Published: 00:01, 17 January 2018
MPs in Kent are leading calls for a change in the law to help tens of thousands of homeowners in the county facing "scandalous" charges they can often do nothing about.
Figures obtained by KentOnline show an estimated 122,000 people in Kent are trapped in controversial property management contracts.
And it is not just those who bought flats that are at the mercy of rising fees imposed by unregulated companies, but an increasing number of houses in newly-built developments.
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Some of the worst examples nationally include a homeowner charged £1,500 by a property management company to make a small alteration to their home, another who wanted to buy a lease to avoid future charges and was told it would cost £2,000, only for the final bill to come to £40,000, and a family house branded 'unsellable' because the ground rent is expected to reach £10,000 a year by 2060.
Many homeowners in Kent who have bought new-builds might not even be aware such charges exist as some victims say the extra costs were not made clear during the buying process and are buried in complex lease documents.
The government is currently analysing feedback received from a public consultation into tackling unfair practices in the housing sector.
A white paper, Fixing our Broken Housing Market, highlighted ministers' aims to "tackle unfair and unreasonable abuses of leasehold; in particular the sale of new leasehold houses and onerous ground rents".
Officials are said to be considering reducing ground rent fees to zero on new-build homes and an announcement is expected within the coming weeks.
But it is not clear what will happen to people already trapped in the system and there are fears their homes could become unsellable if such fees are banned and nothing is done to help them.
Key findings in the government's consultation paper Tackling Unfair Practices in the Leasehold Market included:
Problems facing house owners (freehold)
Problems facing flat owners (leasehold)
Rochester and Strood MP Kelly Tolhurst, who organised a debate about property management company fees in parliament, is among those demanding changes to the law.
"This is an industry with too much room to rip off those with few options,” she said in the House of Commons.
"The room for manoeuvre that leaseholders have to take back some control remains limited and such action is not viable for a number of families and individuals.
"Ultimately, the best way to proceed if someone is having issues with their property management company is to buy the freehold.
"However, that may not be possible for a number of reasons, such as not having the minimum number of leaseholders in the block of flats to take over the management of the block, not to mention collective action challenges.
"Some families and households are already struggling with rising bills and the like, which makes purchasing a freehold a more remote possibility.
"Those families and households are trapped under the direction and reliance of property management companies.
"We need recognition of the flaws in the property management company sector when it comes to service charges.
"We are talking about people's livelihoods, and in too many circumstances they are being ripped off by a service that does not respect value.
"Serviced residences throughout the country are being subjected to this unregulated scandal, and with the ongoing increase in house building, more and more people will be subject to the unfair will of private companies without any course of redress."
Sittingbourne and Sheppey MP Gordon Henderson says he has dealt with complaints about property management companies on seven separate developments in Sittingbourne.
This included issues surrounding such firms increasing fees, failing to meet their contractual requirements and how leaseholders can remove such companies.
"I think there is a place for leasehold properties, particularly when it involves shared equity ownership, which allows young people to get on the property ladder," he said.
"However, the service charges and ground rents charged should be properly controlled.
"I also think that freeholders should not have to pay management service charges unless they choose to enter into an agreement at the time of purchase.
"I think new developments should be designed in such a way that any strips of land are included in the purchase of the nearest property and the largest green spaces are adopted by the local authority.
"Finally, I think that conveyancing solicitors need to ensure they give the right advice to those buying any property on a new development to ensure the buyer understands what they are agreeing to and the extra costs they will be paying."
Mr Henderson also questioned why management service charges and ground rents are not capped, says the cost of converting a leasehold contract into freehold is too expensive, and why the largest element of service charges is often an administration fee.
"There are management company covenants that are simply a money-making ploy, such as charging £250 for a resident to build an extension or to re-mortgage their home," he said.
"Management companies often fail to meet their contractual obligations and it is too difficult to remove management companies unless the residents are directors.
"This is an industry with too much room to rip off those with few options" - MP Kelly Tolhurst
"It is also difficult for freeholders to remove themselves from management services because they require the help of the leaseholders in the same housing development who are often reluctant to get involved."
Maidstone and Weald MP Helen Grant, a member of the All Party Parliamentary Group for Leasehold and Commonhold Reform, confirmed she also had received complaints from constituents about property management companies which she has acted on.
"I believe the leasehold model is appropriate in certain circumstances," she said.
"But I also feel strongly that reform and controls are needed to curb unfair leasehold terms; particularly relating to unreasonable ground rent increases, exorbitant costs for minor permissions from landlords, and the selling on of freehold rights to exploitative investment companies."
The Leasehold Advisory Service, which provides free advice and guidance to the public about residential leasehold law, says it has had 401 enquiries from leaseholders in Kent in the last 12 months.
The number one issue was complaints about service charges, followed by questions about repairs to a building or home, breaches of written agreements, information about the Right to Manage (where residents can take over the running of a block of flats and appoint a company of their choice), and buying the freehold (outright ownership of the property and land it stands on).
No official figures are available about how many residential leasehold properties there are in Kent, but four million exist in England in the private sector, 30% of which are leasehold houses.
The government says a leasehold house can often be presented as a cheaper option than buying the freehold, but it is not always clear the initial discount on the sale price reflects the long-term costs of increasing ground rents, paying to make internal alterations, or buying the freehold.
The property management sector is also not formally regulated, meaning anyone can start up a company.
Despite the criticism, the Association of Residential Managing Agents, the leading trade association for residential managing agents in England and Wales, says a few rogue managing agents can give everyone a bad name.
Sean Cahill, its communications and marketing manager, said: "ARMA works to promote the highest standards in residential leasehold property management by providing advice, training and guidance for its members.
"It also campaigns for improvements in legislation and regulation.
"The management of leasehold properties requires specialist professional expertise, an understanding of a unique body of law and complex procedures.
"The sector is currently unregulated: anybody can set up as a managing agent and start trading.
"So, a managing agent doesn’t have to join ARMA, but it is recommended that leaseholders chose an ARMA-accredited agent they can trust and conforms to the highest standards."
Mr Cahill said in the absence of statutory regulation, ARMA introduced self-regulation for its roughly 300-strong members, called ARMA-Q.
It vets agents before they join to make sure they meet the body’s consumer charter and standards and makes sure they are audited to ensure they maintain standards.
An independent regulatory panel also oversees ARMA-Q members and any company falling short of the consumer charter can face disciplinary action.
"ARMA believes that statutory regulation of managing agents has to be a good thing for consumers," added Mr Cahill.
"In an unregulated industry, a few rogue managing agents can give everyone a bad name" - Sean Cahill
"In an unregulated industry, a few rogue managing agents can give everyone a bad name."
A separate government consultation, Improving the Home Buying and Selling Process, remains ongoing and includes examining the relationship between solicitors and house builders.
This stems from the fact customers are often directed towards legal firms 'recommended' by the developer they are buying a home from, potentially leading to a conflict of interest.
A spokesman for the Law Society of England and Wales said: "All solicitors are expected to act in their client’s best interests at all times.
"We have been very upfront about our concerns regarding the exploitative nature of escalating ground rents and have called on the government to crack down on this behaviour.
"We have proposed new ways to ensure clients have access to all the information they need when buying a home and look forward to the government taking action following their consultation on leasehold practices."