Crackdown on unfair service charges planned by government

19 October 2017
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The next step in plans to crack down on overpriced service charges has been announced by communities secretary Sajid Javid.

The government wants to look at new ways to protect both leaseholders and tenants in England from unfair costs – in particular for service charges, which leaseholders pay towards repairs and maintenance of their homes, which are often passed on to tenants.

According to latest government data, there are more than 4.2 million leasehold homes in England with service charges of between £2.5 billion and £3.5 billion a year.

Earlier this year, the government set out plans to ban developers from selling new-build houses as leasehold in future developments. It now wants to take this further.

It is seeking views on whether new regulations need to be brought in to overhaul the property management sector; whether it needs to introduce measures to protect consumers from unfair costs and overpriced service charges; and to look at ways to place more power in the hands of consumers by giving leaseholders more say over their choice of management agent.

The Department for Communities and Local Government (DCLG) has presented anecdotal evidence of poor management of properties, which includes the case of a group of leaseholders being charged 10 times the market rate to have a new fire escape fitted – with the £30,000 contract handed to the freeholder’s brother.

Meanwhile another agent attempted to charge a leaseholder nearly £5,000 to transfer ownership of a parking space to other leaseholders.

According to consumer group Which?, unfair practices can add as much as £700 million unnecessarily to service charges each year, while the All Party Parliamentary Group on leaseholds believes the figure could be higher, totaling 1.4 billion.

The government also wants to do more to protect landlords from unscrupulous property management firms. It reports the case of a managing agent which charged a landlord £500 just to fix a broken shower door.

Currently, the property management sector is self-regulated via professional organisations, such as the Association of Residential Managing Agents (ARMA), ARLA Propertymark (formally Association of Residential Letting Agents), and the National Approved Letting Scheme (NALS), which have a code of conduct – but there are rogue agents who don’t belong to any of these bodies.

The DCLG is also considering whether an independent regulatory body is needed, and if this is the case, whether there should be separate bodies to deal with leasehold and private rented management, and letting agents.

Regulating the industry

Other proposals under consideration is changing the law so that all letting and management agents, working in both the private rented and leasehold sectors, must be qualified and regulated in order to practise and looking at whether consumers should have more say over the appointment of their managing agents.

Mr Javid says: “This is supposed to be the age of the empowered consumer – yet in property management, we’re still living in the past.

“Our proposed changes to regulate the industry will give landlords, renters and leaseholders the confidence they need to know that their agents must comply with the rules.”

The call for evidence will last until 29 November 2017 and you can respond via {an online survey}.  https:/www.surveymonkey.co.uk/r/property_agents.

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