Government rejects proposal to end Fleecehold extortion and corruption

The government has rejected a proposal from a Tory peer to end extortion and corruption under the so-called Fleecehold deals.

A cross-party group of peers has condemned the freehold system, under which owners of freehold properties are bound by contracts to maintain the common areas around them.

This means that although landowners own the land their home sits on, they may have to pay significant fees to a third party to maintain areas such as gardens and private roads. It is estimated that this system would affect up to 1.5 million owners.

Baroness Finn, Boris Johnson's former chief of staff at Downing Street, told the government: “We must end this scandalous 'Fleecehold' model, which has brought misery to so many.

There are many examples of abuse, with residents being charged terrorism insurance for fencing or work that never took place.

Baroness Finn

We need to protect them from extortion and corruption, which is essentially the Fleecehold model.

There are many examples of abuse, with residents being charged terrorism insurance for fencing or work that never took place.

The problems with the Fleecehold model are all too obvious. We need to resolve these problems for existing residents, which is why I welcome the current measures in the Bill, but we also need to prevent this model from being used in the future, otherwise we will deliberately pile up problems for new buyers of housing of tomorrow.

Lady Finn told the House of Lords that when a developer hands over the management of parts of an estate to another company, the developer pays less for certain charges and the council abdicates responsibility for maintaining those assets.

She argued that the developer and the council share the profits, while residents and new tenants get the bill, adding that it is not just collusion between the council and the developer, but 'an extremely inefficient way of handling things.

His comments come as peers continue to examine the Leasehold and Freehold Reform Bill line by line.

Lady Finn proposed an amendment to the bill to ban future estates where freeholds are tied to costly charges without recourse, saying developments should only be private estates when it comes to a deliberate and known choice on the part of buyers.

The amendment seeks to address the recommendation in the Competition and Markets Authority (CMA) report that the government prepare common adoption standards and direct local authorities to take responsibility for these public facilities once the standards are met.

These are very important issues that need to be carefully considered, but they are not things that the bill can fully address.

Baroness Scott of Bybrook

Lady Finn said: I recognize and welcome the provisions of the Bill which currently provide additional redress for those trapped in fleece, but it is important to ensure that no one becomes an accidental fleece holder again.

Fleecehold became prevalent, not because of a political decision by an elected government, but rather as a way for developers and managing agents to make more money at the expense of unsuspecting owners.

However, Housing Minister Baroness Scott of Bybrook said: These are very important issues that need to be carefully considered, but they are not things that the Bill can fully address.

Legislation on planning considerations and responsibility for the management of public facilities is covered elsewhere and falls outside the scope of the Bill.

Governments' thoughts on this issue will be set out in our response to the CMA report.

Peers on the other side of the House criticized the unauthorized ownership system and urged the Government to add protections to the bill to guard against exorbitant fees for freeholders of these estates.

Labor MP Baroness Taylor of Stevenage said it was a scheme which extorted landlords with unexpected and exorbitant fees and residents on these estates were trapped in extortionary relationships with companies irresponsible management.

She highlighted that the government has failed to take any of the steps recommended by the CMA to end the problem of one-size-fits-all detention and said cross-party condemnation of the situation shows it is untenable.

She said the system simply provides another method to extort money from struggling landlords, effectively making them tenants of the public space of their estates.

Other amendments proposed by peers include giving those with freehold ownership on private or mixed-use estates the right to manage on an equal footing with tenants, measures to prevent developers from building with lower standards and provisions allowing reimbursement of costs when services are not provided. .

Lady Scott said the Government was concerned about some practical issues in these areas, as well as potential unintended consequences of the amendments.

The comments in the House of Lords came after 46 Conservative MPs wrote to Leveling Up secretary Michael Gove calling on the government to stop the creation of polar estates.