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The rise of privately owned and managed new build estates over the past 20 years has led to freeholders having to pay new build estate management fees on top of council tax. You may face other costs too, which can cause difficulties when selling. Read on to find out more and what you can do about it.
New build estate management fees usually cover the maintenance of any communal gardens, pavements, private roads, car parks and play areas within the new build estate. Estate management fees are often charged if you buy a new build freehold house. But if you buy a leasehold property you may need to pay a service charge too. Plus, you’ll pay council tax on top.
These new build estate management fees, known as ‘fleecehold’, have crept in over the last 20 years and is now the industry norm. Owners of at least a million newly built homes on 20,000 new housing estates, face paying these estate charges and permission fees with no way to challenge them or to take over the management themselves. This problem continues to grow.
Estate charges are different to service charge and ground rent which you may also need to pay. Read more in our guide on Leasehold Charges: What to know.
The main problems with new build estate management fees are:
You buy a freehold house on a new build estate and are told there is a small charge to look after the lovely green open spaces. Sounds reasonable? Yes, until problems start. For example, you may soon find that you’re being charged high new build freehold estate management fees 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. Your only way out is to sell and pay off the fees to the management company. When you sell it’s likely that you’ll experience delays (as often happens if you’re selling a leasehold property). But, more importantly, you may also find it difficult to find a buyer as the buyer’s lender and conveyancer will likely raise concerns about the estate management fees.
Plus, you may also find that construction on the estate is sub-standard, which will result in higher maintenance costs over the long-term. Examples may include trees not properly planted, cheap paths and gravel roads.
Unlike leasehold service charges where there is a tribunal, there is no alternative dispute resolution available for freeholders to dispute estate management fees. Although you can dispute estate management fees in county court, not many people have the resources to do so. This isn’t helped by the contract being written by the developer and in many cases seems to be deliberately vague.
However, if you are considering taking action, you may find this guide to Bringing and Defending a Small Claim by the Civil Justice Council useful.
You have no consumer rights as the managing agents are accountable to the landowner (often themselves) and not you. There is no way you can demand a new managing agent. There is no statutory right to manage as with leasehold property.
Even with the promise that the managing agent will hand over responsibility to a residents’ management company, this may not happen.
Residents on a private estate find they have to pay whatever charge the company decides for whatever level of service. The open space you pay for can be used and abused by the general public and yet you are required to cover the cost of maintaining the estate as well as paying council tax.
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Leaseholders on private new build estates sometimes also pay estate management fees in addition to their ground rent and service charges. Read more in our guide Leasehold charges – what to know.
The Leasehold and Freehold Reform Act 2024, is now law but has yet to be implemented. The new act is aims to:
But the battle is just beginning to put a stop to uncapped and out of control ‘extra’ estate management fees.
Many homeowners on private estates feel duped, ripped off and are very angry at the way they are being treated. The current system is unfair to ‘fleecehold’ owners who feel they have not been fully informed of their extra financial obligations when buying a home on a newly built estate.
The Competition & Markets Authority investigated fleecehold as part of their Housebuilding Market Study and made the following recommendations to government.
The government responded in October 2024, promising:
At HomeOwners Alliance we fully support the CMA recommendations and we are disappointed with the government’s response that promises further consultation and little immediate action. Little will change for those living on these estates today. The problem will continue to grow as the CMA found that 80% of new homes sold by the 11 largest developers in 2021/22 were subject to estate management charges.
At HomeOwners Alliance we worked with the Sunday Times to expose the issue that while getting rid of a management company would be welcomed by many residents of new build estates, they may still need to pay extra charges to live on new developments.
For example, residents in a Cranbrook, a new town in Devon, saw the town council take over responsibility for the upkeep of facilities such as landscaped gardens. However, the council is now charging band F properties a £370 surcharge, rising to £512 for band H properties in addition to council tax. Residents receive no more services than people elsewhere in Devon.
If you refuse to pay new build estate management fees because you are dissatisfied, you may be bullied into paying up under threat of court action, as well as, additional debt collection charges.
You are also at risk of repossession. The 1925 Property Act states that a lease can be created on your home if you refuse to pay. Mortgage lenders will often insist on a Deed of Variation to protect them against this from happening.
The current situation is the result of negotiations between developers and planning authorities under what is known as “Section 106 agreements”. The original intention of these funding agreements was to reduce the impact of new developments on their surrounding infrastructure (roads, schools etc.) where they would not otherwise obtain planning permission.
Over the years, it has turned into a mechanism for councils to use this much needed funding from developers to pay for council-wide services.
Developers can reduce their overall section 106 spend by offering to manage the new build estate themselves. This also saves them money in construction costs and the council saves money but not having to adopt the estate while still charging full council tax.
Councils may think they are doing the best for their ratepayers, but they are selling out on their new homeowners. Home buyers pick up the tab, forced to pay for open space and playgrounds they do not own and which are public amenities. Also, there may be an element of misselling here by developers if new buyers are not made aware of these charges. Also, there isn’t any obligation to set out how they may increase in the future.
Also, homeowners may have no say over how these spaces, which may be of sub-standard construction, are managed. The investors end up retaining ownership of the open spaces while the homeowners have to pay. There are some cases where homeowners are having to pay the landowner to maintain their own gardens.
HorNet is a group of UK homeowners campaigning to abolish privately managed estates which are publicly accessible in favour of mandatory adoption by councils. As of November 2024, they represent over 231,000 households and 960 estates. At HomeOwners Alliance we fully support HorNet and encourage all residents paying estate charges to join their campaign.
Most newly built homes sold now will have an estate charge attached. Even if the developer intends to set up a resident management company to manage the estate when it is finished, there is no guarantee that this will happen. Even if it does, there is still an open-ended liability when you sign your deeds to purchase a new build property. You will still be required to pay your share of costs to maintain open spaces and other maintenance costs. See our guide for more about service charges.
Make sure you know what you’re letting yourself in by asking the estate agent and developer’s sales office the following. Get their answers in detail and in writing (email is fine).
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If you own a freehold property, you won’t pay a freehold service charge. However, if you buy a new build freehold property you may need to pay estate management fees. This covers the maintenance of the new build estate.
If you buy a new build house there’s a good chance that you’ll be charged estate management fees by a management company. The management company services will be detailed in the deeds to your property and will usually deal with the maintenance of any shared areas.
