Residential Estate Management Companies

John Glen Excerpts

Tuesday 22nd April 2025 Westminster Hall

[Caroline Voaden]

I am glad that the hon. Lady says that the Government are in a hurry. We are looking forward to seeing the legislation come before the House.

Out of the 1,100 people to whom I was referring, only 10 were happy with the way things were going with their management company. By anyone’s measure, that is a pretty shocking state of affairs. Respondents talked of shoddy workmanship, years of delays in getting repairs done, charges for gardening where no gardens exist, charges for new windows when windows are not replaced, charges for buildings insurance when there are no communal buildings, charges for new light bulbs when there is no communal lighting—it would be funny if it were not so serious. They talked of broken lifts, flooded car parks, leaking ceilings, including one that has been leaking for nine years, exorbitant insurance charges—the list goes on and on.

[John Glen (Salisbury) (Con)]

One other aspect worthy of scrutiny is the situation whereby a developer sets up a management company made up of family members of the original developer, leaving residents with a real challenge to get to the heart of who is truly accountable. That is something that I have seen in my constituency, and I am sure that it happens across the country. It is something that the Government need to address in whatever they come forward with.

[Caroline Voaden]

The right hon. Member raises a very good point. The ownership of some of these companies is murky to say the least.

Service charges are going up way beyond inflation, with no clear explanation of what the increases are for, and management companies refuse to give clear explanations when asked. At Camomile Lawn in Totnes in my constituency, residents were told that the annual contribution to a reserve fund had been increased from £2,000 to £8,000 a year—over 265%. Service charges were raised 23% based on a 10-year plan, but the plan was not shared with the residents, even when they asked. Accounting costs went up 55% in one year with no explanation given. This is a classic example of poor communication and a refusal to engage constructively with residents who want to understand the basis on which financial decisions are made.

The lack of transparency around service charges has been debated in this House many times, not least in December 2023 on Second Reading of the Bill that became the Leasehold and Freehold Reform Act 2024. It is way past time that management companies were required to act responsibly, treat residents with respect and provide timely, straightforward and accessible information to all residents, regardless of their status as leaseholders or freeholders, and regardless of age.

One resident said:

“We feel like we are being taken advantage of because they see us as old.”

That is a common reflection of those living in retirement villages. Too often, questions go unanswered, letters and phone calls are ignored, and justifiable requests for clarity and information on charges get rebuffed or given such poor responses that they do not mean anything. A delay in bill payment caused by asking a legitimate question often leads to a penalty charge for late payment—a sharp practice that clearly has to end. What is more, people are being forced to pay for the privilege of having asked those questions. One respondent said:

“I received a bill of more than £2,000 for incurring charges trying to see where my money was being spent—£25 per email, £35 per phone call and solicitor charges on top. I felt completely robbed.”

Older people often feel bullied by management companies—scared to question charges, confused by badly written statements and threatened with legal action if they are late paying charges because of wanting to question something. One resident said:

“Our management company leverage their familiarity with legal processes and the vast financial resources at their disposal to bully and intimidate leaseholders.”

This is not just about money; it is about how people feel living in a home that they may have put their life savings into buying. These homes are often sold as offering peace of mind, but one respondent said:

“I’m drained, scared and mentally exhausted. It feels like I’m being financially and emotionally worn down for simply asking for basic transparency and fairness.”

Another said:

“My mental health has been seriously impacted by the state of our building. No one should be unhappy in their home or feel like they don’t want to go home.”

When it comes time to sell, it is yet another tale of woe. Management companies do not respond to requests for information from solicitors; sellers are charged thousands of pounds for management packs that are required for the sale but take months to arrive; buyers get frustrated and pull out, and the price of the property is impacted. Meanwhile, service charges keep rising and ground rents keep being charged.

As my hon. Friend the Member for Cheltenham (Max Wilkinson) said, people are trapped in their properties. Service charges can make it impossible to sell, as they have risen way beyond those charged on new properties in the same area. Dr Janet Richardson’s father bought a flat for £106,000 in 2006. In 2022, he had to move into a care home and she tried to sell the flat. Some months after putting it on the market she received an offer for £10,000 below the purchase price, which she accepted, but for months FirstPort did not answer requests for information, so eventually the buyer pulled out. The flat went back on the market at an even lower price, but still has not sold, three years after first being put on the market. Dr Richardson has now had to agree to sell the property through an assured buyer scheme and says there is likely to be nothing left once all the debts have been paid. She has shown me the figures—it has all gone. If FirstPort had done its job properly she would probably have sold the flat for a reasonable amount two years ago, but of course there is no offer of compensation from FirstPort.

Finally, I come to the nightmare scenario that people face if they dare to attempt to get rid of FirstPort as the management company. Resident groups that have made repeated attempts to release themselves from FirstPort’s management have met resistance and obfuscation, forcing them to retain lawyers and pushing legal fees into the tens of thousands. Those cases have taken an emotional toll on residents, many of whom are elderly. One case in my constituency has been going on for three years and is still not resolved.

South-west based Baker Estates has sacked FirstPort from a new estate at Dartington because of non-performance. The Duchy of Cornwall also sacked the company at the vast Nansledan estate in Newquay. It is more than clear that these companies are not doing their job. Their raison d’être is clearly not that of operating in the best interests of their residents. Estate management companies have had it too good for too long.

As we look again in this place at leasehold properties, we must also look at the difficult situation for freeholders on privately managed estates. We need to bring forward leasehold reform as soon as possible. Does the Minister have a timeline for introducing the leasehold and commonhold reform Bill? Will the Government bring forward legislation to allow freeholders to challenge management charges and to take over the management of a development if they wish?

Have the Government considered greater regulation of estate management companies, such as through an ombudsman, so that residents have some recourse when they encounter problems? If not, will they consider doing so? Will they introduce legislation to prevent management companies from charging residents for legal costs when they ask legitimate questions? Will they introduce legislation to professionalise the management of estates and buildings, with a basic level of service required and a mechanism for complaint and escalation that is easily accessible to residents? I look forward to the Minister’s response. I now leave it to other hon. Members to share experiences of the fleecehold nightmare.

--- Later in debate ---

[The Minister for Housing and Planning (Matthew Pennycook)]

It is a pleasure to serve with you in the chair, Mr Stuart. I congratulate the hon. Member for South Devon (Caroline Voaden) on securing this debate. I commend her for giving the House a much-needed opportunity to discuss the important matter of residential estate management companies in detail. I thank her for so clearly highlighting the pertinent issues in her opening remarks. I also thank all the other hon. Members who have spoken for the insight they have provided. I assure them that I well understand the strength of feeling when it comes to this issue.

The debate as a whole has not only underscored the case for acting to tackle the problems associated with freehold estate management arrangements, but highlighted that those problems take various forms. Part of the challenge facing the Government, and why we believe appropriate consultation in this area is essential, is ensuring that the interventions we make in due course capture the diversity of models and challenges.

We have covered a large range of specific issues today. I will address as many as I can in my response. We have also strayed into leasehold and commonhold. The White Paper is very distinct from the freehold estate issues that the majority of hon. Members have spoken about today and on which I will therefore mainly focus my remarks.

The Government estimate that there may now be as many as 1.75 million homes on privately managed estates in England, although I must make clear that not all of them are liable to pay charges. As the debate has made abundantly clear, the prevalence of such freehold estates creates a wide range of problems—problems that, not least as a result of the dogged campaigning by groups such as the National Leasehold Campaign and the Home Owners Rights Network, are now well known and well understood by the public.

Historically, any given local authority and water company would adopt the respective parts of a new residential estate. They would set clear, adoptable standards and provide oversight to ensure those were delivered, but more recently, and especially over the past 10 to 15 years, we have witnessed the growth of private management arrangements, where shared infrastructure, amenities and open spaces are not adopted and responsibility for the costs of ongoing maintenance instead falls on the residents of the estate through an estate rent charge, which residents pay in addition to council tax. The infrastructure and amenities provided on these estates all too often do not meet the minimum standards for adoption. In the worst cases, residents are left living in unfinished and sometimes dangerous developments.

The problem of unfinished housing developments is obviously not confined to freehold estates, and part of the answer is the proper enforcement of planning obligations, but private management models clearly exacerbate the problems faced by many homeowners in this scenario by leaving them liable for the upkeep of the partially completed or unfinished infrastructure.

That is just one of the many problems that residential freeholders living on freehold estates across the country are struggling with. Others include poor service and abuse at the hands of unscrupulous managing agents—we have heard many such examples in the debate today—as well as limited to no transparency about how the charges they pay are spent, onerous restrictions placed on the title deeds of their properties, and a general lack of control over how their estate is managed. These problems are more acute in some cases than others. For example, the absence of any measure of control is most acute in the case of the approximately 20% of freehold estates that have what is known as an embedded management company set in the title deeds of the relevant properties. To take another example, the challenges associated with opaque fees are magnified in estates where management arrangements are fragmented, with more than one managing company; residents have to navigate multiple companies, each of which levy fees for services in a way that significantly increases the potential for abuse.

As many hon. Members mentioned, last year, the Competition and Markets Authority published its study into the housebuilding industry. I encourage any hon. Member who has not yet had the time to read that report in full to do so. The CMA identified the private management of public amenities on housing estates as a detriment to consumers and concluded that

“the root cause of the aggregate detriment…is the decrease in levels of adoption of amenities by relevant authorities”.

The Government agree with the CMA’s conclusion that the housebuilding market is not delivering for consumers and has consistently failed to do so over successive decades.

As hon. Members will be aware, the report made a number of recommendations to Government and we published a response in full. It called for measures to strengthen protection for existing homeowners, as well as for the Government to mandate adoption of all new estates and to implement common adoptable standards for infrastructure. The Government have accepted many of the recommendations in principle, but we recognise that further work is required in a number of areas.

In the immediate term, we need to introduce protections for residential freeholders on already constructed freehold estates. As hon. Members mentioned many times, part 5 of the Leasehold and Freehold Reform Act 2004 contains powers to establish a regulatory framework that to provide such protections, including the provision of standardised demands and an annual report; giving homeowners the right to challenge the reasonableness of charges levied; requiring estate managers to consult homeowners where the anticipated costs exceed an appropriate amount; and giving residential freeholders the right to apply to a tribunal to appoint a manager in the event of serious management failure. Taken together, these measures will vastly improve the situation for many residential freeholders, improving transparency and driving accountability among estate management companies.

As I set out in my written ministerial statement last November, the Government recognise the importance of acting as quickly as is feasible to implement these provisions, but the establishment of a new regulatory framework through detailed secondary legislation requires us to grapple with a range of technical questions. It is important that we carry out appropriate consultation to make sure that the new system operates effectively and to the lasting benefit of residential freeholders.

[John Glen]

The Minister is setting out a thorough analysis of the challenge that he faces. Could he say something about the distinction between existing entities and those that are yet to be set up? One of the concerns is that the Government’s legislation will not deal fully with existing arrangements, and that the none of the cases that we have heard about today will get redress from the Government’s intervention.

[Matthew Pennycook]

To be clear, the protections we are talking about, which we intend to switch on as soon as is feasible and were provided for by powers under the Leasehold and Freehold Reform Act passed by the previous Government, will benefit existing residential freeholders on existing estates. I will come to the prevalence of those arrangements in due course, but I can reassure hon. Members that we intend to carry out that consultation this year, as promised, and that I am doing everything I can to expedite it.

Beyond the short-term need to protect residential freeholders better, we have to take steps to reduce the prevalence of private estate management arrangements, which are the root cause of the problems we are considering today. In my written ministerial statement, I committed the Government to consulting on legislative and policy options to achieve that objective. I hope that hon. Members appreciate that this is not a simple and straightforward area of policy and that the implications of policy choices are potentially far-reaching.