Sharma responds to debate on property management company fees

7th November 2017

Alok Sharma responds on behalf of the Government to a Westinster Hall debate on property management company fees.

It is a pleasure to serve under your chairmanship, Mr Evans. I congratulate my hon. Friend the Member for Rochester and Strood (Kelly Tolhurst) on securing this incredibly important debate, on an issue which matters to her constituents and those of many Members across the House. She has highlighted a number of individual cases with organisations. As a result of the debate, they will no doubt have heard the concerns that she has very publicly raised. I hope that those organisations will reflect and communicate with her.

The Government are committed to fairness in the housing sector. We recently committed to improving consumer choice and fairness for leaseholders, which I will come on to. We are also now doing the same in the property management sector, in recognition of the growing concern about the quality of service that some managing agents provide to leaseholders, which my hon. Friend highlighted. I am aware that she has received representations from her constituents, and other Members have received similar representations from theirs. Clearly, we have to act to address those issues and create a housing market that ultimately works for everyone and has fairness at its heart.

As the number of leasehold and private rented homes in England has grown, so of course has the market for property managers. According to one estimate, annual service charges alone now amount to as much as £3.5 billion. All property agents, no matter their size or the type of property they manage—whether working with private landlords or indeed housing associations, as my hon. Friend mentioned—have a significant level of responsibility in the jobs they do. My hon. Friend is right: if one pays hundreds of pounds for a service, one expects the person providing the service to be a competent, experienced professional who will deliver what has been agreed.

Currently, however, anyone can set up a business as a property agent, even if they have no experience. Agents are not currently required to have any qualifications, undertake training or indeed be accredited, so unsurprisingly some experts believe that agents are overcharging by as much as £1.4 billion every year, with reports of poor service or even, in some cases, no service provided at all, as my hon. Friend has highlighted today. That is totally unacceptable, and I appreciate the frustration that my hon. Friend’s constituents must feel when paying service charges over which they have little or no say and then, on top of that, finding it extremely difficult to challenge overcharging or a lack of delivery.

Existing processes for leaseholders to seek redress or decide to carry out their own property management are often lengthy and complex, leaving them at the mercy of agents who are not doing their jobs or, if they are doing them, doing them pretty badly. That is why the Government are committed to doing more to protect leaseholders’ consumer rights. The housing White Paper of February this year promised to tackle abuse of leasehold—something that has struck a real chord with consumers. We saw that in the 6,000 responses that we received to the public consultation. I can confirm that we aim to respond to that consultation before Christmas.

It is also right that we now take action to raise standards in the property management sector. To that end, we have issued a call for evidence on whether we need to regulate property management agents, and what approach would have the most positive impact. In doing so, our focus is on protecting and empowering those who pay for managing agents’ services, including leaseholders. We want to make it easier for them to stop unfair fees and exorbitant service charges, and to access effective redress. We also want to make the process for removing or switching agents much easier.

With that in mind, the call for evidence poses questions about minimum entry requirements, promoting financial transparency and different regulatory approaches, such as a professional body for property agents, or perhaps a Government-established body to enforce standards and best practice. We want to hear the views of everyone who has an interest in those matters, and I am sure that my hon. Friend the Member for Rochester and Strood will take that message clearly to her constituents. The call for evidence closes on 29 November. The easiest way to take part is online, by entering the title of the call for evidence—“Protecting consumers in the letting and managing agent market”—into the search box at www.gov.uk. We will listen carefully to feedback from those who know the market best to find the right way forward.

The sector has taken some encouraging steps towards self-regulation and sharing best practice. There are a number of industry bodies who champion high standards. However, poor practice undermines those laudable efforts, so it is vital that we root it out and raise standards across the board. We want to give agents a clear and consistent framework to operate in, and leaseholders confidence in the way their homes are being managed, which will ultimately create a fairer, more transparent system where professionalism is the norm. I know that is what all Members want to see.

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