Property Service Charges

I beg to move,

That this House has considered property service charges.

It is a privilege to bring this important debate to the House today. I thank the Backbench Business Committee for granting it.

I remember vividly the day, over 20 years ago now, when I picked up the keys to my first flat in south-east London. It took time to get to a position where my salary was sufficient to secure a mortgage and to save up the deposit, but I managed to do it. I spent the first few weeks on a mattress on the floor while I saved for a bed, but it was the most amazing feeling in the world to own my own home. I was fortunate enough to have purchased the freehold, so I never had to face paying service charges that I could not afford and I never had to rely on a third-party management company to make essential repairs. When the time was right for me to move on, my flat was easy to sell.

Others have not been so lucky. They have bought leasehold on a private estate, and with that comes a life sentence. Today, I want to give a voice to those people on the hook for ever-increasing service charges, trapped in homes they cannot afford but cannot sell either, who thought they were buying their dream home when actually it was the start of a nightmare. Make no mistake—this is no exaggeration on my part—people’s lives have been and are being ruined by excessive service charges.

Let me start, Madam Deputy Speaker, by telling you about Park 25, a housing estate in Redhill. It was built 18 years ago and has 500 homes, a mixture of houses and flats. It is a contemporary and stunning site, with the type of homes that people want to live in. It is particularly attractive to key workers, such as doctors and nurses, due to its proximity to East Surrey hospital. Like many new estates, it was built by private developers with no arrangements made for the local authority to adopt the communal land after completion, so FirstPort was appointed as the property manager to maintain the estate. This means that residents of Park 25 pay an expensive service charge to FirstPort, on top of their mortgage and on top of their council tax, for pretty basic services. Those service charges are going up significantly every year, driving some homeowners to the absolute brink.

I first became aware of the issue when I met Louise, a single mum, at my first ever surgery last year—a meeting I will never forget. She told me how she had purchased a one-bedroom flat on Park 25 when they were first built, but the service charges quickly increased, becoming unaffordable for her, in part due to the expensive biomass communal heating system. In desperation she tried to sell, but three times over she lost her buyer. She now lets out the flat and has moved back in with her family, unable to access the equity that would allow her to buy somewhere else. She is trapped, not able to move on with her life.

Then there is Alfie, who purchased a two-bedroom flat in 2018. He was

“thrilled to get on the property ladder at the age of 23, thinking it was a valuable investment.”

His first service charge payment was just under £2,200 per annum. Six years later, it is over £3,600—a 70% increase. For that, he says

“they basically cut the grass and insure the building”.

When heating is included it gets even worse, due to the biomass system. The first amount becomes £3,400, going up to a whopping £8,000 per annum—a 135% increase. Again, Madam Deputy Speaker, I remind you that he is paying council tax and a mortgage on top.

Alfie did consider challenging the service fees at a tribunal, but he was advised by the Leasehold Advisory Service that for any chance of success he would need to appoint a surveyor to review the service charges. However, to do that there needed to be a recognised tenants’ association, and to set that up, over 50% of leaseholders needed to agree. In the case of Park 25, he quickly found that to be an impossible task as many rent out their properties and so are not easily traced. With that door closed to him, he tried to sell his property for over two years—even for £50,000 less than he bought it for just to cover the mortgage. There was lots of interest, but every time the potential purchaser found out about the service charges, they withdrew. Alfie says:

“Understandably, nobody wants to buy it. The ‘we buy any property’ companies won’t touch it and even the auction sites which run a ‘no sale no fee’ policy don’t want to take it on”.

I commend the hon. Lady for securing this important debate—the fact that so many Members are present is an indication of its importance. In my constituency I have seen an increase in the number of people who bought their house or flat many years ago and are now facing difficulties with the level of charges, unexpected cost increases, and poor communication and service quality. Does she agree that a service charge can never be seen as a blank cheque for the owners, and that what those charges are spent on must be itemised and made clear?

I completely agree.

To add insult to injury, Alfie told me that FirstPort charges an £80 administration fee if payment is not made within 30 days of demand. In 2023 he received his fee on Christmas day while in discussions about a payment plan to settle outstanding fees. FirstPort refused to remove the charge despite his financial struggles. Alfie has now left the UK and is renting his flat out at a loss, because that is the only option available to him.

The hon. Lady highlights the problem of residents being charged late payment fees. I have a number of constituents who never received an original letter demanding payment, but who are then charged late payment fees despite not knowing a payment was due. Does she agree with me that the lack of communication is another critical issue that we must address?

I thank the hon. Member for raising that point. I completely agree that is very much an issue, as I have heard that too.

Alfie and Louise, sadly, are not alone. So many other people on Park 25 find themselves in the same situation: trapped, unable to sell and move on with their lives, and wishing they had never bought the property in the first place. Sam, another resident, said that

“it’s not an exaggeration to say this is ruining people’s lives”.

He has a wife and child and wants to have another, but he cannot move to a bigger property as he cannot sell this one. It is literally stopping them growing their family. He even tried selling his flat for £80,000 less than the valuation, and he still could not sell it due to the service charges. This is devastating for them as a family.

As a constituency MP, I have had some appalling experiences with FirstPort, at Oak Lodge in Hockley and at King Georges Court in Rayleigh. The latter is a four-storey McCarthy Stone development that it manages, where the lift was out of action for almost a year. Is not the fundamental problem with FirstPort that it is ultimately owned by several offshore venture capital companies that are very aggressive in seeking revenue from their tenants, but do not seem very willing to provide a decent quality of service in return?

I thank my right hon. Friend for providing that very useful context. I will come on to that in my speech. One of the challenges we have is that property service companies are seeking to make a profit, yet they are unregulated and free to do as they will. It is for this place to get a handle on that. I hope that today we can think constructively about potential solutions to address the problem, the scale of which, across the House, we all recognise. We do not want our constituents to continue to face it. I am afraid to say that FirstPort is not covering itself in glory. I have now heard hundreds of times over about its lack of responsiveness, lack of transparency on costs and inadequate explanations of service charge increases. Residents have told me about being billed for services they have never received, like window cleaning, with no avenue to formally challenge and remediate. Any opportunity to charge a resident is used to the full.

These things are all symptomatic of an industry that prioritises extracting maximum value from leaseholders, regardless of the human cost. There is no incentive for property service companies to act any differently. It is incredibly hard for leaseholders to remove them, so the companies have free rein to do pretty much what they like. This fundamental power imbalance must be addressed, and it must be made easier for leaseholders to take their business elsewhere.

The Park 25 service charge for the year ending 30 April 2026 is estimated to be just under £1.9 million— 13% higher than last year’s estimate. The increase in costs is primarily to cover the future replacement of playground equipment, street lighting, road repairs and other infrastructure. Park 25 residents are also paying council tax for exactly those types of things outside the estate. Out of the £1.9 million service charge, FirstPort keeps around £142,000 in fees, which works out at just under 8% of the total service charge. How easy was it for me to find that £142,000 figure in FirstPort’s costs breakdown? Not very—I had to total up numbers across many pages of costs, as there is no nice, neat summary at the front showing the total amount.

South Derbyshire district council has taken the bold and rather commendable decision to ban any new property management fees, and to backdate that to January 2025. However, that does not help those who already have homes they bought before 2025. Does the hon. Lady agree that we should press our Government to legislate to help those who are tied into these arrangements to come out of them?

I thank the hon. Member for that point. An important debate for us to have today is about what we do going forward, both for those who have not yet bought a leasehold and to help our constituents who are in this situation right now. I am really interested to hear everyone’s views on that.

These companies are a symptom of the problem; they are opportunists making money from an inequitable system. It is this House that must take responsibility for addressing the intrinsic unfairness and urgently make the changes needed to unshackle leaseholders. I hope that we will today hear hon. Members’ views on the solutions, not just the issues. We cannot keep building new housing estates under this same model, perpetuating the problem. This is increasingly important in the light of the Government’s ambitious plan to build 1.5 million new homes over the next few years. I have to say, if nothing has changed when the time comes for my children to purchase a property, I will be strongly advising them not to purchase a leasehold on a private estate.

To start us off, I will give the House my view. I think making it easier for leaseholders to change property service company is important, as is better regulation and higher standards, but that will not fundamentally transform the situation. What is needed—what is critical—is a change to the default model, so that homeowners are not paying both the council and a private company for the exact same services.

One sensible and equitable option would be that local authorities are obliged to adopt communal land and infrastructure on completion of new estates in all but the most exceptional cases. For that to work in practice, developers would need to be obliged to ensure that the infrastructure meets the council’s standards before transfer. That way, owners of leasehold properties would be put on an equal footing with everyone else, paying for communal services once through their council tax. That would certainly deal with future issues.

The hon. Lady is making some excellent points. I really think it is the radical solutions that we need to consider. I should probably declare an interest as a director of a right-to-manage company—we got so fed up with the freeholder failing to manage our building properly that we took back control. However, as she points out, that is not the end of the story, and we still need to get a lot of people to agree on a lot of things, and building up the reserve fund is particularly difficult. I encourage the hon. Lady to keep coming up with ideas that are bolder than the ones that are out there at the moment, because it is a sticky problem to fix.

I thank the hon. Member for his encouragement and I will keep coming up with radical ideas.

Before I finish, I want to raise the issue of education and information provision to homebuyers. If most people knew the current problems with leasehold arrangements, they would not buy them—or they certainly would not pay as much for them. I am sure that conveyancers include warnings and information when managing the sale and purchase process, but it is not cutting through. People are sleepwalking into purchases with little or no understanding of the uncapped service charges they are signing up to, and we must do more to ensure that people are adequately advised and informed before signing on the dotted line.

I would be most grateful if the Minister could today give his view on a few things. How can we best address the current power imbalance between leaseholders and property service companies? What role does he see an industry regulator playing in driving up standards? What default tenure model should be used for future housing estates to reduce the incidences of these issues in the first place? I would also appreciate his views on my suggestion to move to a mandatory adoption model after development completion.

Order. All Back Benchers are now on a six-minute speaking limit. I call Justin Madders.

I congratulate the hon. Member for Reigate (Rebecca Paul) on her excellent speech and on securing the debate. I state for the record that I am a patron of the Leasehold Knowledge Partnership, which does such good work in advising leaseholders.

It was eight years ago that I stood on the Opposition side of the Chamber and described the use of leasehold in new developments as the payment protection insurance of the house building industry. I am pleased to say that the previous Government eventually started to tackle that, and the current Government will hopefully complete that work soon so that we can finally condemn leasehold to the history books.

It was four years ago that I stood on the Opposition side of the Chamber and warned that estate management fees could replacement leasehold as the new PPI of the house building industry—or, as the indomitable women of the National Leasehold Campaign termed it, “fleecehold.” Now that has come to pass; it seems that just about every new development built in this country adopts the same exploitative model, and the public are rightly asking what we are going to do about it. The Minister has amassed great expertise in this area, and I know he is keen to crack on with reform.

There are a number of legal cases ongoing. I am pleased to see that the bogus argument about human rights has been dispatched by the High Court. However, there are a number of others where well-resourced freeholders are trying to preserve the status quo, and not every court is as wise as the High Court was in the human rights case. The Court of Appeal recently found in the Romney House case that where a tenant goes to the first-tier tribunal to challenge a service charge, the tribunal needs only to consider whether the process was reasonable, and not whether the charges themselves were reasonable. That is absurd, and has had the effect of requiring those leaseholders to pay for the refurbishment of a gym that they do not actually own. It is freeholders with their seemingly limitless resources that can challenge and delay actions by leaseholders to preserve their rotten system at every turn, so the sooner we implement the leasehold Act in full the better.