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Property agents face scrutiny over ‘unfair’ fees

Government aims to protect leaseholders from excessive fees

The government has today launched a six-week consultation into lettings and managing agents, amid reports of leaseholders and tenants being hit with unreasonable bills for repairs and services.

The announcement comes a month after the close of a consultation into banning leasehold new-build homes and ‘doubling’ ground rent clauses.

Here, we explain what the new consultation covers and how it fits into wider efforts to reform the leasehold sector.

Excessive service charges under fire

There are currently 4.2m leaseholders and 4.5m tenants in England – and the government has recently claimed these groups don’t have enough power when dealing with unfair charges levied by their property agents.

Leaseholders generally pay a monthly or yearly service charge, which covers the costs of repairs and maintenance to their building. Last year, leaseholders in the UK paid up to £3.5bn in service charges, according to government figures.

But in some cases, it’s not clear how the money is being spent or whether it’s a reasonable sum. As examples, the government cited a group of leaseholders who were charged 10 times the market rate for a new fire escape – or another leaseholder asked to pay £5,000 to transfer a parking space to a neighbour.

With this consultation, the government aims to increase transparency in the sector by making dealings between freeholders and managing agents clearer and allowing leaseholders and tenants to know what they are being charged for, and why.

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Leaseholders and tenants to be ’empowered’

Communities secretary Sajid Javid said leaseholders need more power to appeal against what they consider to be over-the-top costs, and have a say in which managing agent is appointed by their freeholder.

Announcing the consultation, Mr Javid said: ‘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 consultation will investigate whether current regulations require an overhaul, how consumers can be protected from unfair costs and ways to give consumers more power over their managing agents.

Agents could be regulated

Managing agents are appointed by landlords and freeholders to look after their property, and usually oversee maintenance issues.

The government feels that ‘rogue’ agents remain an issue in the sector, and the consultation will ask if one or more new regulatory bodies are needed to oversee leasehold management and letting agents as a whole.

As it stands, many lettings and management agents are part of bodies such as ARLA Propertymark – and thus agree to follow a code of conduct – but others have slipped the net.

Because of this, the government suggested a compulsory system whereby agents are qualified and regulated may be necessary.

The latest on new-build leasehold issues

This latest announcement is part of a wider government effort to reform the leasehold sector.

In the summer, the government launched an eight-week consultation into unfair abuses in the leasehold sector – with proposals to ban new-build leasehold homes and reform ground rent ‘doubling’ clauses.

Such clauses, where ground rent costs double every ten years, can make properties unmortgageable and impossible to sell.

The consultation closed last month, and as yet no findings have been published.

Do you have a leasehold issue?

If you’re in the process of buying a leasehold home or are having problems with your existing leasehold property, we’re interested in hearing from you.

You can contact us on money-letters@which.co.uk, or via our Facebook or Twitter pages.

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