Property management companies would be banned from operating in England and Wales if they persistently ripped off leaseholders, under plans being considered by Labour.
Lisa Nandy, the shadow housing secretary, is looking at proposals to clamp down on the sector, amid complaints from leaseholders about escalating fees and essential maintenance being left undone.
The plans, which have not yet been completed, are under consideration as part of a wider package to overhaul the current leasehold system, including bringing an eventual end to leaseholds altogether.
During a Commons debate on Tuesday, Nandy called the practices of some property managing agents “a scandal hiding in plain sight”. Her backbench colleague Emma Hardy added: “There is no one regulating these companies. They’re accountable to no one – even members of parliament find it very difficult to hold them to account for their bad practice.”
About 10 million Britons own their homes through leasehold, and face having to pay extra charges for ground rent, service fees and leasehold extensions.
Michael Gove has promised to end what he called the “feudal” leasehold system, but the Guardian revealed earlier this month those plans had been watered down after Downing Street decided they would be too difficult to enact before the next election.
Ministers said on Tuesday they intended to cap ground rents and ban property owners from charging leaseholders extortionate fees to fulfil simple requests.
Labour said it would enact a “phased” end to the system if elected next year, including a ban on new developments being sold as leaseholds, scrapping any issued after 2017 and eliminating more historical versions in the longer term.
In the meantime, the party also plans to clamp down on the service companies that maintain properties on behalf of owners.
Labour sources told the Guardian the party was looking at a system that would mirror the licensing regimes it had already promised for landlords and agents in the rented sector.
Shadow ministers are scrutinising the proposals made by Lord Best, who was commissioned by the government in 2018 to come up with a new regulatory system for property management companies.
Best recommended creating a regulator for the industry, which would have the power to make sure property agents were qualified, that they were transparent about service fees and that they had signed up to some kind of system to settle disputes with leaseholders.
He argued that if agents were found to have breached the regulations, the new body would have the power to issue warnings or fines. Those that continued to violate the rules would lose their licence altogether, he suggested, with any that operated without a licence being subject to prosecution.
Best’s report, published in 2019, was never enacted by the government. A government source said ministers were still considering the report and working with the industry to decide a way forward.
The crossbench peer said: “Some parts of the government are opposed to regulation as a general principle. But on this occasion, some form of regulation is needed, as there really isn’t any at the moment.”
