Freehold House but Service Charge for Parking Bays

SallyAnneBooth

Dear Knowledgeable People,

I am in dire need of advice and would be really grateful for any responses. Here goes:

I am currently in the process of buying a new build house (Freehold). The development is a small one built by a local builder and has just a couple of houses and a block of 10 flats.

The parking for the houses is at the back of the development, there are a total of 14 parking bays (1 per flat and 2 per house). I've had the plans back and the house plot and 2 parking bays are outlined in red.

I'm told that I will own the Freehold of the house and also the 2 parking bays. Then I was told there will be a Service Charge of £300 per year for the maintenance of the gate that is at the entrance of the car park and upkeep of the road that leads into the car park including the area between the bays. There is no Residents Association and the builder has set up their own Management Company. The flats pay £1000 per year as they have a refuse area in the car park and get their windows cleaned etc.

I've had a look at the planning permission docs, and it states that the parking area "should be available at all times".......to me this suggests that if there is a charge of £300 per year then it isn't available at all times. I would have thought all costs would be absorbed in total asking price as I will own the Freehold.

Thank you for help in advance, really appreciate it.

NeilCr

I have a freehold house on an estate with parking and we have electric gates.

We pay an amount towards the gates for ongoing costs - servicing, maintenance and any breakdowns. That amount is shared between our freehold houses and the leasehold flats on the estate as we all use the gates.

It won't go on the price of the house because it is about ongoing costs

ETA.

Make sure you know how to override the gates if they fail!

G_M

Any liability for maintenance for the parking area will be specified within the property Title and/or related legal paperwork.


Your conveyancer will review and explain this to you.


It's not unusual for there to be a cost for maintaining communal areas or parking management.

SallyAnneBooth

Hi Neil,

Thanks for the swift reply!

Yes it seems we have the same set up. Are you able to judge from your experience if £300 per year is reasonable?

My only fear is that how much will increase in the future. I am aiming to negotiate a fixed increase of 2% per year for at least 99 years as I don't want to have problems if I decide to sell and move on.

Do you own the land your parking bays sit on too? Thanks Neil!

Sally-Anne

SallyAnneBooth

Thank you for the reply

My main concern is how they will rise in the future and issues when selling on.

In your experience is it possible to get Service Charges fixed (providing the seller agrees to sign up to the deal)?

E.g. is it legally possible to have the service charge as £300 per year and only to increase by 2% per year for X amount of years.

NeilCr

SallyAnneBooth wrote: »

Hi Neil,

Thanks for the swift reply!

Yes it seems we have the same set up. Are you able to judge from your experience if £300 per year is reasonable?

My only fear is that how much will increase in the future. I am aiming to negotiate a fixed increase of 2% per year for at least 99 years as I don't want to have problems if I decide to sell and move on.

Do you own the land your parking bays sit on too? Thanks Neil!

Sally-Anne

Yes we do.

The best way to control the service charges is to see if the builder will pass/sell the freehold to you as a group of residents. Then you can manage it yourselves and set the service charges. I'd be surprised if you will get them to agree to fixed increases as there will be unexpected costs which will effect budgeting etc

ETA

It's difficult to judge on whether or not £300 is reasonable. If the gates go they can be expensive to fix. They should have a maintenance contract. We were fine for a number of years then had a couple of horrendous years

SallyAnneBooth

Hi Neil,

I've already been told there is no intention for Builder to sell or pass on management of the common areas to the residents. Yes it's unlikely they will agree but I will chance my arm.

Average inflation over the past 100 years has been around 5%, meaning my service charge will be £3.5k+ in 50 years time if this is used as a baseline.

And excellent point Neil - say if on a miserable Monday morning I cannot take my car out as the electric gates refuse to open (for whatever reason), then there should be some sort of overriding mechanism available to open the gates?

Sally-Anne

NeilCr

SallyAnneBooth wrote: »

And excellent point Neil - say if on a miserable Monday morning I cannot take my car out as the electric gates refuse to open (for whatever reason), then there should be some sort of overriding mechanism available to open the gates?

Sally-Anne

Definitely

On my old estate we had fob operated gates which jammed the day my friend was staying with me. She has her own business and was due at a fair early that morning which was why she was at my place. She lost a lot of business as she had to wait for the gate company to come out. She wasn't happy.

Here a few of us know the trick of overriding - we occasionally get frantic knocking on our doors early in the morning!

OldMusicGuy

I am chair of a residents association on a small estate of freehold properties. The private road that leads to all the houses is not owned by us, instead the developer has kept the freehold and we pay a property management company to maintain the common areas. Here's a number of things you need to be aware of:

- There will be an agreement you will sign as part of the transfer of land that will outline the terms of the maintenance agreement. This will describe what the management company will do, what responsibilities you have, and how they will charge for their services. You need to read this carefully to understand what you are letting yourself in for.

- The £300 is probably no more than an "estimate" of the annual charge. They will be charging you for more than the gates, they will also charge you for the upkeep of the road, insurance on the road, electrical testing of the gates, health and saftey inspections and anything else they can think of. The way our agreement works is the management company charges a 15% management fee on top of the costs, so ours tries to get away with charging us anything they can to bump up their management fee.

- Look closely in your agreement at how the management fee is calculated and escalates. The property management companies try to use these as a license to print money.

- Unlike leasehold properties, you have no right to buy the freehold of the common areas. You can form a residents association (we did) but you cannot form a residents management company and take over running the common areas (like leasehold tenants can). There's no way a developer will sell you the freehold on common areas as it is a license to print money, and you cannot take over the running of them.

- We have had serious issues with our property management company in recent years. They have been overcharging us and doing various things wrong. We have had to take them to the Property Ombudsman twice to get them to adhere to our management agreement and to correct overcharges.

Bottom line - you could be letting yourself in for years of escalating charges and poor service. Make sure you read the management agreement closely before you complete and understand what you are letting yourself in for. Try to get to see this before you exchange as it may impact your decision to go ahead.

SallyAnneBooth

Thanks once again Neil- point noted. I will definitely find out if an overriding mechanism is in place.

The electric gates for this development has fob operated gates too.

Sally-Anne

NeilCr

OldMusicGuy wrote: »

- Unlike leasehold properties, you have no right to buy the freehold of the common areas. You can form a residents association (we did) but you cannot form a residents management company and take over running the common areas (like leasehold tenants can). There's no way a developer will sell you the freehold on common areas as it is a license to print money, and you cannot take over the running of them.

.

I agree with quite a lot of this post but I do think that this an "it depends"

On both of the estates I've lived on the developer (on both occasions a small local firm) wanted rid of the freehold as they didn't want the hassle. The first one was a block of flats (so leasehold) and the residents were offered the freehold at a reasonable price.

Where I am now (a mix of leasehold and freehold) the developer gave us the freehold.

FWIW I wouldn't now buy on an estate where the residents didn't own the freehold.