Standard vs Special Conditions of Sale

1st_time_buyer

Hi everyone,

Hope someone is able to share their experience and knowledge. Thanks in advance for taking the time to read my long post!

Background: I'm a first time buyer, new build, freehold house, small developer, Help to Buy equity loan. Have received the contract and made enquiries back to conveyancer - they don't seem very responsive and I don't find them entirely helpful. I know they have lots to do, but I have a busy job too and am managing to respond to anything asked from me pretty swiftly. Until I received the contract in the post, and being a first timer, I had never heard of "Standard Conditions of Sale", let alone be familiar with what they are. I was never provided with a copy, yet the enclosed "Special Conditions" I received makes all sorts of references to the excluded Standard Conditions. I did a bit of online searching and found the Fifth Edition which is what the contract uses. They're excluding 1.5.2, 3.1.3, 3.3, 4.1.1, 4.3.2, 4.7 and 6.8.3.

My questions:

- Should I have been provided with a copy of the standard conditions, or was I expected to know what this is? I would expect a conveyancing solicitor to know, but I'm just Joe Bloggs. I'm not sure if this is the norm, forgetfulness, or deliberately withheld to shroud the contract in further mystery.

- For anyone au fait with the conditions: should I be concerned with any of the excluded Standard Conditions listed above? Personally, 4.7 is the one I'm most concerned with (Where the seller is, or is required to be, a member of a company that has an interest in the property or has management responsibilities for the property or the surrounding areas, the seller is, without cost to the buyer, to provide such documents on completion as will enable the buyer to become a member of that company.) Why would this be excluded? The conveyancer's cover letter said that as a buyer we would be required to become members of the management company and two homeowners on the estate become directors. Surely the Special Condition takes precedence here?

- I've come to learn that all new build freeholds, as far as I've asked (and according to all I know who've purchased one) have estate rentcharges (also referred as service charges, maintenance fees - all seems the same). I don't mind this. There is the possibility the estate will be adopted by the local authority. If not, I can stomach the charges. My understanding is that if the resident members of the management company are not happy with the managing agent appointed by the management company, they can be sacked and a new agent appointed. However, if the residents are not members of the management company i.e. they've been prevented from joining as per exclusion 4.7 noted above, then directorship of the management company will remain with the developers and be out of residents' control. I'm not sure if I'm misunderstanding this though.

Thanks again, and look forward to hearing others' experience with similar scenarios.

eddddy

Removing 4.7 doesn't, by itself, mean you won't be required to be a member of the company.

Removing 4.7 seems to mean that the seller won't provide the relevant documents on completion, and without cost to the buyer.

So I guess you need to ask your solicitor when those documents will be provided (and whether there will be a cost for providing those documents).

For example, it may be that they want to wait until the sales of all the houses complete, then they will provide the documents to  all the property owners, and make them all members of the company at the same time.

But, obviously, you need to clarify that with your solicitor. And ask questions like: "Can they back out of making you (and other property owners) members of the company?". "What if it takes years to sell all the properties and/or the seller decides not to build all the planned properties?"

1st_time_buyer

Thanks Eddddy for your reply. Those are useful questions to put to the solicitor. Although I'm waiting for answers to other questions asked two weeks ago now; it's like getting blood out of a stone!

You raised a good point about possibly waiting for all houses to complete before being sent documents - could be the case. It's a small development, so I have no concerns of it taking long to sell. 

I'll be sure to ask those bits though and carry on pushing for answers!

Thanks

bucksbloke

Service charges are generally introduced for areas of the development that will not be adopted by the Council. 

1st_time_buyer

bucksbloke said:

Service charges are generally introduced for areas of the development that will not be adopted by the Council. 

Thanks for taking the time to reply. I get that point; one of the covenants states however, that the buyer won't object to the local authority adopting the estate, should they do so later down the line. Until that time comes, I know fees will apply for maintenance. 

davidmcn

1st_time_buyer said:

bucksbloke said:

Service charges are generally introduced for areas of the development that will not be adopted by the Council. 

Thanks for taking the time to reply. I get that point; one of the covenants states however, that the buyer won't object to the local authority adopting the estate, should they do so later down the line. Until that time comes, I know fees will apply for maintenance. 

All pretty standard stuff if you're buying newbuild (or anything approximating "new").

1st_time_buyer

Thanks for everyone's response so far.

Turns out the management company is limited by guarantee, not by shares. Therefore freeholders on the estate will not become members/shareholders. Is this a normal setup?

davidmcn

They still have members (or "guarantors"). Who are those going to be if not the freeholders?

1st_time_buyer

I would have thought the current directors/Person with Significant Control, according to the company's incorporation document. But I'm not sure if this is a standard sort of arrangement - as this is my first house, I want to make sure I do as much due diligence before going ahead.

Sachs

The fact that the communal areas are to be owned by a company by guarantee rather than the developer remaining the sole shareholder is probably a good sign. However the key question remains who and how you can become a Director of the company.

1st_time_buyer

Initially, I was advised that homeowners would be elected/offered to become directors of the management company, although I've very recently found out that this information is incorrect. Seems like quite an oversight on the conveyancer's part.

So it appears that us homeowners cannot become a director. Directorship remains solely with the developers. The managing agent they have appointed to look after the estate is a company limited by shares, one of the joint shareholders being the developer.

With this kind of set up, would that mean that the managing agent could increase their fees (because why not?), and the homeowners can do nothing about it? Even if unhappy with the service of the managing agent, homeowners wouldn't have the power to sack them, as surely this could only be done by the directors? And why would they want to essentially sack the company they're employing, when they have a financial interest?

Perhaps I'm reading too much into it, so apologies if these are unnecessary questions. It might be absolutely legitimate, as why would they risk doing something which could be so damaging to their reputation? Of course, I would love to have these answered by the conveyancer, but they've taken 3 weeks to reveal this small snippet of information and my faith in them is waning!