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Problems facing freeholders on new developments

There are new problems facing freeholders. We take a closer look at the issue and learn how a new network established by homeowners is campaigning for change.

November 9, 2016

problems facing freeholders

There is a silent revolution going on in the new build market, which no one seems to know about, least of all the actual homeowners and their conveyancers. The legal term is “freeholders on private estates”. Most people know about freehold and leasehold, but this new model has crept in without democratic scrutiny or discussion and over the past 10 years or so has become the industry standard. The new problems facing freeholders are estimated to affect at least half a million homes in the UK.

What is it?

You buy a freehold house on a new build estate and are told there is a small service charge to look after the lovely green open spaces. Sounds reasonable? Yes, until the problems start – like being charged high management bills for poor service or being charged before the estate is completed. Then, you begin digging and find the devil is in the detail. The charge is bound to your property through your title deeds, so your only way out is to move and pay off the fees. If you do move, the management company is involved with the property transfer, with fees to pay and possible delays (as often happens with leasehold transactions).

If you want to dispute the fees or ask for justification for spending so much you find that, unlike leaseholders who have a tribunal, there is no alternative dispute resolution available to freeholders. Your only alternative is to fight it in court. Not many people have the resources and motivation to take this on. You have no consumer rights as the management companies are accountable to the landowner (themselves) and not you. There is no way to change the service provider and no right to manage.

So the freeholders on a private estate find they have to pay whatever charge the company decides for whatever level of service it chooses. The open space you pay for can be used and abused by the general public and yet you are still expected to pay full council tax.

Leaseholders on private new build estates sometimes suffer from the same problem. In addition, they may end up paying inflated ground rents and may find the cost of buying their freehold is unaffordable. Although they may have a right to manage their own building and internal common parts, they have no such right with regard to the management of landscape and external amenities such as play areas. They are effectively paying two different types of charge with entirely different rules.

How has this happened?

This has all come about due to negotiations between developers and planning authorities under what is known as “Section 106 agreements”. The original intention of these was to mitigate the impact of new developments on their surrounding infrastructure (roads, schools etc.) where they would otherwise not obtain planning permission. Over the years it has turned into a mechanism for councils to squeeze funding from developers in a sort of legalised bribery. Councils may think they are doing the best for their ratepayers, but in the process are selling out on the new homeowners. So much is clawed back under 106 agreements that standards of build quality are reduced to maintain profit margins and the homeowners are forced to pay for open space which is not theirs and over which they have no influence.

If you refuse to pay because you are dissatisfied, your concerns and queries will be ignored, and you may be bullied in to paying up under threat of court action.

Homeowners feel duped, ripped off and very angry at the unfair and cynical way they are being treated. HorNet is a UK wide network to campaign for change and regulation. The group agrees that the whole system is unfair and unjust to the homeowner. The bigger picture involves retention of land by investors and the back door privatisation of green open space.

If you agree the government should step in and at least put in some form of regulation and alternative dispute resolution, then please sign HorNet’s petition

If you are in a similar situation, learn more about service charges in our guide. Become a member of HomeOwners Alliance for extra support and to help us campaign for better regulation of this area. 

With thanks to HorNet for contributing to this article.


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15 Comments

  1. I have now written to my MP regarding this utter nonsense and asked her to campaign about this. I may have been lucky and not purchased a new build but my children now have fewer options when they come to buy and help to buy has increased prices of all property. We must also remember that it’s not just about half yearly fees payable on the new build estates that are not due from other home owners, there is a real risk of serious financial pain, let us remember that the new build housing developments are ‘ private’ and anything that happens on them is the responsibility of the home owners…… how about the arrival of the travelling community on the open green land, fly tipping….. sink holes….. etc, who do you think pays to sort this out, not the council that is for sure. This is like an open wound and the new buyers are being sold a pup, I see no reason other than profit why a developer would keep the estate private and not have it adopted. What a shambles.

    Comment by Simon — October 17, 2018 @ 9:46 am

  2. We own a freehold home and have been paying management fees for the past 12 years to maintain Aqua cells (to collect water in case of flood – fortunately, we were some of the luckier ones as the land was eventually adopted by the local authority). Whilst the charge is reasonable for this maintenance the costs to maintain the cells, including the companies insurance etc, far exceeds the actual costs to the company , i am extremely frustrated also now, since needing to alter our title deeds that I am required to pay money to the management. Company as they are tied into our deeds with a restriction.
    it seems as if the management companies are in place to simply make money for providing very little service and creating more legal hoops to jump through. Management companies have clients in a sort of headlock (charging prices to create deeds of covenants and compliance certificates When changes are required or a property is sold).
    I am so disappointed and frustrated that these created companies are making money whilst providing very little (I recognise my situation is slightly different with the aqua cells (although charges are far too high to maintain them) but for those paying fees for public spaces? It’s a travesty.

    Comment by Anna Finlason — October 17, 2018 @ 12:47 am

  3. This is a dreadful situation and they should be brought to account. My son bought a discounted new build 2 bed house through the help to buy scheme. It was discounted by 30% and when sold in the future he will sell for 30% less than the normal valuation price . not only did it cost more to buy as he had to use the recommended solicitor/building society his mortgage interest rate was higher his legal fees cost more and now he has just had the first management bill through for development maintenance service fees £400.00. How on earth are first time buyers on low income suppose to manage ? I thought the government were helping young people to get on the ladder not fall straight off it.

    Comment by Simon Corkhill — October 15, 2018 @ 11:52 am

  4. This is happening on the estate where I live in Sleaford, no cooperation from the management company, total disregard for home owners , and now they have employed another company to collect the fees.There have been three so called landscape companies used in the last 12 months all rubbish but nothing is done about it. I have taken the matter up with the local M P.

    Comment by Maurice Etherington — October 8, 2018 @ 12:11 am

  5. You Should look at Hopkins Homes Norfolk!!!! Watton

    Comment by I.Shepherd — October 3, 2018 @ 7:34 pm

  6. The admin costs on our Redrow Development in Bideford are £15k. The cost of the contract for actually doing the grass and hedge cutting is £8,800. How can this be legal?

    Comment by Lizzie Woolfenden — September 19, 2018 @ 7:08 pm

  7. I have had an interest in this unfolding disaster since i ‘ missed a bullet’ when
    i pulled out of buying a leasehold house (with svc charges) on a new build, thank
    god i did, i now own a freehold house with the land outside my house maintained
    by the local authority. This is an utter scandal and i can see a time in the very near future when there will be two types of properties for sale, those with ongoing charges
    payable to 3rd parties and those like mine which are free of such restrictions, i can
    see the values of the former being worth a lot less, it is totally unfair and these
    homeowners are being hung out to dry by this govt who are too busy doing bugger
    all about Brexit. God help them when it comes time to sell.

    Comment by Simon — September 14, 2018 @ 9:41 pm

  8. Personally, i feel that the management fee is unacceptable and authorities discriminates new home buyer. The council should reduces the council tax to match the extra estate charge for new build home as long as they are expecting new home buyers to maintain their surroundings.

    Comment by puvan — August 31, 2018 @ 8:32 pm

  9. Hi Zac, please consider becoming a member, you’ll have access to our Home Helpline team and a free legal call should you need it.

    Comment by Sara Hind — July 4, 2018 @ 3:37 pm

  10. I am really stressed about the same issue, i am in the same situation now.

    I paid the agreed amount, now they’ve sent me another letter asking for more money because there is a deficit on the account. I really do not have the money to pay this bogus service charge anymore. Is there a way round this? I am absolutely fuming because they haven’t done anything on the estate that warrant the charges. This is breaking many family up. Any advice will be appreciated.

    Comment by Zac — July 2, 2018 @ 8:13 pm

  11. Hello Mike, if you wanted to consider taking out a membership with us, one of the benefits would be a free legal call.

    Comment by Sara Hind — June 27, 2018 @ 2:09 pm

  12. I am a Councillor on South Gloucestershire Council serving on one of its development control committees. I am also,a Councillor on Yate Town Council which manages play areas and open spaces in the Town.

    I and Yate Town Council believe that all the open spaces and play areas in the Town should be managed by the Town Council including the new developments. I argue for this at Development Control however the Planning Officers say that we can not impose a condition for the developers to hand them over to the Town Council – the majority accept this “advice”.

    I would be grateful if you can give me any legal advice on the issue.

    Comment by Mike Drew — June 17, 2018 @ 10:14 pm

  13. This is a HUGE scandal waiting to burst into the mainstream.

    It affects hundreds of thousands of families in the UK!

    This story WILL be even bigger than PPI when it all becomes common knowledge.

    Comment by Liv Lee — June 5, 2018 @ 1:43 pm

  14. How is it even possible and why no one is doing anything about it, not fair trapping people into unavoidable, increasing charges. People fall for small service charge at first, but in fact they are not in any way protected from increase or have no way of challenging the fee, if you are freeholder.

    Comment by Aga — October 24, 2017 @ 11:02 am

  15. Yes. This happens.

    Comment by Andrew Smith — February 3, 2017 @ 5:16 pm

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