The New Build Management Con

Noneforit999

We bought a new build in 2015 (freehold) and were made aware we had a management fee each year for the upkeep of the estate, it’s 85 properties in total. They couldn’t tell us what the fee would be.

Year 1 we had no charge as the estate was still being built.

Year 2 it was £150 plus another £25 at the end of the year as they overspent.

Year 3 it was £200 and another £50 for an overspend

I am predicting it’s going to be £300 in year 3 with a year on year rise for the future.

On top of this we have a covenant in our title deeds which says we need to get a certificate from the management company if we want to remortgage.

We remortgaged at year 2 and which was £144 and we are going through another remortgage now and suddenly it’s £240 which is a nice increase considering it’s money for old rope.

Our neighbours moved last year and he was forced to pay £450 for a management pack for the buyers of his house.

I understand paying for the upkeep of the estate, although we have no say on how or where the money is spent. In fact I wonder if they are using their own contractors for the work and simply moving money around.

My issue is with the remortgage fees which seem to go up each time and they are not published anywhere so basically they have you over a barrel and could literally charge you anything!

The best part is that the director of the management company is a director for both the original developer itself and also about 50 other management company so clearly the developer spins up a new management company for each development and rakes even more money in!

It seems to be one big unregulated con and whilst I realise I signed the paperwork when we purchased, if the fees keep going up it’s going to make the house unsellable.

Half the fees are admin costs, £900 per year for sodding postage!

Is this what the housing market has come to? An increase in council tax each year despite having to pay separately for the upkeep on an estate that the Council don’t even manage.

A bit of advice for anybody thinking of buying a new build. Unless it’s literally your only option, don’t bother, it’s not worth the hassle.

SallyAnneBooth

Hello,

I went through a similar thing on very small development. I negotiated to get the Service Charged fixed for the common areas but in the end pulled out of the sale as it just didn't feel right (also very helpful info from the knowledgeable people on this forum helped!).

You're absolutely right that is a scam, especially when the Developers are also the owners of the Management Company.

I would only opt for a new build if there were no common areas, or the Management Company is accountable to the residents.

There is no way to challenge these charges especially for Freeholders, and as you say they can charge whatever they please. There was a thing about this Parliament but AFAIK it had its first reading in Nov 2018 but the 2nd reading has been delayed twice in 2019 with no new date scheduled.

ACG

Council tax pays for the NHS, roads, bin collection and so on.
Management fees pays for erm... cutting the grass areas in the development?

If you own the freehold of the property, how would the developer/management company know you were remortgaging? (genuine question).

Could you not all get together and refuse to pay/ask for them to justify their costs? £900 for postage is probably not a lot if they are still working on the development (or were during the accounting period), things need to be sent recorded delivery and that can easily a fiver for just a letter.

I am not justifying it btw, I would be pretty miffed too, but unless you all get together, there is probably little you can do. You could name the developer so people know to try to avoid them, which may make them think about doing it again.

Noneforit999

ACG wrote: »

Council tax pays for the NHS, roads, bin collection and so on.
Management fees pays for erm... cutting the grass areas in the development?

If you own the freehold of the property, how would the developer/management company know you were remortgaging? (genuine question).

Could you not all get together and refuse to pay/ask for them to justify their costs? £900 for postage is probably not a lot if they are still working on the development (or were during the accounting period), things need to be sent recorded delivery and that can easily a fiver for just a letter.

I am not justifying it btw, I would be pretty miffed too, but unless you all get together, there is probably little you can do. You could name the developer so people know to try to avoid them, which may make them think about doing it again.

They put a covenant (think that's what its called) in your title deed which basically says you need a certificate from them if you want to remortgage, obviously the solicitor sees this on the deed and refuses to arrange completion until they get the certificate, once you have paid the unknown fee that goes up each time. It is a freehold by the way, not a leasehold.

Fairly sure this type of con is standard for most new build estates these days, its standard where we are anyway and all developers seem to do it. Our developer was Bellway but as said, they are all cashing in on it as its easy money.

They have to send your their accounts each financial year but it just lists headings like 'Postage, Lighting, Pathways etc', there is no detail on who they used or how they obtained quotes etc. I suspect as the developer owns the Management company, they use the same contractors that build the developments and then charge a fee as if they had gone out and found one in the yellow pages so I have no idea if we are getting value for money as we are not allowed to ask for specifics, just what areas are costing what.

I should be able to ask them what process they follow to obtain quotes for cutting grass or fixing pathways etc but we are not allowed this, we just have to assume they are getting a good deal and not giving a backhander to their mates and then pocketing the difference.....

SallyAnneBooth

I should be able to ask them what process they follow to obtain quotes for cutting grass or fixing pathways etc but we are not allowed this, we just have to assume they are getting a good deal and not giving a backhander to their mates and then pocketing the difference.....

That's most likely exactly what is happening, they have no incentive to find the best value for money deal as you're obligated to pay the charge regardless.

ACG

Speak to your MP about it.

kingstreet

This would have been better in HBR&S.

It's in the wrong forum in here and is not getting the kind of traffic it would have attracted over there.