Protection for Homebuyers

Sharon Hodgson Excerpts

Thursday 13th December 2018 Westminster Hall

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Ryan. I congratulate my hon. Friend the Member for Stretford and Urmston (Kate Green) on securing this important debate. I would like to follow my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) in speaking about leasehold issues that relate to the protection of homebuyers.

An estimated 12.4% of homes sold in Washington and Sunderland West were sold as leasehold in 2016. I realise that my constituency does not have the largest number of leasehold homes—certainly not as many as the constituencies of some of my hon. Friends—but the issue is still important to my constituents. That is why I recently began a consultation on leasehold homes in which I asked constituents to get in touch with me about their experiences. I only launched the campaign three weeks ago, but 30 constituents have already written to me with their concerns, in some cases in detail. I do not have time to go into the details of each, but I would like to share the themes that have become apparent from their emails.

Most homebuyers were not aware what a leasehold was when they purchased their home. There is a serious lack of knowledge about what leasehold and freehold are; I feel that developers have a duty to inform prospective buyers about the difference between the two and what it means for them. As we have heard, solicitors also have a part to play. It makes a person wonder who they act on behalf of—the buyer or the developer—especially when the developer includes free conveyancing as part of the sale. Solicitors should always act in the best interest of their client, who in this case should be the buyer, not the developer. I have to agree with my hon. Friend the Member for Bishop Auckland (Helen Goodman), who is not in her place at the moment, that this abuse should be referred to the Law Society. I hope that the Minister will make that recommendation; I am sure it is in her power to refer dodgy solicitors to the Law Society.

Does the Minister agree that if we are to protect homebuyers, we should educate them to know the difference between leasehold and freehold so that they can make the best decision for themselves and their families? That should certainly be the case for first-time buyers, and financial education lessons in schools have an important part to play in achieving that.

Notwithstanding the issue of educating the population as a whole, there should be complete transparency from very early on in the sale about whether the property is leasehold and what that means. Two of my constituents have told me that they were not informed that their property was leasehold until the very day of signing the contract. Another has told me that they were not aware that their property was leasehold until nearly 15 years after the original purchase—probably when they tried to make alterations or build an extension. Because of the lack of knowledge about leaseholds and the lack of information available to homebuyers, there is a lot of confusion and variation when it comes to buying the freehold.

Many leaseholders were told that they could purchase the freehold at a later date, perhaps when they had saved enough money. However, when some constituents inquired about purchasing the freehold, they found that the goalposts had moved and the price was much further out of reach than they had expected. Some have even been informed that the freehold is now not for sale—in some cases because it has been sold to a third-party company without the leaseholder’s knowledge.

Not only is the cost of buying the freehold out of reach for some of my constituents; so is the cost of ground rent, which can increase year on year. Then there are the admin fees that homeowners have to pay when asking the freeholder’s permission to make changes to their own property. One of my constituents was charged £400 by the freeholder to build a conservatory on their own property. Another constituent expressed great frustration that they are charged £100 for a yes or no decision on basic things, such as replacing a kitchen, bathroom or even a window. It can sometimes take more than eight weeks to hear back on whether that is a yes or a no.

I know that some leaseholders out there listening will now be horrified and will be deterred from making queries to the freeholder, for fear of being charged some of these exorbitant fees. Too many leaseholders are locked into a state of being regularly over charged by freeholders, being unable to afford their ever-increasing ground rent, or never being able to afford to buy their freehold due it to being linked to some sort of escalator that was hidden in the small print of the contract, which their solicitor never pointed out to them. I share the concerns of my constituents who feel like they have been ripped off by leasehold contracts and I call on the Government to launch an inquiry into the scandal as soon as possible.

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[Liz Twist (Blaydon) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Sharma.

I thank my hon. Friend the Member for Stretford and Urmston (Kate Green) for securing this important debate. It is not before time that the House has had the opportunity to turn to the issues faced by homebuyers, in particular the buyers of new-build homes. At a time when we all recognise the need for substantial home building, we perhaps give too little thought to what happens after the homes are built, bought and sold, and to what happens to the buyers.

My hon. Friend has already spoken about the problems faced when defects are found after purchase and the difficulty of getting a response, let alone a solution, from the house builders. I can certainly echo her concern from experience in my constituency, but I want to look at a couple of other issues that also affect my constituents. The first is that of the completion and adoption of new housing estates. It has very much been a preoccupation for me, not just as an MP but as a local councillor in the years before that.

A new Barratt/David Wilson Homes and Persimmon Homes development was started more than 10 years ago. I will not name it because the residents have mixed views on whether that would be a good thing. Some householders were already living on the site when development stalled in about 2011, because many would-be buyers were unable to find mortgages after the banking crisis. It picked up again, however, and the last house was sold nearly two years ago—most of them long before that.

Families moved in with the promise of play areas for their children, but it took years for them to appear and, as many of those who bought early said, their children were now grown up and not interested in play areas—although, thankfully, the many younger children on the estate are. Buses that were promised to take people from the estate to the local bus interchange, avoiding the need to use a level crossing, did not materialise. The council proposed a price to adopt play areas and public open spaces, but the developers thought the price too high and opted to go with a private management company. Even now, however—one of the companies, Barratt’s David Wilson Homes, has been updating me—they are still arguing about the cost and arrangements of that contract, meaning that residents are concerned about maintenance and safety into the future, and of course about the appearance of their estate.

A spine road runs through the estate, in a loop from one entrance to the other, but it was not until this year that work started on completing the surfacing of the road and installing kerbs for drainage. Checking that latest update I received, I find that the date for completion of the work has been pushed back to January ’19. Residents are very concerned about that, with lots of young children on the estate and cars flying about on a very uneven surface. They are worried about damage to the cars but they are much more worried about damage to the children, who until recently had nowhere else to play. Furthermore, no fees have yet been paid to the council for the adoption of the roads, despite its best efforts, and street lighting is not finally sorted out. I could go on—but we get the picture.

We—residents, local councillors and me—have not sat back and let that happen. We have met with the developers, looked at enforcement action and complained like hell. We even had a liaison committee with the two developers, to work through all the issues, but, sadly, despite hours of talk, everything seems to come down to money and the developers not wanting to spend the money on the estate to complete it.

[Mrs Hodgson]

My hon. Friend is making some valuable points that have not been mentioned so far. The issue of unadopted roads came up on a new-build development in my constituency, especially with regard to an area where shops, the takeaway, restaurants, pubs and things have been built. The roads are unadopted, so people can just park wherever they like, creating huge issues with knock-on effects, such as on safety, which she has mentioned. I raised this in an Adjournment debate on the Floor of the main Chamber, and it would be great if something came out of this debate regarding unadopted roads on new-build estates.

[Liz Twist]

My hon. Friend reminds me of something else that I should have mentioned: at the time of buying the properties, my homebuyers were told that there would be a shop, a pub and a bus, but none of those things has come to pass. Even while we were telling residents that that was not going to happen, new buyers towards the end were still being told that there was going to be a pub on site—all the residents already knew that that was not going to happen. That is an important point, and she made another one about safety. As we all know, parking on new developments is a huge issue, with residents feeling it is insufficient and with the dangers that that can present.

[Mrs Hodgson]

On that very point, I am grateful that my hon. Friend has given way, because I do not think that I made myself clear—though she probably knew what I meant. Because the roads are unadopted, there are no yellow lines. On the roundabouts, articulated lorries can pull over to park, and no one can move them on because there are no yellow lines or anything—the roads are all still unadopted. That is a major problem in the whole area. Some measure should provide for temporary adoption of the roads for safety reasons, even while the estate is still being built.

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[Mrs Wheeler]

The hon. Lady poses a number of questions, all of which are very interesting. I will reread Hansard after the debate and take on board what I can.

The Government agree that the situation is unfair, so we intend to introduce a new statutory regime and are considering whether freeholders should have a right to change the provider of maintenance services by applying to the tribunal for appointment of a new manager, which may be useful if a freeholder is dissatisfied with the service they are receiving. As it happens, my officials are now analysing the responses and the Government intend to bring forward legislation to implement changes as soon as parliamentary time allows.

We move on to another area in this vast debate, home buying and selling. Around 1 million homes are bought and sold in England each year, but another 25% to 33% of planned sales fall through, costing consumers around £270 million and creating stress for far too many people. The Government published our response to the home buying and selling call for evidence in April 2018, setting out an ambitious programme of action to make the buying and selling process in England cheaper, faster and less stressful, in line with our manifesto commitment. There is no silver bullet that can change everything at a stroke and fix the process. Instead, we will need to make a number of practical changes, some big, some small, which taken together will make the experience much better. To put hon. Members’ minds at rest, we as a Government are here to tackle those issues.

We have already started work. We have created a new working group focusing on the regulation of property agents, chaired by Lord Best. We have begun working with industry and the National Trading Standards estate agency team to develop guidance on making referral fees more transparent and to look at the case for banning them. We have also doubled the funding available to that team. We have written to all local authorities reminding them of the Government’s ambition to have a property search request completed within 10 working days. We have consulted in implementing reforms to the leasehold system, seeking views on fixed timeframes and maximum fees for freeholders and managing agents to provide leasehold information.

We have held workshops with industry to develop detailed and thorough how-to-buy and how-to-sell guides to inform consumers, to be published in 2019. We have started work with industry and consumers to make conveyancing data more transparent so that buyers and sellers can make a more informed choice and we have worked with industry to develop a standardised reservation agreement. We will commission behavioural insight analysis to support its implementation; it will increase commitment between buyers and sellers much earlier in the process. Together, our reforms will create a much better process, which guides buyers and sellers and gives them the information they need at the time they need it, allowing them to make the biggest purchase of their lives with confidence.

I confirm to the hon. Member for Poplar and Limehouse that I will write to him regarding cladding and sprinklers. My hon. Friend the Member for Worthing West kindly brought up the question of VAT on service charges. As he will know, that is a matter for Her Majesty’s Treasury, but it is something that has only recently raised its head, so I will write to him about that.

On bonuses for those larger businesses, we announced in August that we are helping to improve shareholder scrutiny of executive pay, strengthen the employee voice in boardrooms and build confidence in how large companies are run. Under those reforms, all quoted companies will be required to disclose and explain annually the rationale for the chief executive’s pay and the ratio to the average pay of their UK employees. The new reforms will provide greater transparency on the impact of share growth and executive pay.

The Government have been clear that this should be a country that works for everyone. That means building more of the right homes in the right places and ensuring the housing market works for all parts of our community. We must ensure that ordinary people purchasing a new home have the protection they deserve and are treated fairly.

[Mrs Hodgson]

I was listening carefully to the Minister, but I may have missed this—if I did, I am very sorry. I wonder if she could say something about a point that both my hon. Friend the Member for Bishop Auckland (Helen Goodman) and I mentioned, about referring some of these dodgy lawyers, conveyancers or solicitors to the Law Society when they are not acting in the best interests of their client, who should be the buyer.

[Mrs Wheeler]

Absolutely. I am sorry that the hon. Lady did not hear me say it, but the Secretary of State has written to the Solicitors Regulation Authority, the SRA.

[Mrs Hodgson]

Thank you.

[Mrs Wheeler]

My absolute pleasure. We must ensure that everybody has the protection they deserve and is treated fairly, and that all efforts are made to ensure that builders build to the standards and finishes that we expect. Once again, I thank the hon. Member for Stretford and Urmston for securing this valuable debate, and I look forward to her summing-up speech, right now.