Rentcharge and service charge on freehold

NOVAMET21

Hi all

I really hope that someone could give their experiences or thoughts on the below.

I'm currently in the process of buying a new build and I have just recieved the deeds. Whilst reading the deeds, I came across rentcharges which I was not aware of this on the freehold properties at all.

So, after researching about the rentcharges it has made me have a second thought. Although it states that these rentcharges are relatively a small fee but it contradicts the fact the property being freehold.

Also, some of the clauses in the deeds is putting me right off to be honest. Few examples,

* the property should only be used as the residence of a single family only and cannot be let or sublet.
Now I'm not thinking or letting the property but what if we want to in few years time.

* any exterior and internal alterations should not be carried out without the consent of the transferor (developer).

To top this there is a service charge of £600 per year.

I will appreciate your advise, suggestions or replies.

Thanks
AG

G_M

These are quite common on New Builds. There is a backlash against them.


For now, you take it or leave it.


I know what I'd do but there again it depends what the alternatives are for you.

NOVAMET21

Hi G_M

I knew about the service charges which I am not very keen on anyway but on top of this there is this rent charge clause which is bugging me.

Also the 2 clause I mention not sure if these are normal for new builds in othere developments.

Thanks
AG

rachel230

G_M is right when he says there is a huge backlash at the moment.
Don't believe anything you are told in the sales office.
Research..and research some more.
You will basically be allowing unknown people to take unregulated sums of money from you and your family whenever they want - ground rent/ service charges/permission fees etc. These will always increase year upon year and you will be helpless to argue without the threat of forfeiture.
Join the National Leasehold Campaign and ask there/read of the thousands of people suffering from outrageous rent charges and other onerous demands. The LKP - leasehold knowledge partnership- is also a good source of information.
Finally if you do go ahead, get your own solicitor who is experienced in complex leases. Do NOT use any solicitor recommended by the developer no matter how many incentives they offer you to use theirs!

NOVAMET21

Hi rachel230

Yes I have appointed my own solicitor and she have higlighted the rentcharge and the other 2 clauses I mentioned in my original post.

I will need to ask further on these as I dont feel comfortable with it. I saw that these rentcharges can be redeemed at a price which really should be paid by the developer.

rachel230

I'm pleased you are cautious and asking questions. Many people are swept along and wear blinkers. Go on to the websites I mentioned. You will be glad you did!

FTBAngst

agurung wrote: »

Hi rachel230

Yes I have appointed my own solicitor and she have higlighted the rentcharge and the other 2 clauses I mentioned in my original post.

I will need to ask further on these as I dont feel comfortable with it. I saw that these rentcharges can be redeemed at a price which really should be paid by the developer.

It’s another way the developer saves money themselves. On some estate they don’t build the roads to an adoptable standard (money saving) and then have a management company set up to take money from you to maintain them, but up 70 or 80% of your bill can be for the management fee. On one near me the residents were all told they have to use BT Internet because BT put in all the infrastructure for free (another cost the developer should have taken in my opinion). New build estates are rife with ways big companies save or make money off the residents.

da_rule

There is a mechanism that enables you to buy out a rentcharge (it’s usually relatively cheap). Also, a lot of rentcharges are so small that the beneficiary usually doesn’t both asking for them.

I would get your solicitor to ask when the rentcharge was last paid and then, if there has been a long period of non-payment that your sale price is reduced accordingly in case the beneficiary comes after you.

All rentcharges will be extinguished on 22 August 2037, although people will still be able to recover rentcharges that should have been paid before this date.

NOVAMET21

Hi da_rule

Good points. I will definitely ask to get rid of the rentcharge element as its freehold.

I probably think the developer only bought the land maybe 2 years ago so not much of back payment.

I read about the demolishing the rentcharges from 2037. Does this mean the rentcharge clause in the deeds will be invalid?

Istinne

Rentcharges on properties built after the introduction of the Rentcharges Act 1977 are slightly different from those on properties built before it. A rentcharge on a modern property is what is called an 'estate rentcharge'. An estate rentcharge is a rentcharge created for the purpose of making the the covenants in a Transfer enforceable by the rent owner, in this case the Developer. For example, if someone wasn't paying their service charges the Developer could use the rentcharge to enforce the clause of the Transfer which refers to payment of those service charges in Court.

I believe that the abolition of rentcharges only refers to those 'true' rentcharges that were in force before the introduction of the Rentcharges Act. I'm fairly certain that estate rentcharges will not be affected by this but I would suggest asking your solicitor just to be sure! I'm also not sure whether or not you can buy out estate rentcharges - I'm fairly certain that you can't and again I would take legal advice on this issue.

In terms of the Covenants in the Transfer you refer to, the alterations one is fairly common and is usually to protect the character of the estate, so to speak. The Housing Association that I work for operates that where a covenant like this is in force consent 'should not be reasonably withheld' but I'm not sure if that is just a company policy or a legal thing. The subletting one is more unusual with the property being Freehold but the Developer, as the land owner, can effectively put whatever they like in the Transfer and if you sign that Transfer you are agreeing to be bound by those terms. As G_M said, it's a take it or leave it sort of thing unfortunately!

It is very unlikely that the Developer will vary the terms of the Transfer for one property on the Estate but you could always ask. The only other thing I can think of is asking for a Deed of Variation in the future but there is no guarantee that the Developer or their successor in Title would agree to vary the terms!

dippa

FTBAngst wrote: »

It’s another way the developer saves money themselves. On some estate they don’t build the roads to an adoptable standard (money saving) and then have a management company set up to take money from you to maintain them, but up 70 or 80% of your bill can be for the management fee. On one near me the residents were all told they have to use BT Internet because BT put in all the infrastructure for free (another cost the developer should have taken in my opinion). New build estates are rife with ways big companies save or make money off the residents.

There's no such thing as BT's own infrastructure. Openreach own all the network, which is used by Sky, Talktalk, BT, Vodafone and so on...