Positive Covenant on freehold to pay maintenance fee

DaisyMay99

Hello,

We are buying a Taylor Wimpey new build. Not exchanged contracts yet but have paid reservation fee, approx £600 (50%) of options and owe the solicitor around £1000 (from this purchase and another on the same estate we pulled out of) and have paid valuation fees etc.

There is a Positive Covenant on freehold on the house to pay a maintenance fee to a community interest company.

According to companies house the CiC was registered by FAIRFIELD COMPANY SECRETARIES LIMITED. CHAMONIX GROUP LTD and POVEY, Adrian Martin are among the directors.

The CIC will employ managing agent Chamonix Estates Ltd, who FAIRFIELD COMPANY SECRETARIES LIMITED., CHAMONIX GROUP LTD and POVEY, Adrian Martin are directors of.

"It’s common for companies that own the communal areas of private estates to employ managing agents to carry out the maintenance and other services.

The managing agent will sign a contract with and be accountable to the
company’s directors; it has no legal contract with the individual freeholders.

The agent will normally prepare a budget to be approved by the directors;
send out invoices; organise contracts (gardening for example); deal with
repairs; and prepare accounts for the directors at the end of each
financial year." (google quote)

Our contract states we must pay an annual maintenance fee to the CIC. It does not say how much, or give any future projections. It does say that on completion we need a pay an apportionment of our £110 fee (I am guessing this £110 is an estimate of what the annual maintenance fee will be ) and that no further charge will be payable until all houses on the estate are sold and the CiC and managing agent become active.

it seems like a gross conflict of interest and unfair to members that the managing agent only effectively have ‘themselves’ to answer to.

I also note Chamonix Estates Ltd is not a member of The Association of Residential Managing Agents ARMA which means members are not able to complain to an independent ombudsman.

To me this sounds like a ridiculous thing to sign, my husband, the solicitor and Taylor Wimpey are acting like I am crazy to even question it. Saying 'well if the fees were upped then everyone on the estate would complain, blah blah' but from what I can see, the directors of the CIC have a vested interest in the profit of the managing agent so surely price hikes are inevitable. And if we sign this contract we are legally obliged to pay any amount invoiced and have no one to complain to!

I also looked in to member's right to manage, however I would imagine that the directors would be very keen on keeping chamonix as the managing agent seeing as they, themselves would be profiteering, which they are unable to do by owning the CIC alone.

Does anyone have any advice, perhaps a bit of perspective for me? Does anyone know the rights a member of a CIC has? The CIC incorporation doc does have details but in all honesty I just don't understand what it means in 'real life'.

I know these things are increasingly common on new estates but it seems insane.

I love this house and it would break our hearts (and banks) to pull out.

Freecall

You are correct to be cautious although, in practice, if you want a new estate house you probably have few options as that is the way the market has moved.

As a freeholder you will have some rights regarding what is spent (and therefore charged to you) but not many. Charges have to be legitimate but there is no test of 'reasonableness' for example, as there would be with a leasehold property.

I think you may also be getting confused when you mention "right to manage" as that will not apply here. The contract you enter into is precisely that, a contract. The terms are as stated, you will have no additional protection.

Having said all of that, millions of people now have this arrangement with landowners of adjacent land which they use.

ARMA has a useful leaflet on the subject which you can find here.

marksoton

I wouldn't be happy at all.

stator

It is very common but I would not be happy unless there was some kind of right for the residents to take over management, buy somewhere less risky, not new build.

DaisyMay99

Thank you fort the replies so far.

"there is no test of 'reasonableness" - this is so worrying to me. Am I right in thinking the managing agent could charge any amount as long as it was ok'd by the CIC directors and I would have to pay it?

Eg they could say grass cutting a 1 x 1m space costs £1000 etc and work this in to the budget and this is totally legal?

It seems outrageous that the 'members' / home owners can't decide they want to 'fire' the managing agent and hire a much cheaper alternative, or manage it themselves.

The thing I am most concerned about is the CIC being owned by the same people the managing agent is owned by - is this commonplace on new builds?

On first impressions I thought, 'ok we pay money to a CiC, any monies taken need to be reinvested and there isn't an opportunity to profiteer', I feel like they have deliberately made it look that way which is so underhand and sends alarms off for me!

stator

The management company may make a profit from "commission" paid by the contractors engaged for works. (Some people might call this a kick back). The contractors they engage might not always be the cheapest.

patman99

There is always the chance that any contractors employed to look after the common areas are, in fact, just companies owned by the CIC so the CIC makes a profit for the directors by moving the money around.

SmlSave

As well as the lovely maintenance fees, don't forget that when you come to sell in the future you'll also have to pay for the Management Pack (easily £200-£400). It's standard practice, any decent solicitor will demand it and its another way for management companies to make more money.

eddddy

DaisyMay99 wrote: »

To me this sounds like a ridiculous thing to sign, my husband, the solicitor and Taylor Wimpey are acting like I am crazy to even question it.

Just out of interest - was the solicitor one recommended by Taylor Wimpey?

rtho782

You're not crazy.

Positive covenants do not usually run with the land, but these "estate charges" have been challenged in court by subsequent buyers and DO run with the land, so this may affect resale value.

Unlike a leaseholder, there are no protections for you whatsoever, and no way to challenge the amounts.

You also can't take over the company, even if you have every freeholder on the estate want to do so.

And, they have to evidence their costs, but there is no control over the costs. So, I could be the director, and decide to pay my brother's gardening company £1,000,000 an hour to cut the grass. This is then a cost to me and gets rebilled to you. You can't fight it, tough.

All this for services you'd usually pay your council for, but don't expect a council tax reduction.

We pulled out of a Taylor Wimpey home, after speaking to others on one of their developments who said the fees had doubled every year in the 5 years since they lived there, and they now could not sell.

Richard_Webster

Builders can get away with all kinds of things, including overpricing, because people seem to want new houses. If more folk were to tell sales reps that there was a perfectly good 10 year old house down the road for £5-20K less so why should they pay over the oddds for a new one, then they would be more reasonable.

On the builder's side it is often the case that the layout of the estate is such that there are some common areas that have to be managed inthe future. Councils aren't interested - or only at very high upfront cost, so builders go in for this variable rentcharge method of colelcting the cost.

Ideally they should set upa company to be owned by the residents (and perhaps managed by a professional property managere). Then if the residents are sufficiently cross about expensive management they can kick the manager out and appoint their own instead. Most of the time inertia rules and it is never possible to get a qurater company meeting with a majority wanting to do this.
When they do, and this is what builders will know, they end up trying (and failing) to manage it themselves - the company goes into liquidation - and the common areas become a mess and unsightly.