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Sheltered Accommodation

Motion made, and Question proposed, That this House do now adjourn.-- [Mr. Conway]

2.52 am

Mr. Andrew Miller (Ellesmere Port and Neston) : First, may I say how pleased I am to be able to raise this issue in the House. My interest started as a result of a complaint from a group of constituents who were living in one of the types of property which I intend to describe.

When the group originally wrote to me, they also copied the letter and sent it to a now retired county councillor, Mr. Ken Maynard, who lives close to me. He had written an article for the magazine Choice . My subsequent research has so far identified 65 hon. Members with a constituency interest, and so far 93 colleagues have signed early-day motion 161. Before I go any further, I put on record my thanks to Ken Maynard, to Wendy James of Choice magazine and to my researcher, Keir Woods. They have done a tremendous amount of work to uncover the scandals which are going on up and down the country.

I refer in particular to owner-occupied sheltered accommodation where the freehold is owned by a third party. Such types of property expanded rapidly during the 1980s, and there are now more than 80,000 units of accommodation in 2,000 developments across the country. Managing agents are appointed by the freeholder--usually the builder of the complex--to provide a certain range of services, including that of a warden in return for a monthly services charge. The managing agents also deal with the appointment of firms to undertake building repairs and to deal with contractors.

That is well and good, except in the case of inefficient, uncaring and incompetent managing agents, who provide sub-standard care and who do not give access to audited accounts.

The examples that I have uncovered range across a wide spectrum. They include the sacking of a window cleaner so that a more expensive sister company of the managing agent could be brought in to do the job a lot worse. I found overcharging and hidden charges, including an exorbitant percentage of the service charge directed towards company administration. In some cases, that amounted to almost 30 per cent. A warden was paid £7,000 a year for just three mornings work a week.

I also found outrageous and unjustified service charge rises of as much as 60 per cent. over three years. They were in direct contravention of brochure promises, and massively in excess of most people's pension increases. Owners or relatives of the owners of properties were responsible for charges when properties were vacant. Despite that, leaseholders were prevented from subletting. In some cases, a 1 per cent. payment had to be made to the managing agents' solicitors just for surrendering the lease when a sale was made. There was lack of consultation with leaseholders before properties were passed from one group of managing agents to another. There were also problems with a National House Building Council guarantee which ran from the date of the first occupancy in a development and not the last. That left the managing agents reluctant to challenge builders, as they do not hold possession of the lease until the last property is occupied. Transfer fees, a proportion of the sale price, were paid to the landlord on the sale of the lease.

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They do not benefit the occupier, but go directly to the landlord, for whom they are a useful source of regular income.

The principle of peppercorn rents has long been established in the leasehold sector. A minimal ground rent is charged to maintain freeholders' rights. That has long since vanished from the sheltered accommodation sector. In its place, freeholders often charge high ground rents to leaseholders who have paid capital sums for their properties but receive no benefits.

I want to give examples to show how widespread the scandal is. In Peterborough, a resident bought a property managed by Haven Management, a subsidiary of Anglia Secure Homes, because she felt that she might one day require a wheelchair, and she was allowed storage space in the property. She was subsequently told that she could not store her wheelchair in the property, because the battery might emit toxic fumes. Despite assuring the managers that the batteries were not of that type, the poor woman was left high and dry.

In another case involving Haven Management in Cromer, Anglia Secure Homes built the houses, and related firms received all the contracts to maintain the properties. Painting was carried out in bad weather. It peeled off quickly and had to be replaced. In that case, no regard was paid to safety considerations. Railings were left out of place for some weeks. Only when a shareholder who was also a resident threatened to tell a shareholders' meeting did the company relent and pay money that it owed to residents.

Hanover housing association in Droitwich appointed what was described as a poor-quality warden, who failed to repair important things like the timer switch on communal lighting facilities in corridors. In Millbrae gardens in Scotland, changes in prices between 1989 and 1992 were such that service costs rose 40 per cent. ; warden costs rose by 50 per cent. ; central alarm costs rose 31 per cent. ; and administration costs rose by a staggering 100 per cent.

Mrs. Angela Browning (Tiverton) : I have waited until this late hour to listen to the hon. Gentleman, because he is raising a very important subject. He is aware that some of my constituents have contacted him. I have received correspondence, and I am concerned about the figures that the hon. Gentleman has recounted. At a time of low inflation, when prices have been held down, service charges across a range of services provided to the elderly in sheltered accommodation appear to be inflationary and exorbitant.

The hon. Gentleman makes an important point when he says that there is often great difficulty in finding out how these sums have been charged. Elderly residents often have great difficulty in presenting their case, even when they act collectively, and sometimes even when some of the residents have a legal background. Increasingly, they write to MPs and others seeking assistance.

One of the most frightening aspects of the problem is the fact that these are elderly people who entered sheltered accommodation at a time in their lives when they were looking carefully at their income and what it would provide in their latter years. These huge, unexpected and regular increases cause enormous stress and anxiety at a time when people least expect it and least need it. I hope that the Minister will pay careful attention to the hon. Gentleman's account, because I know from the information that he has

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received that this is not just a small, isolated incident. There are cases all around the country, including some in the west country, and we are all concerned about the trend.

Mr. Miller : The hon. Lady makes some important points, and I hope that the Minister was listening carefully. I shall seek to address some of them specifically later in my speech, when I pose some ideas to the Minister about how significant improvements can be made. I was speaking about Millbrae gardens in Scotland. When residents withheld some money, Hanover went to court and was ordered to go to arbitration but refused. Its representative system in the properties is deeply flawed, because employees of the company sit on a committee which can only make decisions unanimously. That is crazy. In Hampshire, the Humanist housing association has made increases of 40.6 per cent. and a management fee increase of 48 per cent. and has said :

"We do not speculate on their willingness to pay, they are bound to do so by the terms of their leases."

That association is a charity. Some charity ! I uncovered an example in Halifax of service charge increases in excess of 36 per cent. in a year.

In Scotland, the situation is slightly different, but the House should congratulate my hon. Friend the Member for Edinburgh, South (Mr. Griffiths), who did a tremendous amount to uncover the practices of a company called McCarthy and Stone. That company recently sold its subsidiary, Perevel, which managed some 16,000 of its units, and has transferred the freeholds of its properties to Perevel. One wonders how much consultation preceded those moves.

These problems have arisen basically because there is inadequate regulation of managing agents and enforcement of the regulatons. It is widely assumed that all leaseholders are protected in law enshrining the rights of the tenant in protection from many of the problems that I have highlighted, especially rising prices, hidden charges, sub-standard service or lack of consultation and access to accounts.

Enforcement through the legal process is extremely complicated and time- consuming. For example, to replace a managing agent, preliminary notice must be served, the name and address of the tenant lodging the complaint, intent to go to court to have a manager appointed, and grounds under which the attempt will be made have to be stated, and an ultimatum must be sent to the landlord. If the landlord and freeholder do not take any positive action, the tenant must apply to the court for the appointment of a manager. The names and addresses of all those who are affected have to be listed, and, finally, the tenant has to recommend a manager to the court. Would the Minister want to follow such a procedure now, let alone when he is 75 years of age ?

In other instances the process is similarly long and involved and, for a number of reasons, it is off-putting for the leaseholder. Some of the people are frail and not really capable of going through all that trouble, and the hon. Member for Tiverton (Mrs. Browning) touched on that. They moved into sheltered accommodation to avoid just such hassle. The process is extremely slow, particularly if the landlord or managing agent decides to contest the matter, and the pensioner may well die in the meantime.

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Finally, there is the cost. The people concerned are not rich ; they are often on fixed pensions, as the hon. Lady said. A gentleman from Tewkesbury was advised against taking legal action

"mainly because of the risk of very high costs".

Even the managing agents of sheltered housing, who are advantaged by such a complicated process, seem to appreciate its absurdity. Robert Smith, finance director of Haven said in The Daily Telegraph in October 1989 :

"there are some historic cases where there are anomalies, and it would be better if people could go to a totally impartial ombudsman to resolve these disputes by arbitration. It seems crazy that people should have to go to court which is expensive, stressful and demoralising".

That was true in 1989 ; it is much more true today.

The present position is described in a letter from a Minister in a letter to Mr. Maynard on 27 April 1993 saying something to the effect that the ombudsman service for housing association tenants is available to owner- occupiers where the tenants are a registered housing association. However, that does not take into account those leaseholders whose managing agents are not a registered housing association--a large proportion of the cases to which I refer. The ombudsman is not a statutory appointment by the Minister and does not have the power to enforce his conclusions unless he is hired as an arbiter to settle a dispute, for which a fee is required. He reports to the Housing Corporation, which uses its statutory powers if action needs to be taken.

The remit of the ombudsman is unclear. He is unable to rule on the justness of a service charge, and thus is useless to a large number of owner- occupiers who have legitimate grievances. It appears that he will be an irrelevance to the majority of complainants.

The limitation of the ombudsman must also be noted. He can act only on the reference being made, and that presupposes all the points that I mentioned earlier coming to a head and being agreed on by the tenants of a particular property in an organised group.

Recent legislation states that, if 66 per cent. of leaseholders in a sheltered development decide to buy out their freehold, they are at liberty to do so. They can choose their own managing agents. However, why should leaseholders, who have already paid substantial sums of money to purchase the leasehold, be asked to pay further sums of money just to get legal protection? Again, the process is extremely complicated and the organisation involved extremely onerous, particularly to the elderly.

The landlord is entitled to expect the investment value of the block and half the marriage value, and compensation for loss of any development rights. In addition, the new freeholders take on joint responsibility for the management of the flats, even though they may employ an outside managing agent and they are all responsible to shareholders. Those are not exactly the issues that people want to take on at that time of life.

Despite the complications and the expense, some groups have sought to purchase of the freehold and it is not as simple as it might seem, even to a host of lawyers. There was an example in Hayling Island in Hampshire, where it was reported that obstructive tactics from a freeholder's solicitors were used in order to circumvent the leaseholders' right to the first refusal on the freehold. Such tactics are deplorable and must be stopped.

What is needed? FRASH--the Federation of Residents Associations in Sheltered Accommodation--presented the

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other place with some recommendations before 6 April last year, hoping that amendments would be made to the Housing and Urban Development Bill, which became the Leasehold Reform, Housing and Urban Development Act 1993. FRASH sought, first, regular and public review of service charges rises ; secondly, independent opinion on what is a reasonable charge--incidentally, Age Concern has suggested between £6 and £12 a week--thirdly, random independent audits to ensure discipline ; fourthly, an agency to monitor the application of the codes approved by the Secretary of State and envisaged in the Bill but not with the force of law ; and finally, the availability of an arbiter or an ombudsman to settle disputes.

There is also an urgent requirement for some direct accountability. Currently, managing agents are responsible to the wrong people--to the freeholders who appoint them rather than to the leaseholders to whom they have a duty of care. Some amendments in that respect may go a long way towards solving the problem.

David Bogle, the housing manager of the Guardian housing association, was reported in The Sunday Times of 12 April 1992 as worried that leaseholders who purchase their freehold and select their own managing agents

"could fall prey to irresponsible management companies offering low tenders".

That sounds suspiciously like a justification for management companies imposing high charges.

Although it is a pretence to claim that increased accountability will automatically lead to irresponsibility, the deficiency in the Government's approach thus far is clear. Even if the right to buy the freehold worked effectively and was attractive to residents, without some regulatory system residents would still be open to the type of abuse to which I have referred.

Beyond the expansion of the role of the ombudsman, the problem requires a two-pronged assault. The regulations in place need to be backed by more stringent monitoring to ensure that they work in line with FRASH's recommendations and, if leaseholders were given the right to choose their managing agents, a good proportion of agents would improve their services voluntarily or risk losing business. Managing agents would clearly have to have statutory duties towards the freeholder, but pressure would be taken off the leaseholder, as he would no longer have to go through complicated legal processes to ensure accountability. I recommend that the Minister considers that novel approach in great detail.

Finally, may I thank the Minister for replying to the series of parliamentary questions that I tabled in November? I can provide him with yet further enormous amounts of detailed documentation on cases across the country but, now that the Minister is aware of the problem, I hope that he and his Department will have the good grace to acknowledge how widespread it is and agree that it justifies a fresh look. I am sure that all parties would welcome moves to improve the lot of the elderly in the situation that I have described.

3.13 am

The Parliamentary Under-Secretary of State for the Environment (Mr. Tony Baldry) : I have listened with great care to the hon. Member foEllesmere Port and Neston (Mr. Miller) and also took note of the intervention of my hon. Friend the Member for Tiverton (Mrs.

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Browning). I appreciate the hon. Gentleman's concern about the management of sheltered housing and agree that elderly leaseholders, like all owner-occupiers, should of course have the greatest possible control over the way in which their properties are managed. That is why all leaseholders do, in fact, have statutory protection, do have rights under the terms of their lease and do have opportunities to take control when they wish to do so. Indeed, control was one of the most important principles behind recent housing legislation, especially with regard to leaseholders.

The hon. Gentleman has suggested that the attractiveness of the sheltered housing option is being eroded because leaseholders do not have sufficient protection, and that there should be further protection to ensure that managing agents are accountable. The lease protects the leaseholder, because it forms a contract with the landlord. Anyone entering into a lease needs to take legal advice before signing any agreement. A lease is a series of mutually reinforcing covenants, rights and remedies that need to be understood. Any lawyer specialising in property law will be able to examine a lease and advise the prospective leaseholder of its terms and protection. It is to everyone's advantage if disputes do not lead to the courts and to all the expense and distress that can cause. I therefore welcome the services of the Sheltered Housing Advisory and Conciliation Service.

The hon. Gentleman said that one managing agent's actions had directly contravened a brochure promise. If I were the lawyer representing the leaseholder in question, my first instinct would be to ascertain the terms of the lease. In the case where the managing agent would not allow a wheelchair to be stored, as a lawyer I find it difficult to imagine what restrictive covenant the landlord could possibly have inserted in the lease to prevent that leaseholder from doing as he wished.

Both parties are entitled to expect the terms of their contract to be honoured--and if they are not, remedies are available. If a landlord fails to perform his obligations under the lease, the leaseholder may take him to court.

I am aware of concern that some leases are unsatisfactory, and Parliament has given all leaseholders statutory protection under the Landlord and Tenant Acts 1985 and 1987, strengthened by the Leasehold Reform, Housing and Urban Development Act 1993. That legislation strengthened the courts' powers in cases of proven bad management, gave leaseholders the right to a management, gave leaseholders the right to a management audit and, most importantly, allowed long leaseholders the right to buy their freeholds or to extend their leases.

I shall describe the most important protection given by those Acts. For management problems alone, there are a formidable range of rights. Leaseholders have a right to information that will enable them to identify their landlord and an address in England or Wales to serve notices. They have the right to find out about the insurance of their block or complex and can challenge it in court. Also, a recognised tenants association has the right to be consulted about the appointment or employment of a managing agent.

If the management of a block proves totally unsatisfactory, leaseholders have the sanction of asking the court to appoint a manager to allow compulsory acquisition.

Under a new right that only came into force on 1 November 1993, leaseholders may require a full

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management audit of their landlord's service charges or other management accounts, which will provide evidence where there has been bad management. Such evidence may be used in court.

The hon. Gentleman and my hon. Friend gave examples in which the levelof service charges was of concern. Under legislation, leaseholders have the right to ask how charges are made up and to inspect documents. They have full statutory protection to challenge unreasonable charges, and a stututory right to be consulted about major works.

Qualifying long leaseholders have the ultimate sanction, where they wish to obtain control of enfranchising under the 1993 Act without the need to prove bad management. That right is open to elderly leaseholders where they are qualifying tenants--although I appreciate that in many cases, enfranchisement would not be the right course for elderly leaseholders.

I acknowledge that the choice of sheltered housing may not have been totally satisfactory for everyone. In many cases,

dissatisfaction is genuine and needs resolving. In others, it has been brought about by a failure of communication between managers and tenants.

In cases in which dissatisfaction is genuine, as I have said, we have recently introduced an important power that offers protection for all leaseholders. The 1993 Act gives the Secretary of State power to approve codes of practice relating to the management of residential property. Such codes are likely to be drafted with the consensus of best practice from across a wide range of interested bodies, to ensure that they command general respect. They will be useful in directing the managers of residential property, and helping tenants where management is not satisfactory.

Mr. Miller : Will the Minister assure me that he will consult the organisations that represent such residents before publishing codes of practice?

Mr. Baldry : Yes, indeed : when we are drawing up codes of practice, it is our usual practice to consult bodies that will have an interest in them, wherever possible. Where there are recognised special interest groups or consumer groups, it will be the general practice of the

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Department to consult those organisations. I am convinced that the codes of practice can play a vital role in improving standards of management of residential property.

The hon. Gentleman called for the introduction of an ombudsman service to register and regulate landlords or managing agents in the private sheltered housing sector, similar to the service set up by the Housing Corporation for tenants of registered housing associations. I am not sure how that arrangement would work. Unless the parties are prepared to agree some other jurisdiction, only the courts can settle private disputes and impose sanctions ; an ombudsman, therefore, would be of benefit only if both parties agreed to conciliation.

The hon. Gentleman gave the example of a managing agent who said he felt that a matter should go to independent arbitration. It is always possible, of course, for a matter to go to independent arbitration--or any other form of arbitration--if both sides agree ; the difficulty in such cases is the fact that landlord and leaseholders cannot agree, cannot arbitrate and cannot concur that legal agreements have been broken. The only answer is legislation to replace the jurisdiction of the courts with that of an ombudsman--but I see no scope for an ombudsman, beyond the role of a voluntary conciliator.

Other roles for ombudsmen--including that of the parliamentary commissioner --specifically exclude the power to investigate if there is access to the courts to seek relief. In addition, the ombudsman is concerned with maladministration, rather than the level of service charges. A conciliation service is already available to leaseholders in sheltered accommodation, sponsored by Age Concern.

I consider that elderly leaseholders--along with all other leaseholders-- have considerable rights, remedies and protection under existing legislation. I shall, of course, take careful note of the points made by the hon. Gentleman, in case there is a lacuna in the protection offered ; but I believe that the new legislation provides considerable protection. I shall, of course, take a close interest in that legislation--

The Motion having been made after Ten o'clock and the debate having continued for half an hour, Mr. Deputy Speaker-- adjourned the House without Question put, pursuant to the Standing Order. Adjourned at twenty- two minutes past Three o'clock.

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