There are a lot of good things in this Bill. I give credit to the Minister and previous Ministers for introducing it, and my hon. Friend the Member for North East Bedfordshire (Richard Fuller), who has played a massive role in bringing it to the House. It effectively bans the sale of new leasehold houses through new clause 42 that we have been discussing, extends leaseholders’ rights in various ways and increases transparency over service charges.
However, there are two big things that still need to be strengthened in the Bill, which we have spoken about in Committee and on Report. The first is to end the fleecehold estate model. New clauses 1, 2, 6 and 7 are relevant to that. I was glad to hear the Minister, who understands this issue, talking about going away and considering this further, but for the benefit of the Whips, what my constituents want is not for the Minister to consider it further but to ride in like a new sheriff on a white horse and sort out the fraudsters, scam artists and various cheats who are making their lives a misery. That is what we want on the Government Benches.
The fleecehold estate scandal is just like the Post Office scandal, except that it affects more people. In considering the Post Office scandal, many people have asked, “How could we not have known about this injustice? It ruined so many people’s lives for so long, yet nothing was done.” It is the same in this situation.
My constituency has lots of these new estates. Often, the first people know of the problem is when they receive a massive bill that they did not know was coming and that was not mentioned in the notes they were given when they bought the house. And, funnily enough, it was not drawn to their attention by the lawyers of the housebuilder, whose services they are often encouraged to use. Some of these bills are a really scary size and often escalate quickly over time. A huge number of people—more and more every day—are now affected. About 20,000 estates are affected, involving between 1 million and 1.5 million homeowners and potentially 3 million or 4 million people. According to the Competition and Markets Authority, over the past five years 80% of the freehold properties built by the 11 biggest builders have used this fleecehold model.
A lot of my residents describe it as being like paying a second council tax, except that if a local councillor is not doing a good job, they can be kicked out, but it is not possible to do that to a fleecehold landlord, no matter how badly they perform. New clause 6 would address that, and I hope that the Government will address it as the Bill progresses.
I think that everyone now knows how the fleecehold scam works. Back in the good old days, the builder would build a new estate, make sure that all the roads and so on were up to spec and pay a section 106 charge. The council would then take it over and run it, and if there was a problem, people could contact their local councillor. Under the fleecehold model, it is not so simple. In effect, there is collusion between the council and the developer. The developer agrees to hand over to a different company—it might own that company itself or hand it over to the residents—the running of many parts of the estate, be it the roads, the verges or other facilities. That means that the developer pays less in section 106, the council does not have to maintain the road and effectively they split the profits while the residents and the new tenants get the new, massive bill.
It is extremely inefficient to run things in that way in the real economy. Usually, the council goes from road to road with its verge-cutting lawnmowers—it uses one simple system. On one fleecehold estate, however, a guy drives down from Oldham, which is more than two hours away, mows a tiny bit of lawn and then leaves. It is economic madness. A lot of the charges that people are hit with involve opaque management fees for nothing. It is inefficient to run things in this way in the real world. There is a ticking time bomb here. In addition to the number of people affected by the fleecehold estates scandal, the second problem is that when things are not adopted, they do not go through a gateway where we can check whether they are up to scratch. I know from the experience of my constituency that a lot of things are done badly and then a huge bill will land on the people on these poor estates to sort out the problems in the future.
We heard all about this in Committee. I pay particular tribute to Harry Scoffin, the work of the group Free Leaseholders and the residents group HORNET—the Home Owners Rights Network. They all made a powerful case to abolish the fleecehold estates model entirely. As one witness told the Committee:
“This is my property. It is my hard-earned future…normal homebuyers are not qualified to manage estates. If we are given the right to manage, if we are looking at a development of over 100 homes, it is really hard to get in touch with 100 people who will agree and be on the same page. It is not workable.”––[Official Report, Leasehold and Freehold Reform Public Bill Committee, 16 January 2024; c. 54-55, Q133-134.]
I will give a few examples from my constituency. Karen is a brilliant lady who does lots of work for her community. She moved into a new Barratt home because she was bored of doing loads of DIY every weekend on her old home. She now finds herself spending massive amounts of time fighting a fleecehold company called FirstPort, a company so notorious that a national action group has been set up against it—the details can be found on Facebook—whose work I commend.
Karen explains:
“Barratt’s encouraged us to use their nominated conveyance solicitor for which in return we got £500 towards our legal bill. We were fools to do this, but money was tight…FirstPort didn’t do or arrange any grass cutting or anything by way of a service in the first two years.”
At first the bill was £35, and this year it will be £74. Karen continues:
“Our bill for the year includes: Property Damage & Public Liability Insurance…Terrorism Insurance…Grounds Maintenance…General Maintenance…FirstPort’s Management Fees”—
the most expensive item—
“Audit/External Accountant’s Certificate and Fee…General Reserve…Health and Safety Risk Assessment…This comes to £74.64 per house.”
She says:
“In the months of December, January and February each year I must spend more than a couple of days a week working on this. It’s like having a part time job. I didn’t move house to face the possibility of having to be a director of a residents’ ‘Right to Manage’ company. I want adoption…by the local council…as it used to be.”
She is right. Members may be asking, “Why are residents of this estate having to pay terrorism insurance for a fence?” That is a very good question, to which I do not know the answer.
Let me introduce Members to James—a brilliant, hard-working constituent of mine, who has had to do tons of work on the estate where he lives. He says:
“Councils should be adopting new estates”.
He says that he has done
“about 50 days’ work…over the first couple of years. We moved in in 2018 and it wasn’t really sorted until 2021—in fact it is still going on.
Had I not been proactive we would have ended up being short-changed.”
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Residents of Hursley Park in my constituency have had no end of problems with their developer, who is currently refusing even to meet them to discuss some of their problems. Paths have been done on the cheap and have become a quagmire, and benches have not been looked after properly. Fortunately, owing to a legal error on the developer’s part, the residents have managed to gain control of the residents management committee, but after three years of effort they are still trying to get the developer to make good the problems so that they do not face years of bills. They are still fighting. Many of them do not want to run their own estate, and they should not have had to do so.
My last example relates to Farndon Fields—an estate that has been built over the last decade by a multiplicity of developers including Redrow and Avant. Courtyards and shared spaces in the development were not adopted by the council. Astonishingly, each tiny courtyard was run as its own financial entity and was subsequently managed by a company called Chamonix, which turned out to be extraordinarily difficult to contact. Each year the residents were forced to pay “maintenance” charges for a couple of minutes’ work over a whole year. One of my constituents wrote to me:
“On one occasion I was continually asked to pay an invoice which I had previously paid and despite sending proof of payment two or three times, I was told court action would be taken. I replied welcoming this and advising them that I would counterclaim for stress and my time. I then received an apology letter from the financial director…I am now fighting a charge for work…for £367”.
Thankfully, residents managed to wrest back control from the company after a huge amount of effort; that was just as well, because Chamonix has now been bought out by FirstPort, so they have had a lucky bullet.
I could go on and on. From charging residents for “terrorism insurance” for a fence to ripping out newly planted trees to charging residents for work that never happened, the absurdity of the fleecehold scam is apparent to everyone who has encountered it. However, there are
a number of ways in which we could solve the problem—and while we need to solve it for existing residents, which will involve some sort of right to manage and a much clearer ability to gain control of one’s own estate, we also need to prevent this model from being used in the future. We could take up the brilliant proposal of my hon. Friend the Member for North East Bedfordshire to prevent management companies from taking on services that are normally provided by local councils. We could also take up the suggestion made by Councillor Shaun Gunner, the leader of the Conservative group on Arun District Council, to change the Government’s guidance on the use of planning conditions, which currently states:
“Conditions cannot require that land is formally given up (or ceded) to other parties”.
We could, perhaps, change the existing guidance to make it difficult for people to go down the fleecehold route. Whatever we do, however, we have to end this scammy model, which is bringing misery to the lives of my constituents.
Another thing that we must do is end forfeiture, as is suggested in new clause 5 and as the Minister has suggested today: I am pleased that he is talking about taking action. Margaret Thatcher told the Conservative party conference in 1982:
“There is no prouder word in our history than ‘freeholder’.”
She was right, and the ideal of property ownership has a long history on this side of the House, but a great many people who are buying freehold properties are actually being conned. It turns out that they do not really own their properties at all, and that if they fall even a little behind on their bills or refuse to pay some scammy fleecehold company a small amount of money, they risk not just being made to repay, and perhaps paying the costs as well, but losing their houses. It is that threat that enables the fleecehold cowboys to get away with it. They are terrorising people by threatening them with the loss of their homes, and we must put a stop to it. As Mrs Thatcher said in her final book,
““Everyone involved in the country’s economic life has to be protected against extortion and corruption.”
That is exactly what fleecehold is, and we have to end it.
The final small thing that we must do in the Bill is to start the “turnaway”—I use that word advisedly—from ground rents. Ground rents are not payments made in return for any service; the historical rationale for their existence is totally obsolete. A 2018 survey found that half the people who faced these escalating bills did not realise that they would be applied when they bought their properties, and they cause huge problems with remortgaging. I understand the problems and challenges of having to move away gradually from this model, but we should start to turn the supertanker now. We are talking about pure economic rents and pure rentiers; it is a totally unfair system. We might have to move slowly, but we have to start the movement away from these ground rent grazers, because this is an unfair system with no rationale.
I know that the Minister understands the issues and I encourage him on all these issues to be brave and sort out the problems. There has been no legislation since 2002. This is our one chance, so let’s really go for it: let us have Conservative principles, and end these massive rip-offs.