New freehold build & 'service charges'

toffee_pie

Hi All,

As per the title, I have an initial deposit down on a new build home that myself the missus are happy with but just the other day I was looking into the service charge (told to be £200 p/a) and got some rather scary stories on the web, should I be concerned or has anyone else pulled out of a house due to this or even have good news?
The build in question is no where near completion (many many years left but my plot will be ready in June ish) - the size of the development leads me to wonder if this £200 will magically increase and with zero control over these dubious fees I am having second thoughts.

cheers

Sachs

The service charge itself is less important in the long run than who controls it. Find that out and if it is anyone other than the residents then run. If they tell you it will be the residents then you need to make sure that is written in your contract and title deeds.

OldMusicGuy

Like Sachs says, you need to find out who owns the freehold of the common areas and how that is managed. It may be the developer, or it may be owned by all the freeholders on the development, in which case there should be a residents' management company set up to manage it.

I live on a small development where the developer still owns the freehold. They farm out the maintenance of the common areas to a property management company who do an appalling job and are a nightmare to deal with. Fortunately we have a very old style of maintenance agreement which has a cap on the management fees they can charge but this doesn't stop all kinds of shenanigans with them. We have no rights to replace the property management company, nor can we take over control through a residents' management company (leaseholders in flats do have the right to force this but freeholders do not).

If the setup is a residents' management company that is better (although you have to get involved a bit in running things). However, even that has some issues - someone posted on here about how the developer controlled the residents' management company and has refused to give control to the residents. So even that can have difficulties.

Now either of these situations needn't be a deal breakers but I can guarantee that the fees and costs will creep up every year. So you need to get the full detail of how the common areas are managed and also see a draft of any management/maintenance agreement to see what you will be committing to in terms of charges. Make sure you get all this information before you exchange.

Just Google "fleecehold" to get some good examples of where this goes wrong.....

getmore4less

I would walk and look for an older property that does not have this hanging over it too much of a risk going forward.

Even if it becomes owned by the "community" you will still get issues.

You will probably need to put in quite a lot of time/effort getting the developer to cough up the information required before you get to exchange.

Where I live the councils were still adopting so although the landscaping and roads get maintenance it does not get improved we are stuck with what we have.

Upside when the childrens play area got vandalised we were not picking up the tab.

toffee_pie

thanks for the advice guys, its a brand new development and will cover many fields, play areas - heck an eco system if you like. The service charge we are told is necessary for the upkeep of the development to satisfy the developers contract, or something like that.
I am seeing them Sunday for fitting out the house but that is pretty secondary on the grand scheme of things - met a mortage guy today and he said all new builds have charges associated with them...

nuts.
When I see the developers Sunday should they provide all this information about the service agreement as called out above? I should wait to receive this before moving forward...no need to get a solicitor yet ?(mortage should be approved next week when I will need a solicitor involved)

cheers

getmore4less

Stop spending money till you know what you are letting yourself into.

FTBAngst

toffee_pie wrote: »

thanks for the advice guys, its a brand new development and will cover many fields, play areas - heck an eco system if you like. The service charge we are told is necessary for the upkeep of the development to satisfy the developers contract, or something like that.
I am seeing them Sunday for fitting out the house but that is pretty secondary on the grand scheme of things - met a mortage guy today and he said all new builds have charges associated with them...

nuts.
When I see the developers Sunday should they provide all this information about the service agreement as called out above? I should wait to receive this before moving forward...no need to get a solicitor yet ?(mortage should be approved next week when I will need a solicitor involved)

cheers

If people keep accepting that all new build have a charge associated with them therefore it’s ok, the situation will never change. A friend almost bought a new build but couldn’t stand the uncertain. The estimate he was given at reservation went up before the house was even built. An extra £30 for a house still at foundation level! The solicitor had real problems getting any information about the estate charges and the management company. The sales office didn’t tell him anything and he had to pay a solicitor to get the little information he had. Someone else I know was told a lot of stuff by the sales person and when she moved in discovered none of it was true. She was told by the solicitor that ‘this is normal for all new builds’ so moved in anyway. It’s normal because people just accept it.

Check the Home Owner Rights Network (or HORNets). There are a lot of horror stories on there about estate charges.

With something like this you’ll either be wrestling with a management company who sees your estate and the residents as a cash cow OR if the residents on your estate have the right to appoint a chair and form a residents association (which is seen as the lesser of two evils), you’ll be stuck with the politics of the estate. Do you have time to partake in estate meetings and organising, or managing? What if you fall out with a few of your neighbors and can’t agree? There are lots of things to consider. The sales office defintiely underplay the significance and implications of the estate management

G_M

toffee_pie wrote: »

nuts.
When I see the developers Sunday should they provide all this information about the service agreement as called out above? I should wait to receive this before moving forward...no need to get a solicitor yet ?(mortage should be approved next week when I will need a solicitor involved)

They will give you lots of reassuring words. They will either dodge the hard questions, or more likely downplay the costs and upplay the services you'll receive.

None of this will be worth diddly squat unless it is wrtten into the contract, and the Title deeds - which they will not guarantee to do, or if they do promise, they'll renegue later.

If it's not writen into the contract, forget it.

I'm afraid it's Catch 22.
If most/all buyers refused to buy unless the devlopments were handed over to the council, or at least to a functioning and legally constituted Residents Association to manage, the developers would change their business model and stop these freehold service charge/management arrangements.

But as long as niaive buyers (not meant pejoratively) accept these arrangements, and the government permits them, developers will continue to tie buyers to them.

NeilCr

I'd go with the "if the residents are going to own the freehold" then yes. But you'd need to be dead certain that is going to happen

And, this can be absolutely fine. I've been a director of this estate for ten years and was a director at the block of flats I lived in before. The key is to make sure you appoint a good managing agent. In general residents have been more than happy with the way we run things (they are not shy in coming forward if there is a problem) and we have never had any issues with politics.

The hardest thing (certainly at my previous flat) can be actually getting anyone interested enough to become a director and become involved. No problem here where some of us are retired and have time on our hands. The other block was in London and had a lot of tenants.

I, of course, acknowledge that there will be those developments that do have problems with politics and people taking the whole thing over but can only go on my experiences and those of friends who live in similar developments.

If the estate has many years to go before it is finished the developer isn't going to hand over the freehold any time soon. Even if there is a Residents Association that "advises" the developer it won't have any real teeth and you'll face the battles described by OldMusicGuy.

toffee_pie

ok, so update.

I am going to continue with this as we do need to get a foothold into a property - been saying for years myself and missus will get a gaff - its help to buy so no need for a 20% deposit, its a new development in a nice secluded area so thats a positive with 2 isolated and private car park spots which i want.

Now, the maintenance fee, DWH were not really saying much other than what I already know but some of the maintenance is from the annual fee (£200 ish) and council will carry other works in the development. I need to obviously see the full run down once I see the solicitor.

I might be worrying too much, also I dont intend to stay there 25 years or whatever, it would be more like 5 or 6 and sell up.

I am going to post another thread on furnishings as It doesnt take a scientist to figure out you are getting fleeced by upgrade prices...!

thanks again.

[Deleted User]

Also think about when you come to sell, is any cost and set up going to put off other buyers who won't be lured by the ' shiny new house' as it wont be 6/7 yrs down the line.


Some people want an uncomplicated home and not bother with being part of an unknown service charges, managing agents, residents committees, disagreements about what is done and when.


Its only these new build help to buy schemes and new housing developments that have moved towards all this and the only reason is to make money for someone, ultimately not you.


I'd walk away and find a true freehold.