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First time buyers are not being told the whole story by the “shiny sales staff” Labor The former minister has claimed that he has called for a ban on wealth management fees.
Justin Madders Said that many of those who buy property on the property are unaware that they are “often agreeing to pay an unspecified amount of money to unspecified recipients for as long as they live in the house”.
Property management companies charge home owners for the maintenance of communal areas such as gardens, footpaths, private roads, car parks and play areas.
This fee is uncapped and is in addition to council tax.
Mr Madders said the “exploitative model” should no longer be accepted by councils as part of planning applications.
He said the concerns raised over property management fees echo the leasehold scam MPs There was a debate on property service charges on Thursday.
Responding, Housing Minister Matthew Pennycook said Government Is committed to ending these so-called “fleecehold” agreements, and is consulting on legislative and policy options.
“We must end this practice immediately,” Mr Madders told the Commons.
“I urge the Minister to send clear instructions to local authorities that property management arrangements will no longer be accepted in planning applications, and if necessary legislate to ban them on any new developments.
“The longer we put off fixing this, the longer it will take us to fix this mess.
“I am afraid the Minister will be told how such a move would impact our ambitious housebuilding plans, and how it would harm the housing market generally. But didn’t we face the same arguments the first time we tried to abolish leasehold?”
He said: “The reality is that an asset management company is nothing more than a calculation on the balance sheet.
“Developers have no interest in keeping a clean slate after they leave. If they can make the profits more attractive by creating a management company, they will do that.
“And they’re getting away with it because we’ve allowed them to.”
Mr Madders added: “Many people are not aware of the implications of a property management company or how much it will cost when they buy their home.
“Often first-time buyers, they are excited by the prospect of owning a new home, and they put their trust in the system, the lenders, the developers, the lawyers and with that the echoes of the leasehold scam are very strong.
“Shiny salespeople paint a very different picture.
“They never uncovered the reality that in addition to the significant commitment they are making when purchasing a home, they are also agreeing to pay an unspecified amount of money to often unspecified recipients for as long as they live in the home.”
Conservative MP Rebecca Paul, who led the debate, said homeowners should not have to pay a council and a private company for exactly the same services and called for a change to the default model.
The Reigate MP said: “A sensible and equitable option would be for local authorities to, in all but the most exceptional cases, be obliged to adopt community land and infrastructure when new properties are completed.
“But to put this into practice, developers will be obliged to ensure that the infrastructure meets council standards before transfer.
“This way, owners of leasehold properties are put on an equal footing with everyone else paying for communal services through their council tax once in a while, which will certainly deal with future issues.”
Independent MP Chris Hinchliffe called for reforms that would give leaseholders “a direct route out of being forever tied to service charges by irresponsible companies”.
He said that home owners on the property are “hostages to the whims and designs of service companies who can charge service charges of any amount they wish, and without any redress”.
The MP for North East Hertfordshire said: “The property service charge scandal is one of the most unjust, inexcusable and generally infuriating issues facing my constituents.
“In many cases, these charges amount to little more than parasitic exploitation of ordinary people by absentee landlords and businesses and this has been allowed to continue for too long.”
Housing Minister Mr Pennycook said: “May I today reiterate the Government’s firm commitment to completely end the injustice of wool holding.
“As set out in my written Ministerial Statement for November 2024, we will consult this year on legislative and policy options to reduce the prevalence of private property management arrangements, which are the root cause of the problems experienced by many residential freeholders.”
He said the government “wants to empower home owners who already live on property under these arrangements”, and said the Law Commission is considering how residents can be given more control over the management of their property.
“In the short term, it is vital that we protect residential freeholders on privately managed properties from unfair charges,” the minister said.
The Government is consulting again this year on how to implement new protections in the Leasehold and Freehold Act, with Mr Pennycook saying he is committed to implementing them “as quickly as possible”.