Former minister calls for ban on ‘exploitative’ estate management fees

First-time buyers are not being told the full story by “glitzy sales staff”, a Labour former minister has claimed as he called for a ban on estate management fees.

Justin Madders said many of those purchasing properties on an estate are unaware they are “agreeing to pay an unspecified sum to often unspecified recipients for as long as they stay in the home”.

Estate management companies charge homeowners for the maintenance of communal areas such as gardens, pavements, private roads, car parks and play areas.

This fee is uncapped and in addition to council tax.

Mr Madders said the “exploitative model” should no longer be accepted by councils as part of planning applications.

He added concerns raised over estate management fees echo the leasehold scandal, as MPs debated property service charges on Thursday.

Responding, housing minister Matthew Pennycook said the Government is committed to ending these so-called “fleecehold” agreements, and is consulting on legislative and policy options.

“We must end this practice as a matter of urgency,” Mr Madders told the Commons.

“I urge the minister to send a clear instruction to local authorities that estate management arrangements will no longer be accepted in planning applications, and to legislate to ban them on any new developments, if necessary.

“The longer we put off fixing that, the longer it will take us to fix this mess.

“I fear the minister will be told that such a move would have an impact on the ambitious house building plans that we rightly have, and how it would damage the housing market more generally. But weren’t we first faced with the same arguments when we tried to abolish the leasehold?”

He added: “The reality is that an estate management company is nothing more than a calculation on the balance sheet.

“The developers have zero interest in keeping the verges neat and tidy after they have gone. If they can make the bottom line look more attractive by creating a management company, they will.

“And they keep getting away with it because we let them.”

Mr Madders continued: “Many people are not aware of the implications of an estate management company or how much it will cost them when they buy their home.

“Often first-time buyers, they’re excited by the prospect of owning a new home, and they place their trust in the system, the lenders, the developers, the lawyers and the echoes of leasehold scandal with this are very loud.

“Glitzy sales staff paint a very different picture.

“They never set out the reality that in addition to the significant commitment that they are making when they buy a home, they’re also agreeing to pay an unspecified sum to often unspecified recipients for as long as they stay in the home.”

Conservative MP Rebecca Paul, who led the debate, said homeowners should not be paying the council and a private company for the exact same services and called for a change to the default model.

The Reigate MP added: “One sensible and equitable option would be that local authorities are obliged, in all but the most exceptional of cases, to adopt communal land and infrastructure on completion of new estates.

“But for this to work in practice, developers would also need to be obliged to ensure the infrastructure meets the council standards before transfer.

“That way, owners of leaseholder properties are put on an equal footing with everyone else paying for communal services once through their council tax, that would certainly deal with future issues.”

Independent MP Chris Hinchliff called for reforms which would give leaseholders “a straightforward way out of being forever tied to service fees by unaccountable companies”.

He said homeowners on estates were “hostages to the whims and designs of service companies who can charge any amount of service fee they wish, and without redress”.

The North East Hertfordshire MP added: “The scandal of property service charges is one of the most unjust, indefensible and generally enraging issues facing my constituents.

“In many cases, these charges amount to little more than a form of parasitic exploitation of ordinary people by absentee landlords and businesses and it has been allowed to fester for far too long.”

Housing minister Mr Pennycook said: “Can I reiterate today the Government’s firm commitment to end the injustice of fleecehold entirely.

“As set out in my written ministerial statement of November 2024, we’ll consult this year on legislative and policy options to reduce the prevalence of private estate management arrangements, which are the root cause of the problems experienced by many residential freeholders.”

He added that the Government also wants to “empower homeowners already living on estates under these arrangements”, and said the Law Commission is considering how residents could be given greater control of the management of their estates.

“In the short term, it’s imperative that we protect residential freeholders on privately managed estates from unfair charges,” the minister said.

The Government is consulting again this year on how to implement new protections in the Leasehold and Freehold Act, which Mr Pennycook said he is determined to bring them into force “as quickly as possible”.