HC Deb 23 March 1989 vol 149 cc1291-8 12.30 pm
Mr. Nigel Griffiths (Edinburgh, South)

I thank you, Mr. Deputy Speaker, on behalf of thousands of retired people, for giving me an opportunity in this Adjournment debate to raise the problems facing them in retirement flats with unresponsive managers. Over 20,000 new flats and houses for retired people have been built in this decade, yet their residents have minimal rights. Elderly people have been lured in their thousands into purchasing retirement homes only to find that they have no control over the accounts or the managers. Many of them are having to suffer incompetent management and soaring costs. There is ample evidence of firms profiteering at the expense of the frail and elderly.

I am grateful to the Minister for meeting me last Tuesday and for the courtesy and sympathy he has shown on this matter. I do not believe that changes in housing benefit regulations offer a solution, and changes in management practices will not suffice. We need a change in management and a choice for residents. Many residents are satisfied with the current arrangements but many are not, and with good cause.

People responded in their thousands to advertisements such as that from McCarthy and Stone which said: You are free of future worries of running a large property … Our friendly management support team, Peveril Management Services … now offers you the perfect retirement home in Homeroyal House. Once residents move into such homes they often find that the management prices soar. The developers are either luring people in with artificial prices or imposing large increases to swell their profits. At present, it appears that management agencies of retirement properties allow developers to write themselves blank cheques at the expense of tenants and residents. Complaints are dismissed out of hand. I shall read some of the letters I have received.

At Fleetwood farm in Southport, the managers, Northern County Homes, took exception to a committee being formed. An elderly resident writes: Now they have sent their bully boy with a stick. We all fought in the last war and won—but not for this kind of treatment. McCarthy and Stone wrote to residents in Scotland's largest retirement complex in Edinburgh saying: We do not recognise any committee or other group as representing the views or interests of residents as a whole." Yet Mr. McCarthy, with an eye on public relations, claims publicly to encourage residents' associations. At High Wycombe, the Warden housing association has not produced properly audited accounts after 22 months. In Crowborough, a resident of Martlet's court wrote to me saying: The elderly are being conned and it is time the Government should bring in laws to protect us. In Upminster, retired people who are not satisfied with management are forced to sell at two thirds of the market price. In Homeabbey house in Cheltenham, one resident writes of McCarthy and Stone: their replies have been totally unsatisfactory and often unrelated to the issues I raised. I have been disgusted with their attitude towards elderly people. It is a scandal that retired people who have reached the pinnacle of their professions in the services during and after the war, in Churches, public administration, commerce, business and industry should be treated as if they are doddery old fools. If I were ever to hold the Minister's position, I could wish for no better or more competent advisers than the residents who have briefed me in Homecross house in Edinburgh or the retired people who have written so lucidly from Torquay to Tunbridge Wells, from Harrow to Hove and from many other parts of the United Kingdom. It is an insult to those retired people who have served this country so well that developers like McCarthy and Stone often refuse even to acknowledge their letters.

Many older people in retirement flats face spiralling costs of management charges, which are far above the rate of inflation and the rate of increase in the retirement pension. Assurances from developers such as McCarthy and Stone that costs will be kept down have proved worthless. Often the new residents have looked to move from large, draughty family homes which are hard to heat and a constant drain on their resources to a smaller, comfortable retirement home. This was to be their dream home where they could expect many years of happy retirement. Sadly, for many people throughout the country, that dream has turned into a nightmare.

In Homeroyal house in Edinburgh, residents were issued in 1987 with a brochure from McCarthy and Stone which said: management charges rise at a rate either slightly below or at the level of inflation. The sales staff repeated that assurance, yet in the 18 months since one of my constituent's purchased a flat there, the management charge has risen by over 16 per cent., twice the then rate of inflation.

McCarthy and Stone has done nothing to honour its promise to keep charges down. The charge for the son of one of my constituents staying overnight in the guest room rose by 60 per cent. in the five months between April and September, although each resident had already contributed £250 to furnish the guest room—a total of well over £8,000. I wonder how much of that went to equip one bedroom and how much went to McCarthy and Stone's profits. As one resident said to me, The strategy is to lure retired people in. They become trapped in the vice with no escape. In many cases, the management agency is a subsidiary of the developer. Peveril Management Services serves McCarthy and Stone, not the residents. Their interests are all too often neglected.

In Homeroyal house in Edinburgh, one of my constituents has told me that if management costs continue to rise at their present levels, he will not be able to afford to remain in his flat. We are facing the prospects of thousands of older people bankrupting themselves to feed the profits of unscrupulous developers. These people have almost no rights.

In Homeroyal house there was a burglary over a year ago. McCarthy and Stone's surrogate, Peveril Management Services, holds the insurance policy. Between January and June, none of the communal equipment in the lounge or kitchen had been replaced. Then a Minister visited the property in June in a blaze of publicity. The lounge fire was replaced for that visit, but the stolen pictures were not replaced until November; nor was the fridge, while the vases and the clock were not replaced until this January and other equipment has not been replaced over a year later. There is only one expression for such management—uncaring and incompetent. Residents were charged for maintaining a garden which does not exist.

McCarthy and Stone and other management agencies say that cost rises are inevitable, but when the accounts are examined we see that the largest rises are not in service provision of the warden or in the rises in rates, gas or electricity but result from what is euphemistically labelled "management charges". Those charges for the mismanagement of Homeross house in my constituency have risen by 18 per cent. in the past year. They are set to rise by more than 40 per cent. in the next three years in return for no improvement in service.

When I first wrote to McCarthy and Stone about these rocketing costs, John McCarthy wrote back saying that that was a ludicrous claim. I gave him the figures, and he wrote back saying that his present costs were unrealistically low. The McCarthy and Stone residents do not believe that those costs are unrealistically low. In Homeross house about £20,000 is spent on staffing, £20,000 on service provision and a further £20,000—one third of the total —goes on management charges for which only minimal management services are given.

From Homedrive house in Hove, the residents committee has written to me saying: We do not wish to line the pockets of Peveril Management Services. Such letters are all too familiar to Ian Cowie and The Daily Telegraph. I pay tribute to them, to Allison Clements of The Scotsman and to the Edinburgh Evening News for alerting Parliament and the public to the pitfalls of retirement homes. My hon. Friend the Member for Edinburgh, Central (Mr. Darling) has also been pressing for retired people to be given justice by McCarthy and Stone.

Colonel Scott, the residents association convener at McCarthy and Stone's Homeross house, wrote to me: Our main difficulty is that we cannot get replies to our letters. People have written to me from Bournemouth to Blackpool saying the same. At Homeabbey house, a resident wrote complaining to McCarthy and Stone and enclosed a cheque to settle an account. McCarthy and Stone replied saying that the original letter had got lost. Surprisingly, the cheque in the same envelope had been cashed.

Years go by, yet McCarthy and Stone still fails to produce proper accounts. The pattern is the same in Edinburgh, Bournemouth, Torbay and Torquay. Residents are promised the accounts next week, then next month, then next year and then they are told that the accounts are in the post. At Homeroyal house, only one set of accounts has been finalised in two years. At a meeting minuted in April last year, the McCarthy and Stone manager agreed to produce audited accounts in October; that was not done. In November, he told the residents that the accounts were ready; none appeared. In February this year, he informed residents that the accounts would be produced the following week. A month later, they still have not been produced.

Throughout the country, millions of pounds are unaccounted for. The money has not vanished; it sits in the bank accounts of McCarthy and Stone and Peveril Management. When the residents write to John McCarthy about that, they receive no answer. Arthur Young, the accountants for McCarthy and Stone, present accounts for charges that have not been incurred. It sends bills to residents such as one for £3,000 that was sent to one of my constituents and it then issues a correction saying that McCarthy and Stone owes the residents £2,000.

Until proper legislation is enforceable, retired people move to such properties at their peril. They face rising bills, not for rates, services or wardens, but for a bureaucracy. Experience shows that that bureaucracy has forced up costs by almost 70 per cent. Since it was announced that I was introducing a Bill to give choice, rights and protection to retired people, I have received letters of support from all over the country. I have been swamped by complaints, ranging from discourtesy to dishonesty against some of the major retirement property developers.

Mr. McCarthy spoke out in an article called: The truth behind the gossip. It was so full of inaccuracies that it was really the gossip behind the truth. It was a half-fictional account of the workings of McCarthy and Stone that many of the residents found hard to credit.

People should think carefully before purchasing retirement homes. I would not urge anybody to buy from McCarthy and Stone. Indeed, I would urge them to boycott McCarthy and Stone until another piece of valuable work has been carried out in this House. The hon. Member for Fylde (Mr. Jack) has done invaluable work on a voluntary code of practice for the retirement homes industry. I very much welcome that. But the House has heard me detail the problems facing retired people.

Mr. McCarthy wrote to me on 20 February: We are already implementing the code of practice. Does a 69 per cent. increase in management bureaucracy charges comply with that code of practice? Is it part of his code not to carry out repairs, not to reply to letters, to charge people £100 for parking their cars, to charge them for selling their own houses or to dictate to them who their managers and accountants will be? He has brought the code of practice into disrepute even before the ink has dried.

That is why I shall introduce a Bill on 7 April which will give people rights in these matters, such as the right to choose a competent management agency and not to have an incompetent one foisted on them. There will also be the right to have the accounts presented properly and timeously and the right to appoint an auditor who serves the residents, so that they will not have to foot the bill for the manager's accounts. The consumer is not king in the domain of so many of those managers. My Bill will give legislative teeth to the code of practice, and I hope that it will command support on all sides.

12.44 pm
The Parliamentary Under-Secretary of State for Social Security (Mr. Peter Lloyd)

I should like to thank the hon. Member for Edinburgh, South (Mr. Griffiths) for raising this interesting and important subject, which I know is causing many elderly people concern. Although the hon. Gentleman and I may differ somewhat in our approach to finding a solution to the problem, I share his worries and I am as anxious as he is that this cause of anxiety for a number of elderly people should be removed.

There is no doubt that the concept of sheltered housing for the elderly is an excellent one. In most cases, those elderly people who opt to move into sheltered accommodation are happy, both with the standard of the accommodation and with the way in which their homes are managed.

The amount of sheltered housing has increased significantly over the past decade and there are now more than 20,000 homes nationwide. The industry is to be congratulated on its efforts to meet a real and growing demand. Typically, sheltered housing consists of a cluster of purpose-built flats, with some communal faciltities and a resident warden. The vast bulk of such properties are owner-occupied, usually bought outright on a long lease with the proceeds from the sale of a previous home. I understand that in Scotland the homes are likely to be freehold rather than leasehold, due to differences in property law. This has some implications for the legal protection afforded to the owners, which I shall come to later. In all cases, however, the residents will pay rates—or the community charge from 1 April in Scotland—plus a service charge to cover the costs of items such as the warden service, cleaning, heating and lighting any communal areas, and management and administration. This service charge may run into several hundred pounds a year.

The attraction of such housing for the relatively fit elderly is obvious when the home in which they have lived, perhaps for many years, becomes too large and difficult to maintain. Sheltered housing combines the dignity and independence of a home of one's own with the convenience of modern purpose-built housing, the security of knowing that a warden is at hand should help be needed, the congenial company of like-minded neighbours and freedom from the need to worry about organising and paying for maintaining and repairing one's home.

It is that last consideration—the freedom from worry about the possibility of large unbudgeted bills for unexpected repairs or improvements, that concerned the hon. Member for Edinburgh, South in his detailed and copiously documented speech. As I said, most residents of sheltered housing are very happy with their decision. But some are undoubtedly finding their retirement years fraught with unexpected anxieties caused by large bills for service charges of which, they say, the glossy brochures published by the builder or management company completely failed to warn them. In some other cases their invoices have been incorrect or misleading.

Naturally, the effect on residents facing such a situation is worrying. Most elderly people are on fixed incomes. Their capital is tied up in their home. they have budgeted prudently on the basis of the service charges that they were led to expect when they bought their property. They now see their careful calculations upset by steep increases or additional charges for "improvements" that they may not have requested and do not want.

I know that the hon. Member for Edinburgh, South is not alone in his concern about this problem. As he rightly said, my hon. Friend the Member for Fylde (Mr. Jack) has been addressing this very subject through a joint working party with some of the organisations most concerned, and I am grateful for his generous recognition of my hon. Friend's efforts. Those represented on the joint working party include Age Concern, the National Consumer Council, the National Federation of Housing Associations and the National Housebuilders Federation. The aim of the working party was to draw up a voluntary code of practice with the builders and managers of sheltered accommodation, which will ensure that the good management practices of the best-run sheltered housing are adopted by them all.

The code will focus on four main principles: first, how to develop a soundly planned housing scheme; secondly, deciding what estate management services to provide; thirdly, calculating the service charges to pay for those services; and fourthly, customer information, complaints procedures and arbitration to deal with some of the problems that the hon. Member for Edinburgh, South rightly highlights.

The code will stress the need for adequate pre-purchase information and include model guidance—for example, a model leaflet on consumers' legal rights. It will ensure that developers do not hand schemes over, once sold, to inexperienced management agencies. The latter must be reputable and developers will have to sign a standard agreement with them to ensure they inherit the original obligations that the developer entered into with his buyers. The draft code has gone out for consultation and the final version should be published later in the year.

In England and Wales, where most sheltered housing is leasehold, owners already have a measure of legal protection. A long leaseholder's primary safeguard should be the terms of the lease, which should set out the basis for any service charges, including management fees, and make clear the respective rights and duties of the parties to it, including the level of ground rent, the provision of services, the level of warden cover, and so on. As the hon. Member for Edinburgh, South said, those matters should be taken into account when the original lease is drawn up or assigned.

Tenants paying management fees and for services that are recoverable as a variable service charge have statutory protection under the Landlord and Tenant Act 1985. That includes a right to be consulted about major works, a right to information about costs, an opportunity to inspect the supporting documents on which the service charges were based, and a right to challenge unreasonable demands. Those protections were originally for tenants of flats, but they were strengthened and extended to other dwellings by the Landlord and Tenant Act 1987.

That act gives further protection to tenants. For example, when the landlord or his agent is failing in his duties to the tenants, they now have a right to apply to the county court for the appointment of a manager to take over the running of the block; when leases do not provide for the satisfactory management of a block, any party to the lease can apply to the court to vary the terms of the lease; and recognised tenants associations are now entitled to ask landlords to consult them on the appointment of managing agents. Also, from 1 April 1989, under section 42 of the Act, all service charge contributions, including contributions to sinking funds, will have to be held in trust for the benefit of the tenants. The same applies to any income accruing from the investment of such money. That change will be very welcome for some residents particularly those in some of the categories to which the hon. Gentleman referred.

I have listened carefully to the hon. Gentleman's argument for further legislative action, but I do not feel that there is a case for additional coercive action at this stage. I would like first to have an opportunity to test the effect of the voluntary approach. I hope that the code of conduct which I have outlined will be adopted and that it will substantially strengthen the position of residents of sheltered housing. At the end of the day, it is in the interests of those who build and run sheltered accommodation to see that their management policies benefit the residents. Their business interests are not served by widespread dissatisfaction among their customers and potential customers. We must work to ensure that all management companies meet the high standards which are already maintained by the very best.

That will benefit all residents of sheltered accommodation, not merely those who are able and willing to spend their retirement monitoring the performance of their landlords and going through some complex prescribed procedure when they wish to sack or replace an unsatisfactory management company. I do not think that it would be justifiable to treat the owners of sheltered housing differently from the owners of ordinary service flats. However, I and my colleagues in the Department of the Environment will watch this issue with close attention. We shall expect to see a reduction in the complaints received from residents of sheltered housing as the voluntary code of conduct is adopted. If that does not occur, no doubt my colleagues at the Department of the Environment will wish to look at this matter again to see what might be done.

The hon. Gentleman may find it helpful if I finish by considering what help may be available to residents of sheltered housing who are now facing hardship because of unexpectedly high service charge bills. That help may be available through income support or housing benefit. The two principles underlying the way in which help is given are, firstly, that housing benefit cannot be paid to help owner-occupiers with the cost of acquiring or maintaining their own home. Secondly, when it is payable, housing benefit can meet costs related only to the accommodation itself. It does not pay for items such as care, fuel, or meals when they are provided with the accommodation.

In most cases, sheltered housing is owned outright by the occupants. Housing benefit would not be payable except to meet up to 80 per cent. of the occupant's rates or community charge if his financial circumstances justified it. If the owner is entitled to income support, some help may be available with that part of the service charge that relates just to the accommodation. This would include the cost of heating, lighting and cleaning the communal area of the accommodation. If the owner is buying the sheltered accommodation on a mortgage, income support would be available to help with the cost of the mortgage interest payments, but not with the capital element.

There may be a few examples of sheltered accommodation that is rented rather than owned by its occupant. In these cases, housing benefit could be paid to meet the full amount of the eligible rent if the tenant's other income justifies this. The eligible rent would include such items as the cost of heating, cleaning the communal areas, and the cost of providing an alarm system in property that is specially adapted for the use of elderly or disabled people. Eligible rent does not, however, include items such as personal nursing care, heating of the rented accommodation and any meals. The cost of these items is expected to be met through income support and its premiums and other social security benefits for the elderly or disabled, or help may be provided by local social service departments. Thus, a range of help is available to elderly people in sheltered housing who are on low incomes and unable to meet the costs of their accommodation.

I hope that the hon. Gentleman will realise from what I have said that the Government share his concern for the predicament of elderly people who find that the cost of their retirement homes is greater than they anticipated. Although we may differ about the best solution at this stage, I am grateful for his views. I hope that he will continue to monitor the position, in his constituency and more widely. I know that my colleagues in the Department of the Environment will be ready to consider any further representations that he wishes to make. Finally, I congratulate him on securing the time to raise this important issue today.

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