House of Commons - Park Homes - Communities and Local Government Committee

Park Homes - Communities and Local Government Committee Contents

2 Sale blocking

13. 'Sale blocking' has been a common complaint in the submissions we received from park home owners.[16] 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.[17]

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.[18]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.[19] 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.[20]

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.[21]

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.[22] 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".[23] 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 them.[24]

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.[25] 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 it.[26]

17. We are clear that sale blocking is a serious problem in the park homes sector and that it needs to be prevented.

Prevention 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".[27] Eight of twenty one cases heard so far by the Tribunal have been about sale blocking.[28] 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.[29]

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.[30]

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".[31]

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.[32] 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.[33]

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).[34] 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.[35]

Malcolm Kent, another site owner, said that:

We have refused people based on age—that is all—but 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 owner.[36]

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 site.

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 Property Tribunal

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.[37] 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.[38]

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.[39] If these powers can be introduced through secondary legislation, we see no reason to wait for other changes that require primary legislation. Sale 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.[40] 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 was reduced:

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.[41]

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.[42] 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,[43] 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 fees—these 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 the rate.[44]

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

17 Q 135 Back

18 Ev 141, para 21 Back

19 Ev w191 [Annette Brooke MP] Back

20 Ev w154 [name redacted] Back

21 Ev 83 Back

22 Ev 90 Back

23 Ev 141, para 20 Back

24 Office of the Deputy Prime Minister, Economics of the Park Home Industry, 2002, executive summary, para 16 Back

25 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 Back

26 Ev 110, Ev 117 Back

27 HL Deb, 2 March 2011 col 172GC Back