is such a short debate. I am sure that all of us have been paring our words, having been inundated with information.
There are 1.5 million leasehold homes in Great Britain. This means that between 2 million and 3 million people are living in long-term leasehold properties. As the noble Baroness, Lady Gardner of Parkes, showed—and as other speakers, too, will show—there are still considerable problems for those with homes in this sector. This is despite the many Acts of Parliament that have covered leasehold tenure, going back half a century. There were Acts in 1967, 1985, 1987, 1993 and, most recently, in 2002. I was involved in the 2002 Act and was surprised to realise that it was 10 years ago. There is much agreement, I think, about the need for helpful reform of leasehold across the parties. However, it is a complicated area, as we have already heard, and there is less agreement about how to make this reform a reality, and a reality that works.
The leasehold system that we are discussing today is almost a uniquely Anglo-Welsh system. The rest of the world has developed alternative approaches, to which the noble Baroness, Lady Gardner, alluded in her opening comments. The problems in the leasehold sector persist in large part because our present system is one of high legislation but low regulation. At the heart of most of the problems is the fact that the interests of the leaseholder—the one who usually has the most financial, practical and emotional investment in a property—are all too often excluded. As the noble Baroness, Lady Gardner, has pointed out, the balance of power between the freeholder and the leaseholder too often seems to be to the advantage of the freeholder. Furthermore, the root of many problems is that lessors are excluded from management decisions despite the fact that they are the people paying.
There is no independent or compulsory regulation. This situation allows unscrupulous and incompetent managers to continue operating and undermines the influence of those living in managed properties. The lowest source of redress for leaseholders is the land valuation tribunal, but it is often lengthy, expensive and bureaucratic. It is particularly detrimental for poorer households. Many living in leasehold properties are retired; in fact, more than a third of leasehold flats are occupied by economically inactive people—I believe that the noble Baroness, Lady Greengross, is going to talk about people in retirement and the problems that they have. In the short term, the existing infrastructure could be improved by focusing on levering in the interests of all leaseholders to the management process, with a compulsory ombudsman service, and improving the management of leasehold properties through licensing. This would incur some costs for leaseholders, and it would create limited hurdles for those entering as managing agents, but I feel it would improve the value and quality of the service. Greater leaseholder empowerment could be promoted by the Government taking steps to encourage the process of right to manage and the long-term expansion of commonhold.
Since 2002, complaints about managing agents have risen sharply; in fact they have more than quadrupled in the past 10 years. The number of people living in leasehold properties is growing. The Government are committed to unlocking the housing market, and leasehold properties will be an important part of this. We know that they will be particularly important in London, where the majority of new homes will be leasehold flats. In addition, the Government plan to reinvigorate the right to buy for social housing, and this is already creating more leaseholders. Surely leasehold reform should be a priority alongside increasing the housing supply. I am aware that the Housing Minister, Grant Shapps, has stated that the interests of freeholders and managing agents are balanced and that reform should be driven by a more proactive approach from the sector, not by greater regulation. However, it is clear that there are severe problems for leaseholders, and, as voluntary regulation allows companies to operate completely outside any regulatory regime, such problems will continue unless some action is taken.
The noble Baroness, Lady Hanham, who is here today, took part in debates on the 2002 Act, as perhaps did others in the Chamber. I do not know whether the noble Lord, Lord Best, was here at the time, but the noble Lord, Lord Rooker, was then the Minister. I can still hear him saying that the local valuation tribunals would improve matters for leaseholders. However, they are proving costly, lengthy and bureaucratic. What monitoring have the Government done of the operation of local valuation tribunals, and do they have any plans to improve the operation of the tribunals? What research have the Government undertaken on the take-up of commonhold? In 2002, it was supposed to take over from the old system, particularly for new build. I understand from the statistics that that just is not happening. People prefer to go to the old system. What are the Government planning to do to assist the take-up?
I conclude by saying that we have regulation across various areas where there is competition and the regulation is often there to try to look after the interests of consumers. We have not done that properly for leaseholders, and that is one of the best arguments for looking seriously at how we can regulate in the interests of leaseholders. I hope that this short debate this afternoon will assist the Minister in trying to bring home to the Housing Minister, Grant Shapps, how important this is if he really wants to ensure that we have more affordable homes for people.
The Parliamentary Under-Secretary of State, Department for Communities and Local Government (Baroness Hanham)
My Lords, I thank noble Lords who have taken part in this debate—most especially the noble Baroness, Lady Gardner of Parkes, for introducing it. She has taken a long-term interest in housing and has great experience. It is therefore important to be able to deal with the issues that she has raised and those raised by subsequent speakers. I have a limited time, and I say at the outset that if there are areas that I miss, we will make sure that letters are written afterwards.
We believe and understand that most leaseholders are, in fact, satisfied not only with their property but with the way it is managed. However, I accept immediately that there are a number of exceptions to this rule. We also know that leasehold tenure can be complex, and problems and disputes arise, which cause concern, frustration and, in some cases, real distress to the people concerned. We have a statutory framework in place that aims to balance the different parties’ interests in the same property. The goal is to provide leaseholders with the rights and protections they need, while recognising the legitimate interests of landlords.
The current legislative framework, if properly dealt with, can deliver the right balance between the parties involved—but provided it is matched by an increasingly proactive and socially responsible approach by the professionals who are working within the sector. In taking this approach, the Government are, I recognise, presenting a real challenge to those professionals. I am therefore pleased to see this challenge being taken up by various professional bodies such as the Association of Retirement Housing Managers, to which the noble Baroness, Lady Greengross, referred. This can only help leaseholders and others concerned within residential leasehold.
The noble Baroness, Lady Gardner, referred to the London Assembly report, as did other noble Lords. We have noted that the London Assembly’s report on its investigation, Highly Charged, is a thorough and thoughtful contribution to these issues. Most of the report’s recommendations to government in fact relate to the procedures of the leasehold valuation tribunal. As such—although I will refer to the LVT later—they are issues for the Ministry of Justice, and it is up to that ministry to address these issues. It is also now for the Mayor of London and the Assembly to decide what steps they will take, but I suspect that as purdah is in place, I should not continue on that matter.
The noble Baroness, Lady Gardner, also raised the case for consolidation of legislation. This matter is unbelievably complicated. I do not know if the noble Lord, Lord McKenzie, had anything to do with consolidating legislation when he was in government, but it is not to be undertaken lightly at all. We recognise that sometimes it can be beneficial to bring together all relevant legislation, but it takes a long time. You have to bring not only the law but the regulations into one place. At the moment, it is probably not justifiable to spend time consolidating legislation in this area. The noble Lord, Lord McKenzie, referred to the Law Commission and asked whether we were planning to ask it to look at this issue. I said when we previously discussed this issue that we did not think that the Law Commission would be grateful for our recommendation, and that it was very much up to it to decide what it wanted to do. If the commission felt that there was a position or role for it, it would be in a position to take the matter up itself, but we are not at the moment planning to ask it to do so.
Service charges and the management of property were mentioned by the noble Baronesses, Lady Miller and Lady Maddock, as were the role of managing agents and their capability. Noble Lords will know that leaseholders have a range of legal rights concerning service charges and the management of property. They can hold managers and landlords to account if they believe that their service charges are unreasonable or if they are facing continuing poor management. Again, I recognise that this is not an easy area. It throws a lot of responsibility on to tenants’ associations and leaseholders’ associations. The noble Baroness, Lady Miller, referred to that.
However, I do not think that it is for government to intervene any further. People who buy leasehold properties first need to be very careful with the lease they are buying, to know what they are buying, to know what are the service charge implications and management implications. They need to know whether the managing agent has been appointed by the freeholder and what responsibility they take if that managing agent is not standing up to proper scrutiny. At the end of the day, leaseholds are the responsibility and under the ownership of the people who live in a block of flats and it is very much in their interests to have an organisation or association to use to help manage it. Although I accept that that involves a big responsibility on those who do that, there are some very determined leaseholders who manage to achieve it.
I touched briefly on the question of the leasehold valuation tribunal, which caused some ripples early on. I know that there are leaseholders who have had successes with the London valuation tribunals. Although I appreciate that there are difficulties and discrepancies between the amount of costs involved and those who pay for them, it is a fact that the leasehold valuation tribunal is there to be the arbiter in cases where otherwise landlords and tenants cannot agree.
The current maximum fee payable to a tribunal is £500. Sometimes no fee is payable at all, but of course as cases continue each party is responsible for their costs of representation. Leasehold valuation tribunals are independent and do not seek to favour one party or another. They are viewed as the most appropriate forum for dealing with a wide range of leasehold disputes. Any research on the effectiveness of leasehold valuation tribunals would, I fear, be for the Ministry of Justice. It seems ridiculous that that has got out of our hands, but that is where it is. They are given jurisdiction to determine leasehold disputes and parties can of course go to court. Again, I appreciate that that is all quite daunting for people who think that they might want to just go to live a quiet life, but that is not always possible.
Yes, managing agents are appointed by the freeholder.
Baroness Maddock
Before the Minister leaves leasehold valuation tribunals, having said that it is the responsibility of the Ministry of Justice, I would be grateful to know whether it has undertaken any review. As I said in my remarks, I can still hear the noble Lord, Lord Rooker, telling me in 2002 how wonderful it was going to be for everybody. I realise that it is not the Minister's responsibility now, but I would be grateful for that information at some stage.
Baroness Hanham
May I get back to the noble Baroness in due course? I will have to find out whether that has been undertaken.
Managing agents, as I say, are put forward by the freeholder. The leaseholders have some rights if they consider that they property is not being properly managed, and can go to the leasehold valuation tribunal about that or begin to think about taking over the right to manage the property for themselves, which would mean that they were then fully in charge.
Service charges are an issue. All sorts of issues have been raised today about the protection of money and service charges, how much they are and what is involved with them. Again, I am afraid that that is a matter for the leaseholders to watch carefully. It is important that what the managing agents do and the costs that they put forward are transparent, and that the leaseholders have a number of rights. They can and must ask for a summary of service charges, and those charges should be consulted upon. They must be able to see the supporting documentation. They have a right to see insurance documents and the right to have a management audit carried out, albeit at their own expense. So they have some control over the service charges, although I think my noble friend Lady Miller mentioned capital charges and the fact that some people had not understood that they were going to come in.
There are two codes of practice, one from the Association of Retirement Housing Managers, mentioned by the noble Baroness, Lady Greengross, and one from the Royal Institute of Chartered Surveyors, which I think the noble Lord, Lord McKenzie, mentioned. These pay particular attention to the disclosure of commissions. Although the issue has not been entirely raised today, there have been concerns about the commissions taken on insurance. There are good codes of practice that ought to be adhered to. The Association of Retirement Housing Managers code is in the process of being reviewed—we expect that to come off quite soon—and we hope that RICS will also look at that issue and revise what it says.
The noble Baroness, Lady Gardner, and other noble Lords raised two or three other points. I shall comment briefly on commonhold, something that I remember debating with the noble Baroness, Lady Maddock, in 2002 when we were, it is fair to say, vigorously opposed and saw all sorts of pitfalls coming up. Those pitfalls are still there but we could make it easier for a leasehold property to be changed to commonhold. This would now be a matter for the Lord Chancellor, which slips it away from me, and the Secretary of State for Justice. They will be required to have a look at it, and I am sure that we will refer them to this debate so that they will know what has been said about it.
The noble Lord, Lord Best, and the noble Baroness, Lady Greengross, raised the question of exit fees. We could not possibly comment on the practice of any particular company, but we are well aware that these are causing practical issues and great distress. The Office of Fair Trading, as the noble Lord, Lord Best, said, has been considering whether the exit fees might breach the unfair terms in consumer contracts, and if they do indeed constitute a breach, the OFT can take action and can take such companies to court.
I have been advised by the Whip at my right hand that I have truly run out of time. The only point that I have not covered is that on the ombudsman, which the noble Lord, Lord Best, raised. May I write to him about that, since I do not now have time? I have a note of it. I shall also write regarding the red-tape challenge.
There has been too much in this debate for me to go into as much detail in my response as I would have liked. We will scour Hansard and, if we have missed anything, I will write to noble Lords who have taken part. I thank everyone for their contribution on this extremely important subject, and I assure noble Lords that I will draw the Housing Minister’s attention to this debate and the concerns that have been raised.