Leaseholders' Rights Bill Withdrawn Government considers current legislation strikes a fair balance between leaseholder rights and responsibilities

MP Jacqui Tait's Private Members Bill seeking to improve leaseholders rights, received its Second Reading on 26 June 2009. The government did not support it, arguing that current legislation was sufficient. Without government support the bill was doomed, and so was withdrawn at the end of the debate.

Most of the debate focussed on the horrendous problems faced by many public sector leaseholders. However, Barry Gardiner MP - a long-term supporter of leaseholders - drew attention to the failings of the 2002 Commonhold and Leasehold Reform Act, which affect all leaseholders. He highlighted the extremely low take-up of Commonhold, and how less than 10% of blocks have been able to enfranchise.

Gardiner said one reason why the bill was flawed, was because it was a 'Blue Peter' bill, meaning the bill was one that civil servants had prepared earlier: in this case for the previous Conservative government, when landlord interests were stronger. and there was a risk of it not getting through the Lords.
More information here.

Safety of Service Charge Funds: CLG Publishes Guidelines
Communities and Local Government has at last published Guidance Notes on the safety of leaseholders' service charge funds in the event of the holding bank's collapse. Each leaseholder will be compensated up to £50,000.
CLG Guidance Notes

HIPS guide now available
Communities and Local Government published on 26 March 2009 a new guide to Home Information Packs (HIPs). More information here

Hidden Charges (Further) Revealed
RICs consults on transparency in professional fees

A frequent complaint from FPRA members is the lack of transparency in the bills they receive from managing agents, particularly for insurance and services. The Royal Institution of Chartered Surveyors (RICs) recognises there is a problem of hidden professional fees, and recently carried out a consultation to establish the scale and nature of the abuse. The remit included letting renewals, valuation fees, Home Information Packs (HIPs), and Energy Performance Certificates (EPCs).

Peter Goodacre, President of RICs, writes 'it is stating the obvious to say that professionals should at all times be open and transparent in their dealings with their clients... The client should be left with no uncertainty as to what service they have paid for and what the cost of that service is.' That is a far cry from the experience of many leaseholders. So RICs invited anyone with an interest in leasehold to contribute their views and offer examples of billing secrecy, and for a sense of balance, examples of good practice too.

I went along to one of the consultation meetings on behalf of the FPRA membership to report some of the horror stories of opaque charging, and to find out what others had to say. It was a mixed group of around fifteen interested people, mostly property and insurance professionals, with three people, me included, directly representing leaseholders, otherwise known it seems, as consumers. Actually, there was a fourth consumer, Baroness Maggie Jones who chaired the meeting. As a lay person, she announced she would speak up for consumers.

For my part, I drew attention to four categories where a lack of transparency is a problem. First, management fees, where an agent freely adds extra management charges without explanation, without seeking the agreement of the RMC, and then pockets the fee regardless of the protestations of leaseholders. Second, the lack of transparency in the holding of service charge and ground rent funds. Third, the lack of clear complaints procedures offered by many managing agents. Fourth, the well-publicised scandal of inflated block insurance premiums, caused by secret kick-back payments to managing agents and freeholders by complicit insurance brokers.

Neil Cook, an insurance specialist at Kay International plc, who is campaigning to expose the rotten side of the industry, and ensure that consumers get a fair deal, told the meeting much about outrageous buildings insurance scams. Transparency in the billing of insurance would reveal exactly who has taken what from the insurance premium, information that would help empower those leaseholders who have to foot the inflated bill. Watch this space for a future article by Mr. Cook on insurance malpractice and ways to deal with it.

Roger Southam, FRICS, Chairman of Chainbow managing agents, spoke out against poor practices in his own area, the managing agent industry. Wearing his trademark flamboyant suit, he argued that transparency was essential in the managing agent industry to help eradicate a raft of hidden charges, not least the range of rip-offs in insurance pricing, which he said 'beggars belief'.

Other people at the meeting spoke of hidden charges in other areas. Some estate agents take a secret commission from HIPs providers when they organise a HIP for their customers.* Costs in home valuations are sometimes concealed: it was news to me that the surveyor who values a home for a building society may only receive half of the fee, the rest going to so-called Panel Companies, which are third party agencies used by building societies. There is no explicit malpractice here, but the consumer remains in the dark. If consumers were aware of the practice, they might be able to shop around for a cheaper independent survey.

So, after two hours of talking, what had emerged from the consultation? Everyone agreed that transparency was a good thing (who could argue against that?). As Southam said, what's needed is a 'simple sheet of paper explaining who's taken what out of the cake'. But this was not an end in itself. Greater transparency was about giving clients more information to make informed choices, to help create a level playing field for businesses by exposing the dubious charging schemes of unprofessional agents and brokers. A related theme was that consumers need to be better informed about all the processes, legalities, rights and responsibilities involved in leasehold and the purchase of their homes, to be in a stronger position to seek out good value, and resist rogue service providers that deliberately seek to over-charge their clients.

RICS plans to publish a summary of its findings by the end of 2009. (Now published)

Stephen Guy
FPRA Website Editor
Posted 17/08/09

* For more about HIP fee discrepencies see Guardian Money 19/08/09