Maintanence Charge

rodders470

Hi

We're currently buying a house on a new estate, but they have just told us that there is an annual maintanence charge, which pays for a company to look after the estate, grass, trees etc.

But shouldn't this be the councils responsibility? and paid for using my council tax? Is there an option to pay less council tax because of this?

Thanks

Richard_Webster

No there isn't any option over Council Tax.

Generally Councils have been been reluctant to take on the maintenance of open space areas without the developer paying a capital sum to represent the likely future annual cost of the work. These sums have got larger and larger and builders have long since decided it was not financially viable to do this.

So, sorry, if you buy on that estate you are stuck with the charges, most of which will be admin, public liability insurance, and accountancy costs for the management company.

GDB2222

Simple answer is not to buy on an estate like that. Older properties tend to be much better value anyway.

westv

Is this open land being mentioned land that is publically accessible or is it land that forms part of a private estate?
If the later then I can understand the charge. If the former then I don't see why residents of the new areas should be disadvantaged. They are ct payers like everybody else. Isn't it the council that decides how much open land any new development should have?

IHateDida

We used to live on an estate with a maintenance charge - never again. They seem to be able to put the annual charge up whenever they feel like it, and it puts buyers off when you come to sell (I know flats have to pay these - but its not the norm for freehold houses) - as on top of their normal council tax, they will be expected to pay X amount as well. If you aren't too far in, I would consider looking for a house without a charge as you soon get sick of paying for the very little it actually covers (the insurance is the main bulk - and you will find that the grassed areas aren't cut as often as you would think they would be).

Clearly my own opinion...and experience.....but I would reject buying any house that had a maintenance charge - think of your potential resale value and that extra bill that drops on your doormat once every year!

westv

What happens if householders refuse to pay? Does the area just go to pot?

IHateDida

westv wrote: »

What happens if householders refuse to pay? Does the area just go to pot?

We had non payers - and they try and recover the charges going through the courts. Obviously depending on how successful that is depends on the outcome. Basically our management company kept all the money in an account (and they have to publish their accounts for all stakeholders to see once a year) and this would then pay for any shortfalls (and the cost of recovery from non-payers). So in theory, the people who do pay, can end up paying for those that don't. The area will still be maintained but at a higher cost to others.

It really does depend on how many non-payers you get - we luckily only had a few and they managed to recover some of this through the courts.

xycom1

We are getting demands for payment of maintenance charge. I'm one of those naughty non-payers - but mainly because the building company took so long to send an invoice - last year, we got an invoice covering the last three years, so they gave us until the end of 2011 to make payment in full.

Anyway, as Richard said above - a lot of the charge is for insurance & admin costs. But the builders are also collecting a surplus fund which I have been told will be used to "cover the cost of major repairs to the road surfaces, drains etc". I'm not concerned about the amount of the charges or fund, which seem entirely reasonable based on the accounts that I've seen.

I am however, concerned about the arrangements that the builders have in place for the storage of the funds - which by now will be getting on for close to £100K. On enquiry, I was told: "transferred into a separate interest bearing account after the Year End accounts have been finalised."

I am concerned if the building company goes into liquidation, then the money will be set against their liabilities and the homeowers/residents will lose out and could end up having to pay again when these expenses come up in the future. I asked specifically if the funds were held in trust or in a client account for the benefit of the residents, and was just given the fob off phrase in blue above.

Anyone have any comments? Are my concerns justified?

IHateDida

xycom1 wrote: »

We are getting demands for payment of maintenance charge. I'm one of those naughty non-payers - but mainly because the building company took so long to send an invoice - last year, we got an invoice covering the last three years, so they gave us until the end of 2011 to make payment in full.

Anyway, as Richard said above - a lot of the charge is for insurance & admin costs. But the builders are also collecting a surplus fund which I have been told will be used to "cover the cost of major repairs to the road surfaces, drains etc". I'm not concerned about the amount of the charges or fund, which seem entirely reasonable based on the accounts that I've seen.

I am however, concerned about the arrangements that the builders have in place for the storage of the funds - which by now will be getting on for close to £100K. On enquiry, I was told: "transferred into a separate interest bearing account after the Year End accounts have been finalised."

I am concerned if the building company goes into liquidation, then the money will be set against their liabilities and the homeowers/residents will lose out and could end up having to pay again when these expenses come up in the future. I asked specifically if the funds were held in trust or in a client account for the benefit of the residents, and was just given the fob off phrase in blue above.

Anyone have any comments? Are my concerns justified?

We had to be a shareholder in the management company - all households had to buy a £1 share. Are you sure that you don't own a share? It doesn't entitle you to anything - apart from the fact that you can attend a shareholders meeting once a year. This is where the management company explains (justifies) their spending etc... Check and see if this is the case with you. Basically a management company held our funds in an account on the residents behalf. I doubt the building company has anything to do with it - they will have used an external management company I expect - have a look at your deeds as this should explain.

We used to see them squirrel away our money - but they do have to produce annual accounts. We had no say over what contractors they used etc - nor did we have any say over the amounts they used to increase our charge by each year. We were in surplus - but not by the amount your management company is - but they used to justify this by saying that they needed to do it incase any "unforeseen circumstances" arose. But we used to just see it spent on contractors that clearly "shared the same bed" as the management company.

Good luck in sorting it out - do get together with other residents and demand meetings with the management company. You should have a committee made up of representatives from both sides to make sure you're not getting ripped off.

G_M

IHateDida wrote: »

We had to be a shareholder in the management company - all households had to buy a £1 share. ..... It doesn't entitle you to anything - apart from the fact that you can attend a shareholders meeting once a year. This is where the management company explains (justifies) their spending etc.....

...... We had no say over what contractors they used etc - nor did we have any say over the amounts they used to increase our charge by each year.

This does note make sense. If you were a shareholder then there was a (probobly Ltd) company that 'you' collectively owned and which ran the estate. The 'Management Company' collecting the annual charges and arranging the contractors worked for.... you!

You (colectively as the shareholders of the owning company) could fire the management company, or instruct them to use different contractors etc. They were simply contracted by the owning company in which you had a share to do the day-to-day legwork and then account for it at the end of the year.

The trouble with these set-ups is that often the residents, such as you, who actually own the shares, have very poor understanding of how this works, so just leave the professional management company they've employed to get on with it. This suits the management company, as they can charge whatever fee they feel like, instruct contractors who are 'related' businesses or provide kickbacks (not overt obviously!), or otherwise increase their profits, safe in the knowledge that these amateur 'shareholders' will never really question what they do!

xycom1

IHateDida wrote: »

We had to be a shareholder in the management company - all households had to buy a £1 share. Are you sure that you don't own a share? It doesn't entitle you to anything - apart from the fact that you can attend a shareholders meeting once a year. This is where the management company explains (justifies) their spending etc... Check and see if this is the case with you. Basically a management company held our funds in an account on the residents behalf. I doubt the building company has anything to do with it - they will have used an external management company I expect - have a look at your deeds as this should explain.

We used to see them squirrel away our money - but they do have to produce annual accounts. We had no say over what contractors they used etc - nor did we have any say over the amounts they used to increase our charge by each year. We were in surplus - but not by the amount your management company is - but they used to justify this by saying that they needed to do it incase any "unforeseen circumstances" arose. But we used to just see it spent on contractors that clearly "shared the same bed" as the management company.

Good luck in sorting it out - do get together with other residents and demand meetings with the management company. You should have a committee made up of representatives from both sides to make sure you're not getting ripped off.

To clarify, the site on which the homes were built was owned by Xxx Homes. As a brownfield site, they got a massive incentive from the local authority to develop the site, and part of the site was transferred to another building company (from whom we bought our house). Xxx Property Management (same company as the site owning builders) maintain the whole development and own the freehold of the leasehold properties.

At some point we were promised a 'public meeting' (which never materialised) and I guess if we so desired, we could kick the management company out if there was enough agreement and willing to found a co-operative management company.

That's not really the issue though - I'm happy with the job that they're doing, I'm just concerned about the solvency of the company and the protection that our money would have?