The next item is a debate on a Member's legislative proposal, and I call on Hefin David to move the motion.

Motion NDM6681 Hefin David

Supported by David Rees, Mike Hedges, Vikki Howells

To propose that the National Assembly for Wales:

1. Notes a proposal for a Bill on the regulation of estate management companies.

2. The purpose of this Bill would be to:

a) give freeholders who pay charges for the maintenance of communal areas and facilities on a private or mixed-use estate equivalent rights as leaseholders to challenge the reasonableness of service charges;

b) ensure that, where a freeholder pays a rent charge, the rent charge owner is not able to take possession or grant a lease on the property where the rent charge remains unpaid for a short period of time; and

c) give freeholders in Wales equivalent rights to those in England as a result of changes to the regulation of estate management companies planned by the UK Government.

Motion moved.

Diolch, Llywydd. It's an honour to be able to propose a law in this Parliament that will be of benefit to my constituents in Caerphilly, and I believe, and I will argue, that it will be of benefit to the people of Wales as a whole.

This debate and proposed law comes about following two debates that have already taken place in this Chamber—one on leasehold properties and the limited rights faced by leaseholders, and the other one on the plight of unadopted roads and estates affected by those. This today is the missing piece of the jigsaw: the rights of freeholders who own properties on managed estates and the role in relation to those rights of property management companies and estate management companies by whom residents are often trapped in property management contracts. It's a deeply unfair, unregulated market. It is a UK-wide problem. I've got a copy of The Guardian here—well, a printed copy; a modern copy—in which it says,

'Homeowners trapped by "fleecehold"—the new cash cow for developers. They own the freehold but are forced to pay often escalating estate management fees with no accountability.'

That article contains two examples from estates in Cumbria where there is no obligation on estate management companies to keep costs down or provide evidence that the services they charge for are being carried out. This is an absolute scandal and it's unregulated. Also in Kent, from KentOnline, an online newspaper:

'Homeowners in Kent suffering extra housing charges.'

It's happening there too, with 122,000 people in that county trapped in controversial contracts. We should pay credit to the Rochester MP Kelly Tolhurst, who has raised this in a Westminster Hall debate in Westminster.

But it's happening in Wales as well. I've had casework from Cwm Calon in Ystrad Mynach where residents are trapped in these contracts, and Members from across this Chamber, from my party and others, have also mentioned that they've found constituents who have faced exactly the same issues—and I can see Members from across the Chamber nodding. Cwm Calon has an estate management company called Meadfleet, and they're managing agents to a company called Cwm Calon Management Company One Ltd. They're incorporated and registered at Companies House as the residents management company or RMC. RMCs are usually set up—recently, in modern times—on private estates to own the communal areas, with each freeholder, each householder who is a freeholder, becoming a member of that company and having the opportunity to become a director of that company.

However, Cwm Calon Management Company One Ltd was set up in April 2005, over a year before the first property on the estate was even bought, according to council tax records. No-one had the chance to become a director or a member of this company when it was set up. Furthermore, the documents of incorporation show that most of the company's directors are Redrow employees, and until the last property was completed in May 2015, these Redrow employees had a built-in controlling majority in terms of votes at the RMC's annual general meeting, and were therefore able to completely override individual freehold residents should they so wish. How can that be a residents management company, with Redrow, the developer, being the majority shareholders on the RMC—in fact, the only shareholder on the RMC? It is a clear conflict of interest, because the RMC was responsible for appointing the estate management company, Meadfleet, who are responsible for managing the estate, and therefore in the pocket of Redrow. What you see is a very clear conflict of interest. Residents refer to Meadfleet to me as 'Meadfleece', given the fact that they are paying these charges and seeing little return. 

The payment of a monthly fee to a property management and estate company is common practice among leasehold properties, where the monthly fee is known as ground rent, and leaseholders now have statutory rights, including recourse to a tribunal, to appeal against what they perceive as poor standards of service. Freeholders don't have this right.

So, I bring to you today the case of Janine Jones, who has represented many residents, regarding poor, shoddy work, and in fact, in many cases, work that was never done, has sent many e-mails to Meadfleet. In one case—I've mentioned before in this Chamber—the managing director of Meadfleet sent her an e-mail back telling her to get a life, with respect. Although Redrow were very apologetic about that, it showed that they really don't care, and they have no regulation to stop them from just taking the money and doing minimal work. That's what was happening on this estate. Janine Jones has written to Meadfleet, and to Redrow, on numerous occasions, to the extent that she's even engaged a solicitor. And the solicitor has said to her, 'There's very little we can do.' This is of course outrageous, but unlike owners of leasehold properties, freehold owners do not have the same statutory rights to challenge the decisions of the residential management company, and the property estates management company who act on their behalf. This is not good enough. [Interruption.] Yes.

The Deputy Presiding Officer (Ann Jones) took the Chair.

Thank you. It's not just in your area—I had constituents who thought they were actually having to pay that until such time that the council adopted the pavements, roads et cetera, because they were on a new estate, only to discover that they were going to have to pay it for the whole length of time they're there, and it will pass on to the people who purchase the property after them. I think that's outrageous. I can understand why they thought it—you're moving in, the roads aren't adopted, the lights aren't adopted, somebody's got to pay for looking after them. But to treat them that way I think is appalling.

If you want to buy the house, you've got to sign the deed, and if you sign the deed, you're tying yourself into exactly that, for the length of time you own the house, and the people who buy the house after you also have to pay the estate management charge. It's absurd, especially when the estate eventually becomes, on the whole, adopted. It's madness.

There is a regulatory body—it's called the Association of Residential Managing Agents—but it's voluntary, and currently anyone is able to set up a property and estate management company. Anyone of us in this room could get together—a few of us could get together, set up an estate management company, and then just use it as a licence to print money. That's effectively what's happening. I think ARMA should be a statutory body, of which businesses must be members in order to trade.

Will the Member take an intervention?

Yes.

The Member's running out of time. He's only got eight minutes to open and close. So, very quickly.

Okay, I'll be quick. I appreciate the issues you're raising on properties and houses, but it's also an issue for flats and blocks of flats, and those tenants are tied even worse into leasehold and to some of these companies.

Yes, and this is where they grew out of, where there were blocks of flats in London.

I want the Welsh Government to use this opportunity to make sure that freehold property owners do not miss out, and they're accorded the same rights as leaseholders—because actually leaseholders have more rights in this regard—when it comes to challenging the decisions of residential management companies, and their appointed agents. We need property estate management companies to be properly professionalised, and regulated, as other trade and professional bodies are, to stop rogue traders, and people ripping off innocent home owners. The UK Government's going to bring forward their White Paper, 'Fixing our broken housing market', in which proposals will be contained. If we don't act now, as we get more and more new estates, we'll find ourselves left behind. I think the Welsh Government needs to act.

Thank you. Suzy Davies. Sorry, can I just remind Members that it's three minutes—you know; that's good—for intervening speakers? Thank you.

Diolch. Can I just thank Hefin David for introducing these proposals today? They did speak to my recurring nightmare of land law lectures 30 years ago. But I think it is important that you've done this, because even though rentcharges—new rentcharges—were abolished in 1977, there are still some in existence. The remedies—you refer to them in your motion—are hugely draconian, and, of course, the Court of Appeal has quite recently confirmed that these are live remedies, so I think we need legislation now to at least modify them.

Estate rentcharges, which is actually the core of what you're talking about, are a little bit different—perhaps a bit more relevant as well. They don’t carry the disproportionate remedies with them in quite the way that some ordinary rent charges do, but neither were they abolished in 1977. They were specifically retained with small estates in mind, to manage the ongoing maintenance of shared facilities, perhaps like a joint access way, or a shared pumping station—small things like this. And I can think, actually, of one estate in Uplands, which is the ward I live in, built in the 1980s—15 or so properties—they pay about £150 each under a rentcharge to maintain a bit of shared land and an entranceway into Cwmdonkin Park. But larger estates tended to have adopted or adoptable services protected by bonds, so rentcharges weren't used from the 1970s onwards every day because they weren't needed. The unintended consequence of that was that the enforceability of covenant was lost as well, but I'll leave that for another day.

I think now we're seeing that estate rentcharge used more creatively, though. We all know those big estates, where the roads are too narrow, on one of those annoying political canvasses when you can't find somewhere to park. Those roads are pretty much unadoptable and the houses are subject to rentcharges to maintain those and to look after other common areas, and that rent owner, as you say, is usually a large developer or one of the agency companies, and they're collecting that £150—it is 150 quid these days, not a guinea. But as a result of these, they're spending less upfront, avoiding making up estate roads to adoptable standard, avoiding having to give a section 48 bond cover, in the case of them defaulting on adoption, and through the rentcharge, they're creating an investment fund on which they get interest, along with the ability, as you indicated, to increase that rentcharge whenever they like, and charge whatever they like for consents and other covenant enforcement without any accountability. And when you consider how many of this type of estate are likely to be going up under local development plans all over Wales, as councils scramble to meet the housing targets they've been set, this estate rentcharge has become a bit of a developer's dream, I think: completely unregulated, no obligation to consult, no obligation to offer reasonable charges, no right for rent payers for copies of accounts or access to a first-tier tribunal—you've got to go to county court. And I think my little estate in the Uplands is probably fine because, actually, the residents are the management company. But on these big multihundred-house estates, we're going to be in exactly the position you said, and I really hope that one or both Governments manages to deal with this fairly swiftly. 

Thank you, and thank you to Hefin for bringing this, and for your passion; I feel it loud and clear, and I'm glad that you have brought this here today.

In recent weeks, we've been exploring some of the problems with leasehold contracts and unadopted roads, so it's logical that we're now moving on to the problems created by so-called 'fleecehold' arrangements, as you mentioned, service charges and the problems that come with them. These issues are of course linked with wider problems of market abuse in new developments that have happened more frequently since the financial crash. We are seeing increasing reports of poorer standards for new builds, and inadequate redress for some home owners. For example, it costs £120 just to log a complaint with the consumer code for home builders, which is widely viewed as being on the side of the home builders.

Home owners and flat owners are facing estate service charges that are often completely unjustifiable, arbitrary and can cause great financial difficulty. It's a system particularly widespread and expensive in the apartment sector, as I think David Rees mentioned. It's shocking to see that an estate management company can gain possession of a property for unpaid rent over such a short period of time. With the economic state that we find ourselves in, with increasing costs for everyone, and flatlining pay, people need and expect an element of flexibility, and, in fact, it is often available from other utility companies and mortgage companies—that they give you that holiday or that break. In 2018, people rely on this to overcome a difficulty, even short term. So, the fact that someone can lose their home over some unpaid estate management fee is appalling, and people must have protection against losing their home for minor missed payments.

Now, I know the Government has announced some good measures designed to protect these houses purchased under Help to Buy, but as I said last week, this is a very small part of the overall market. The bigger picture here is the fundamental fairness of this model, whether it is leasehold, freehold or anything else. I believe in principle that it is wrong to expect people to pay extra charges, which are often high, for maintenance of a wider estate, and then also expect people to pay council tax. It's an extra financial burden people can't afford. And at some point, I think people are going to revolt over this issue, not just with new housing estates, but also with the tens of thousands of people who pay management fees and also council tax in apartment buildings. It simply isn't right to ask people to pay twice. 

This model is not the way we build an equitable housing sector, or how we improve affordable home ownership, and it's another cost in a society that is now so filled with costs, it is crushing working people. I think this motion is a good one, and it's important that we are discussing it, but I do have to say again, as I did last week during topical questions on leasehold reform, that the Welsh Government could actually use their powers further beyond restrictions surrounding Help to Buy. I understand that they have agreements to not build leasehold under some circumstances, for example from certain home builders, but will those arrangements hold forever and how do they apply here?

So, we do support this proposal for a Bill but I think we should be looking at the whole wider rip-offs that we are becoming aware of and strengthening the protection for consumers across the board in this sector. Diolch.  

I add my thanks to Bethan's thanks to Hefin for bringing the debate today. When we did look at different Members' debates on the Business Committee I was quite keen that we had this debate, so I'm pleased we're having it. I think it is scandalous that these fairly arbitrary charges can be imposed without much in the way of consultation, transparency or the right of legal challenge. As a couple of the contributors have mentioned, it seems to be part of a patchwork quilt of charges that are involved in running households. We had the recent debates, as mentioned, on freeholds and leaseholds and unadopted roads. So, it is part of this whole tapestry of arbitrary charges that people sometimes have to pay, and it's a pity in some ways that we can't just tie them up together in one big Bill. But, of course, that would be constitutionally too difficult. 

A couple of the points that are very pertinent are the fact that we may need to be mindful of what the UK Government legislates on these points, otherwise you could have disparities in the housing market, and you've referred to that in point 2(c) of your motion. And the other major issue is the legal challenge and the fact that the freeholders don't have the appeal process, which you've tackled in point 1 of your motion.

So, it's a good motion. If these points can all be taken on board, with some kind of legislation in Wales, we could have a good outcome. It could strengthen the rights of freeholders and make the rights of freeholders in this area uniform between England and Wales, which I think would probably be the best solution, if we can achieve it. So, we in the UKIP group agree with today's motion, and hopefully today's debate can be the beginning of some meaningful action to resolve this problem. Thank you. 

Can I thank Hefin and I also thought his hwyl on this this afternoon was very, very appropriate, because I think it really is the purpose of a legislature that's reflecting on the interests of the people it serves effectively to allow this sort of avenue where backbenchers can identify really key issues. It's not possible for the Government always to feel the force of these things, because we are in more contact, often, with the person on the street who is facing these difficulties. And this is surely an area of law that is screaming out for regulation and it needs to be updated, or, in effect, a legal process put in place for the first time, to govern the sort of practices that we are now seeing, which were largely absent as my colleague Suzy Davies outlined, 10, 20 or certainly 30 years ago. So, I think it's very, very important. 

I note that the research by consumer group Which? thinks that unfair practices in this sector could amount to about £700 million of unnecessary service charges, because there isn't clarity in terms of governance. It's not transparent, costs that are charged don't have to meet the actual costs of any service  and also management companies can be part of a wider portfolio and can offset costs in one particular estate or even against different business, it appears. It is absolutely outrageous, and, indeed, the UK all-party parliamentary group on leaseholds, which has also looked at this area, think the excessive costs could amount to £1.4 billion. It really is an outrageous practice, and as somebody who really believes in the market when it's effectively regulated, I do think it's a pretty poor show that these practices have developed, largely as a result of private sector building companies. It is something that we now need to see action on. I think Hefin is quite right in point 2(c) of this motion to note that the UK Government is concerned in terms of England, for which it has housing policy responsibility and is working to examine the situation, then rectify it appropriately with legislation, and I certainly think we should have a similar commitment. 

I think a lot of us were shocked when we realised for the first time the prevalence of these abuses and the whole business model that's now emerging, in that you're not developing some estates so that they are adoptable or largely adoptable anyway. It really is something that should stop and I would certainly encourage Hefin to go on in this vein.

Thank you, and finally, Dai Lloyd.

Diolch, Dirprwy Lywydd. It's a pleasure to take part in this very important debate. Can I commend Hefin David for his work in bringing this forward? Obviously, as has been alluded to, there’s been a fair amount of overlap between—. We had the original debate about four weeks ago on the whole freehold/leasehold situation, which Mick Antoniw and others were heavily involved in; then we had the unadopted roads debate a couple of weeks ago; and now we have this one, and there’s a fair amount of overlap of the issues. People wonder sometimes at the frustrations we feel as elected politicians, both at county council level and as Assembly Members, when bread-and-butter issues seem as though they should be resolvable and then, when we get to do it, they cannot be resolved. It really is frustrating and it's even more frustrating for our constituents involved.

There's the task force of the Cabinet Secretary in response to the debate on unadopted roads. There's lots we can do here at Assembly level. I commend Hefin David's approach, asking for Welsh Government action to regulate property and estate management companies in Wales. There’s no substitute for action. We’ve had a very clear elucidation of the issues, both this week and in previous weeks—of these interlinked and overlapping issues. So, I commend the action and look forward to Welsh Government action. Diolch yn fawr, Hefin.

Thank you. Can I now call the Minister for Housing and Regeneration, Rebecca Evans?

Thank you very much, and I also am grateful to Hefin for bringing forward this debate today. There's been a great amount of media attention recently and some really serious concerns raised by AMs about the various issues affecting people who own their homes on a leasehold basis. I was pleased to announce a package of measures to begin to address those concerns just over a week ago. However, Hefin's debate today really does shine a light on the issues affecting people who own their homes on a freehold basis, and specifically where they're on estates and subject to management fees where they, unlike leaseholders, have no means of challenging those charges.

I only have four minutes to respond to this debate, so I won't rehearse again the concerns that Members have been raising so clearly, but I do hear them and I do recognise them. It is clear to me that many of the concerns that we have heard do stem from the same place as the leasehold concerns that we heard in the individual Member's debate led by Mick Antoniw, and that really is about the pressing need to professionalise and raise standards of behaviour in the property and estate management sector. And I say 'professionalise and raise standards of behaviour' because, actually, some of the most professional companies are the ones displaying some of the poorest behaviour.

Members will have heard me say, in response to Mick Antoniw’s debate, that I won't shy away from legislation and they will also have heard me say that we are currently engaging with the Law Commission's review of residential, leasehold and commonhold law. That review has three key strands: it includes leaseholding franchisement; commonhold as an alternative to leasehold; and very importantly in the context of today's debate, the regulation of management agents. I have to say that I think that that may very much be the space that we need to be in when the review reports before too long.

I'm really pleased that the UK Government is also engaging with the Law Commission and looking at these issues, because some of them do fall into the area of consumer law and of the law of property, where we will need to see action from the UK Government as well. However, we don't need to wait to start to address this issue. Our success in securing the agreement of the major house builders to no longer sell new-build houses as leasehold, unless absolutely necessary, is very much down to the constructive relationship that we've built with them through our house builder engagement programme. So, I give Members my commitment today to open up discussions with the sector on the issues that we've heard in this debate today using that forum.

Can we just be clear that this is about freeholders, though? So, it's the discussion about the plight of freeholders in these circumstances.

Absolutely. My intention is to use the constructive relationship that we have built, as evidenced by the recent agreement that we've secured from the house builders, to start to move on and explore the issues that have been raised in this debate today.

In response to Members' leaseholders concerns, I've already introduced a brand new Wales conveyancer accreditation scheme in order to ensure that purchasers have access to good-quality independent advice. Conveyancers will have to complete training and comply with the high standards set out by that scheme. And, again, I'm going to ask my officials to explore how this particular scheme can be used and adopted to address some of the concerns that Members have raised today in relation to freehold.

I've also made clear my intention to put in place a voluntary code of practice to underpin the measures I've already announced in order to start to address those leasehold concerns and to improve standards, improve engagement between all parties, and promote best practice. Again, you have my commitment to explore how we can use that code to address the specific issues that we've had in this debate with regard to freehold.

Finally, I would confirm that I'll set up a task and finish group to advise me on what else can be done to professionalise and raise the standards of conduct in the property and estate management sector. I will specifically ask that group to consider the contributions that Members have made throughout this debate today, and give my commitment to update Members in due course. But, in the meantime, I very much look forward to the next individual Member's ballot, and I look forward to considering Hefin's detailed proposals, should he be successful.

Thank you. I call on Hefin David to reply to the debate with 30 seconds.

I've got very little time. I just want to say a very big thank you to Suzy Davies, who used her professional expertise and knowledge to support my contribution, and it was very helpful to have a conversation with her yesterday; to Bethan Sayed as well; to Gareth Bennett, thank you for actually bringing it forward at Business Committee—that's much appreciated; to David Melding and Dai Lloyd. Actually, what you all did was add in the bits I didn't have time for. So, thank you very much.

It was a very skillful answer from the Minister, I don't know whether she committed to legislation or not, but I did like the content on the whole—I thought it was very helpful and supportive. Thank you for the indication about an individual Member's Bill. Perhaps we should all put in the same Bill and maybe we'll be drawn in the ballot. I'm not precious about who gets it. 

Thank you. The proposal is to note the proposal. Does any Member object? [Objection.] Object. Therefore, we will defer the voting on this item until voting time. 

Voting deferred until voting time.