People living on freehold estates to be handed more power to tackle unreasonable charges for upkeep of shared areas
Homeowners at risk of losing access to their home for a debt as low as £100 over the maintenance of shared areas on their housing estate will no longer have to live in fear, thanks to major government reforms announced today (Thursday, 18 December).
People living in almost two million homes on freehold estates can see their dream of homeownership become a nightmare if they fail to pay often unfair and excessive charges for the upkeep of roads, green spaces and other shared communal areas.
This can result in homeowners losing access to their home or seeing a lease imposed on it, forcing them to pay for occupying the land their home is on until the debt is repaid. Under these conditions the lease doesn't end after the debt has been repaid which can potentially make the property un-mortgageable or unsellable.
The very existence of these powers, even if never used, can also lead to properties potentially being viewed as unsaleable or un-mortgageable. It is one of the many challenges faced by homeowners on these estates, known as fleecehold, and managed by third-party management companies rather than local authorities.
Today (18 December) the government has set out key reforms to tackle the key issues people face, including an intention to ban the use of a draconian law introduced 100 years ago to stop this unfair punishment, strengthen homeowners' rights by giving them standardised information to make it easier to challenge unreasonable bills, and appoint a new substitute manager where there is a serious failure alongside other measures to drive up standards.
Housing and Planning Minister Matthew Pennycook:
"Far too many homeowners living on newly developed housing estates are subject to unfair private management charges as a result of infrastructure remaining unadopted.
"We are determined to end the injustice of 'fleecehold' by reducing the prevalence of private estate management arrangements and providing existing homeowners on freehold estates with greater rights, protections and control over the places they live."
Action will be also taken to look into the root causes behind the prevalence of these housing estates and address them including by exploring whether management controlled by residents should become the default, rather than a third-party management company. This builds on the recommendations of the Competition and Markets Authority (CMA)'s study into the housebuilding industry.
These reforms sit alongside the government's wider commitment to bring to an end the feudal leasehold system, with draft legislation set to come forward in the near future to fundamentally rewire homeownership.
Sarah Cardell, Chief Executive of the CMA, said:
"Our review of the housebuilding market found that 80% of new homes sold by the UK's biggest builders came with estate management charges - leaving many owners facing high and unavoidable costs, with no effective way of challenging shoddy work. The changes the government is consulting on today would deliver on our recommendations and make a huge difference for homeowners across the country."
The government intends to ban the use of enforcement powers contained within Sections 121 and 122 of the Law of Property Act 1925 for failure to pay an estate rentcharge, to free people from the unnecessary fear and stress it causes.
Further measures could see the introduction of common standards for some shared areas, making it mandatory for local authorities to take on certain facilities, improving data and transparency, having a new assessment of the financial impact on homeowners, and strengthening dispute resolution alongside other reforms to tackle incentives and identify the root causes behind the prevalence of these estates.
Views will be sought on these reforms to shape an ambitious reform agenda for the future, alongside measures contained within the Leasehold and Freehold Reform Act 2024, to provide increased rights and consumer protections for people currently living on these estates.
This includes measures to require estate managers to produce a new annual report with relevant financial and non-financial information for homeowners, alongside providing information to homeowners upon request, as well as advanced notification of major works being carried out.
The government is also backing the Law Commission's project regarding the management of housing estates, which will consider how homeowners and residents could be given greater control over the management of their housing estates.
