2 Sale blocking |
13. 'Sale blocking' has been a common complaint in
the submissions we received from park home owners.
It occurs when a site owner withholds approval of a buyer of a
park home solely to prevent a park home owner from selling his
or her home on the open market. By blocking a sale, the site owner
can force the resident to sell the home to the site owner at the
price he or she offers. The attraction for the site owner is that
he or she is then able to put a new home on the pitch and sell
that (or, if the existing home is in good repair) sell the existing
home at its full market value. The economics of the park home
sector mean that it can be more lucrative for a site owner to
block a sale than to take 10 per cent commission on a sale to
a third party. Maria Battle, from Consumer Focus, told us that
"massive profits can be made" through sale blocking:
You can buy a site with 30 homes on it. If you manage
to block 10, you can make £1 million immediately and pay
off your mortgage.
14. Sale blocking can be achieved by several methods.
The Government described examples of sale blocking where site
owners were slow to respond to requests to approve a buyer, or
by refusing approval on spurious grounds.
We also heard that some site owners used interviews, which
they insisted on as part of the approval process, to persuade
prospective buyers to purchase a new home from them elsewhere
on the site. In the
most extreme cases, residents have reported direct intimidation
and harassment. One resident described his experience:
Many times in the last 15 years, the park owner has
refused to let residents sell their older homes even though they
have been in good condition. Many of these residents have been
elderly or in poor health and some have died and left their home
to a relative.
The pitch fee still has to be paid even though they
are blocked from selling it. It is alleged that one prospective
purchaser was told by the owner: 'You can buy it, but I'll make
your life a misery if you do.' Nobody would buy a home on a park
if they were told that by the park owner.
This is an extremely stressful situation for residents
and consequently all of those residents accepted a very low offer
for their home from the park owner. If it is a resident in dispute
with the park owner who wants to sell then he refuses until they
pay their so called arrears, i.e. disputed increases. He then
still refuses and eventually they also accept a very low offer
from the park owner. He then removes the old home and replaces
it with a new one thus making him a lot more money.
The financial loss of a sale can be substantial.
Consumer Focus set out a case in their written evidence where
a buyer was persuaded to buy a home directly from the site owner,
this time in Wales:
Consumer Focus has spoken with one couple who lost
a total of £65,000 due to their site operator blocking the
sale of their park home.
The couple moved to a site in Wales in early 2007.
The couple bought their park home for £135,000, however after
only 15 months living on the site they decided to leave (due to
family reasons) and placed their park home on the market again.
They quickly found a buyer based in the north of
England who offered them £110,000. The sale was agreed and
the couple asked the site operator for approval of the potential
purchaser. The potential purchaser was then informed that they
would have to travel to the park home site in order for the site
operator to interview them. It had been explained that the purchaser
was unwell and making such a journey would be very difficult.
Consequently the sale fell through due to the potential purchaser
not wishing to travel such a distance.
However the couple later found out that the site
operator had instead offered the same purchaser one of the site
operator's own park homes for sale. The site owner agreed that
the purchaser would not have to travel in order to be interviewed
if they bought one of the site owner's park homes. As a result,
the prospective purchaser bought a home on the same site from
the park operator instead of the residents.
After 18 months of couple's park home being on the
market, it eventually sold for only £70,000. The site operator
also demanded that the 10% commission on the property was paid
directly to them before the transaction went through.
Scale of the problem of sale blocking
15. Consumer Focus told us that it was not easy to
assess the scale of sale blocking, pointing out that it was difficult
to contact people who had suffered sale-blocking either because
they had moved on from the site or because the practice was often
targeted at relatives of deceased park home owners disposing with
their estates. The Consumer Focus survey of current residents
found that 21 out of the 484 residents (4%) had personal experience
of sale blocking.
The Government acknowledged that, "while the practice of
sale blocking was not universal" (39% of residents reported
they bought their homes second hand from the existing occupier),
it was aware of a level of complaint that "suggested that
sale blocking is widespread".
In 2002 research carried out for the Government reported that
43% of park home owners were aware that others on their parks
had experienced pressure from site owners to sell their home to
16. Mark Colquhoun, a Detective Inspector from West
Mercia Police, was the senior investigating officer for an investigation
into criminality at a park home site in Worcestershire in 2007.
He told us that sale blocking was at the heart of problems in
the sector and led to incidents of harassment and other malpractice
by site owners:
[...]sale blocking was the key to the criminality
that was perpetrated by those particular site owners. Without
the ability to block sales, I genuinely think that the vast majority
of the problems that occurred on that site would not have occurred
at all. The ability to block sales, I think, can actually act
as an enabler for those who want to commit what are serious criminal
offences against their residents.
Both the British Holiday and Home Parks Association
(BH&HPA) and the National Caravan Council recognised that
sale blocking occurs and they supported legislation to prevent
are clear that sale blocking is a serious problem in the park
homes sector and that it needs to be prevented.
of sale blocking
18. In examining how to prevent sale blocking we
started with two questions. First, whether the recent measures
introduced to prevent site owners unreasonably withholding approval
offer the prospect of stopping the abuse and, second, whether
the need for the owner's approval was justified.
19. The Residential Property Tribunal (RPT) has statutory
responsibility for settling disputes affecting park homes in a
number of subject areas. This work was transferred to them from
the county courts in April 2011 in order to "create a level
playing field between site owners and residents in resolving disputes
and enforcing their rights".
Eight of twenty one cases heard so far by the Tribunal have been
about sale blocking.
In none has the tribunal found the site owner had acted reasonably
in not giving approval. Although it is early days, these determinations
by the Tribunal appear to underline the perception that the behaviour
of a number of site owners has not been reasonable.
20. While we
welcome any change that reduces sale blocking, we are not convinced
that the transfer of jurisdiction of complaints under the 1983
Mobile Homes Act to the Residential Property Tribunal (RPT) will
make a significant impact on the problem.
The RPT does not have a clear power to compensate those affected
by site owners who unreasonably block sales, which blunts the
RPT's effectiveness (we examine this issue further from paragraph
26 below). Moreover, it appears that the Government itself accepts
that changes have to be made as the options in the consultation
document do not include the maintenance of the status quo. The
three options presented in the Government's consultation would
see significant changes. Two would envisage a significant enhancement
of the role of the RPT and a shift in presumption and procedures
in favour of the seller.
- A buyer would be deemed approved
unless the RPT, on application from the site owner, declared them
unsuitable. To prevent vexatious applications, the RPT could prevent
the site owner from receiving the 10% commission if the RPT sided
with the seller.
- The approval process remains in place but the
RPT could intervene and rule that the site owner would lose the
power to approve buyers for two years and would not be entitled
to commission for the sale of the property triggering the referral
to the RPT.
The third option is more radical and would see the
requirement to allow the site operator to approve a buyer abolished.
21. The Park Home Owners Justice Campaign suggested,
that, if the RPT was to have a continuing role, it (or solicitors)
took over the approval process:
Therefore completely removing the "Approval
of the Buyer" process from the Site Owner. It would be for
the Solicitor or Residential Property Tribunal to approve the
references given by the prospective purchaser and ascertain that
the potential purchaser conforms to any age requirement for the
park and any existing site rules.
However, there are concerns from within the industry
that passing responsibility onto the residential property tribunal
might slow the process down too much which might itself deter
buyers and "disadvantage the seller".
22. In our view, enhancing or reforming the role
of the RPT or assigning responsibilities to an independent solicitor
can only be defensible if there is a clear justification for approval
of a buyer by the park home site owner. Consumer Focus, the National
Association of Park Home Residents and the Park Home Owners Justice
Campaign argued that the best way to stop sale blocking was to
remove the right of site owners to approve park home buyers.
Consumer Focus recommended that:
Due to the substantial financial detriment that can
result in a loss of a sale, Consumer Focus thinks that it is disproportionate
to continue with the current system for approval. [...] It is
strongly recommended that the approval process for a potential
purchaser of a park home is removed entirely.
23. Representatives from the park home sector told
us that the site owner's right to approve prospective buyers did
have merit. It ensured that incoming buyers could be relied upon
to pay their pitch fees or conform with site rules (some park
home sites had, for example, rules about the minimum age of residents
or keeping pets).
However, we heard from a number of site owners to suggest that
approval is rarely required. Katy Buswell, who runs a park home
site, told us that:
in the interests of the incoming resident and the
community of the park as a whole, it is helpful if I am involved
in the process. I do not have a right to say that somebody cannot
sell their home. All I have is a right to approve the incoming
person, which must not be unreasonably withheld. As far as I am
concerned, they have to meet the park criteria. On my parks we
do not have an age rule, so it does not apply to me, and we do
allow pets. I have been involved since 1983, and I have never
refused a purchaser.
Malcolm Kent, another site owner, said that:
We have refused people based on agethat is
allbut only in very few cases. All our advertising is for
50-plus, and they are usually the type of people who come to us.
We also think we have a duty to protect the residents who live
on the park. If you buy a park home for a quiet retreat, you do
not expect someone to move in next door with three children, two
dogs and everything else that goes with it. Anybody who spends
these considerable amounts of money should want to meet the park
24. Sale blocking remains a significant problem that
must be addressed urgently. It appears to us that the power of
site owners to approve buyers is used more often to block sales
illegitimately than anything else. The benefits from this process
could be achieved by improving the information that buyers receive
(we discuss this later in paragraph 81). We
conclude that removing a site owner's right to approve prospective
buyers provides the only effective way to eliminate sale blocking.
The existing approval process is unnecessary and it is rarely
used legitimately. Given current experience there is a significant
risk that any mechanism to provide site owners with the power
to approve, or review, a sale through the RPT would be exploited
to block sales, either by slowing the sale process down or by
threatening its use. We recommend that the Government remove the
site owner's power to approve buyers of park homes on his or her
25. We recognise that the removal of a site owner's
right to approve buyers will reduce the owner's contact with the
seller and, to work satisfactorily, will make a significant change
to the position of the seller. It would transfer responsibility
on to the seller to make a buyer aware of site rules and the pitch
agreement. Removing the right to approve would only be a workable
solution if the Government simultaneously enacts measures to ensure
that buyers are better informed of the rights and obligations
of park home owners. We have included recommendations on site
rules (see paragraph 74) and providing information to buyers (see
paragraph 82) to do this.
Immediate measures for the Residential
26. When we asked the Minister to explain the timetable
for legislation following the Government's consultation exercise,
he explained that it was unlikely to find parliamentary time as
a Government bill and he suggested that it might be brought forward
as a private Member's bill. On the assumption that primary legislation
is not planned this session, we asked him if there were measures
that could be enacted more quickly through secondary legislation.
He told us that the bulk of the consultation document would require
primary legislation. We identified the following measure the Government
could enact through secondary legislation.
27. Although the RPT is able to determine park home
disputes, it is not clear whether it is able to award damages
or compensation for incidents of sale blocking.
The BH&HPA told us that providing the RPT with a clear power
to award damages and compensation would introduce a useful deterrent:
much as the RPT allows the homeowner to achieve a
relatively quick determination, to date the RPT has not awarded
damages sufficient to create a deterrent. For example, four parks'
failure to observe the requirements for park home sales has been
identified by RPT Determinations. If the RPT ordered the park
owner to compensate the homeowner for the financial cost of the
loss of their buyer, that deterrent could resolve many of the
issues reported with park home sales.
28. The current consultation document provides measures
to increase the powers available to the RPT and proposes to make
it clear that it should be able to award compensation and damages.
If these powers can be introduced through secondary legislation,
we see no reason to wait for other changes that require primary
blocking is an ongoing problem that blights the sector. Immediate
action is required to deter site owners from exploiting residents
and blocking sales. We recommend that Government bring forward
a statutory instrument this session to enable the Residential
Property Tribunal to award compensation and damages in cases where
sales have illegitimately been blocked. If the Government is unable
to do this, in responding to our report it must set out why it
feels unable to do so.
The 10% commission on sales
29. We received complaints from park home owners
about the commission that they are required to pay to site owners
on the sale of their homes.
As noted above, a site owner can require a seller of a park home
to pay a commission up to a maximum of 10% of the sale price.
Any changes to the 10% commission would impact on the economics
of the sector, and potentially have a knock-on effect increasing
other fees paid by home owners otherwise the financial viability
of sites would be undermined. The research undertaken for the
Government in 2002 by Berkley Hanover Consulting found that pitch
fees would rise significantly if the commission to site owners
Simply decreasing or eliminating the maximum commission
outright would mean that operators would have to increase prices
elsewhere. [...] If commission was abolished, pitch fees would
rise by 20-32%. This might impact on the attractiveness of this
form of tenure.
30. In Bournemouth, we heard from Richard Grigg,
a site owner, who told us that at one site he knew of a residents'
association that was given the option of reducing the commission
fee they would pay on a home sale if they agreed to an increase
in pitch fees. He said that only one in around a hundred residents
agreed to this. His
view chimed with a wider canvass of views carried out in 2006.
The Government pointed out in its written submission that:
The previous Government consulted in 2006,
on what the appropriate maximum rate should be. Some residents
favoured a reduction in, or abolition of, the commission rate,
but accepted that it would result in higher pitch feesthese
residents generally intended to sell their home at some point
in the future. Other residents who generally saw their park home
as their "home for life", wished to retain the existing
rate in return for the protected pitch fees. Site owners, however,
held the view that the rate should not be changed.
Given the balance of views arising from the previous
consultation we do not see there is a strong case for revisiting
31. We see no pressing reason to change the maximum
commission that is paid to site owners on the sale of park homes.
The commission is an important source of revenue for site owners
and provides funding for properly managing and maintaining sites.
Indeed, a change could disturb the balance between commission
and pitch fees, resulting in a significant and unwelcome increase
in pitch fees for many residents on fixed incomes. We
conclude that the right of site owners to receive up to 10% commission
from the sale of park homes on their sites should remain in place.
Without this revenue pitch fees would have to rise. Furthermore,
the commission provides site owners with an incentive to allow
home owners to sell their homes on the open market. Without it,
and in the absence of legislation to abolish the site owner's
approval of buyers, incidents of sale blocking may increase.
16 For example, Ev w5 [name redacted], Ev w15
[name redacted], Ev 90 [Consumer Focus] , Ev w268 [name
redacted], Ev w282 [name redacted] Back
Q 135 Back
Ev 141, para 21 Back
Ev w191 [Annette Brooke MP] Back
Ev w154 [name redacted] Back
Ev 83 Back
Ev 90 Back
Ev 141, para 20 Back
Office of the Deputy Prime Minister, Economics of the Park
Home Industry, 2002, executive summary, para 16 Back
For more information about the case, see: "Mobile home owners
'preyed upon'", BBC News Website, 2009, http://news.bbc.co.uk/1/hi/uk/8222356.stm
Ev 110, Ev 117 Back
HL Deb, 2 March 2011 col 172GC Back
Q 131 [Maria Battle] Back
Department for Communities and Local Government, A better
deal for mobile home owners, April 2012, paras 1.14-1.30 Back
Ev 110 Back
Ev 115 [British Holiday & Home Parks Association], Ev 84
[Consumer Focus] Back
Ev w35, Ev 83, Ev 100 Back
Ev 84 Back
Ev 110 [National Caravan Council], Ev 117 [British Holiday &
Home Parks Association] Back
Q 185 Back
Q 186 Back
Department for Communities and Local Government, A better
deal for mobile home owners, April 2012, para 2.43 Back
Ev 115 Back
Department for Communities and Local Government, A better
deal for mobile home owners, April 2012, para 2.45-6 Back
Ev w5 [name redacted] , Ev w28 [Douglas Michael Gray],
Ev w249 [Eleanor's Wood Qualifying Residents' Association] Back
Office of the Deputy Prime Minister, Housing Research Summary:
Economics of the Park Homes Industry, 2002, p 4 Back
Q 70 Back
Department for Communities and Local Government, Park Home
Commission Rate: A consultation paper, 2006 Back
Ev 142, paras 28-29 Back