FTB - TP1 - Covenants - Pull Out?

NeilCr

greatcrested said:

eidand said:

I can never understand these new build estates and why people buy on them.
You pay maintenance charges but nothing is really yours, here you pay for a nice, private park but everyone has the right to use it. Then you pay council tax on top of that and you have restrictive covenants as well. Finally, you risk getting a !!!!!! house anyway for a huge amount of money because standards are so poor. 
Must be like a self inflicting pain mechanism. Run and don't look back ...

Quite. I'd never buy on one of these estates.

Trouble is property is in short supply and sometimes people have little choice. That combined with FTB ignorance, plus the fact that it's so widespread as to be 'normal', means these arrangements just get perpetuated.

If more buyers kicked up a fuss, insisted on changes to the deeds, threatened to pull out (and pulled out for real) then developers would eventually get the message and stop including these 'standard' terms.

I did - nearly 13 years ago and have been very happy here. It was by far the best house for me in the best position in the town I moved to. Built by a small local builder to a high standard. The covenants work for us in general 

I get that others wouldn't buy them (not sure why it's okay to criticise those who do though) but I am friendly with a number of my fellow residents and they have, absolutely, no complaints either. I completely agree with OldMusicGuy about only buying on an estate where the owners own the freehold. I've been a director here for many years and the set up works well. We have beautiful gardens and trees - quite a chunk of our service charge goes on this. 

It's a shame that there are these generalisations about new build estates on here.

OldMusicGuy

NeilCr said:

I get that others wouldn't buy them (not sure why it's okay to criticise those who do though) but I am friendly with a number of my fellow residents and they have, absolutely, no complaints either. I completely agree with OldMusicGuy about only buying on an estate where the owners own the freehold. I've been a director here for many years and the set up works well. We have beautiful gardens and trees - quite a chunk of our service charge goes on this. 

It's a shame that there are these generalisations about new build estates on here.

Indeed, not all new build developments are created equal. We lived for 20 years in a Charles Church new build and loved it, although now they are part of Persimmon I think standards may have slipped. We had no problems with the house in 20 years and one issue with drainage in the rear garden was fixed without quibble. The development we are moving to is being done by a mid-sized developer and their standards and specs are very good, the quality of the homes is excellent. 

The most important thing is to go in with your eyes open and understand what you are taking on, especially with regard to management of common areas and ongoing costs. 

eidand

NeilCr said:

greatcrested said:

eidand said:

I can never understand these new build estates and why people buy on them.
You pay maintenance charges but nothing is really yours, here you pay for a nice, private park but everyone has the right to use it. Then you pay council tax on top of that and you have restrictive covenants as well. Finally, you risk getting a !!!!!! house anyway for a huge amount of money because standards are so poor. 
Must be like a self inflicting pain mechanism. Run and don't look back ...

Quite. I'd never buy on one of these estates.

Trouble is property is in short supply and sometimes people have little choice. That combined with FTB ignorance, plus the fact that it's so widespread as to be 'normal', means these arrangements just get perpetuated.

If more buyers kicked up a fuss, insisted on changes to the deeds, threatened to pull out (and pulled out for real) then developers would eventually get the message and stop including these 'standard' terms.

I did - nearly 13 years ago and have been very happy here. It was by far the best house for me in the best position in the town I moved to. Built by a small local builder to a high standard. The covenants work for us in general 

I get that others wouldn't buy them (not sure why it's okay to criticise those who do though) but I am friendly with a number of my fellow residents and they have, absolutely, no complaints either. I completely agree with OldMusicGuy about only buying on an estate where the owners own the freehold. I've been a director here for many years and the set up works well. We have beautiful gardens and trees - quite a chunk of our service charge goes on this. 

It's a shame that there are these generalisations about new build estates on here.

the reason quality is so poor on many estates and we have all these abusive management charges plus all these restrictions is because people sign and buy without even reading. Then they come here and complain. I don't doubt there are decent estates but by large, the opposite is true. You pay a premium for such a build and there is a very high chance that you end up with a pot of trouble, not a home. So yes, kick up a fuss and don't buy, otherwise nothing will ever happen.

I would love to buy a nice, new build as well on a nice estate but there is no way in heck i'll pay 4-500k for something with walls that look like waves and also looks like it was built by Bob the builder's dog.

Oh and if I buy a freehold house then it needs to be freehold. No one can tell me that I cannot paint the door any way I like or that I need to go and pay someone a fee for the privilege of building a conservatory. 

toriade

OldMusicGuy said:

I've just moved from a new build (quite old when we moved as we were there for 20 years). The restrictive covenants on that one did not allow any changes to the front of the building at any time, and also that conservatories or extensions at the back could not be built within five years of occupation. I'm moving to another new build right now (just exchanged), and the restrictive covenants on that one are much less onerous. In our new development, changes to the house of any type are only restricted until the last property on the development is completed.

The impact of these covenants can be minor. It's unlikely they will be enforced once the builders have gone and the development is complete unless other residents try to stir up trouble (and even then, the residents can't enforce anything, they would have to get the freeholder involved). For example, we changed the colour of our front door (not allowed) and also removed some plants form the front (again not allowed) but nothing ever happened. 

You also need to look at the rent charge/management fee. This caused us a world of pain in our last property as the management company (FirstPort) was awful and kept overcharging us and trying to get the management fee increased. I would not move to a property with a similar arrangement in place. The development we are moving to has a residents management company arrangement, which means the residents own the freehold of the common areas.

This will come up when you sell the house (it did when we sold ours last year). It will be a possible issue in the future, it depends how desirable the house and development will be to potential buyers. 

This is a very common arrangement for freehold properties on a development with common areas. We have looked at quite a few new developments in the last few months and every one had some kind of management company arrangement to cover this. The reason I was happy with the development we are moving to is because of the residents management company arrangement (which means the residents own the freehold of the common areas). You won't be able to get the developer to change to this arrangement if it is not in place because it requires a lot of work on the part of the developer.

Also, are the roads on the development being adopted by the council? If not, this means your annual costs have to take this into account. On the development we are moving to, the council is adopting all roads and footpaths.      

Yes, roads and sewers will be adopted.
Those are part of the positive covenants by the transferor
- to construct or procure the construction of the Estate Roads and Estate Sewers serving the Property to the standard required for adoption by the local authority and drainage authority; and
- to maintain or procure the maintenance of the Estate Roads and Estate Sewers serving the Property until adoption; and
- to indemnify the Transferee against all costs and claims arising out of the Transferor’s Developer’s breach of these obligations pending adoption but subject nevertheless

toriade

princeofpounds said:

The developer can put whatever covenant they choose in the deeds of course. Of course they could vary them - it’s no harder than a lawyer typing for two minutes in a word processor, in theory. They may not want to, but it is a choice, not a rule.

I would find it unacceptable to have a permanent covenant on development - it’s just another way to screw money out of you down the line for permission. The developer has no genuine interest in the estate in perpetuity that would require such controls in good faith.

The guff about ‘standard on the estate’ is just that; what they really mean is they want to apply it to all the properties on the estate for their own reasons. That is different, and it’s a shame you are using their recommended solicitor because this is exactly the sort of thing they tend to gloss over. You also know from this variation that they are apparently lying over how standard their approach is.

As for the rent charge... well, specifics matter. If there are common areas, they have to be paid for somehow - councils often insist it exists in planning but refuse to adopt it these days, so the root cause is not always the developer actually. But new build communal management and charging practices have a mixed reputation, so you need to be confident it’s an ok set-up.

Thanks @Princeofpounds.

Exactly, I'm fine with the estate management fees as this must be paid somehow, obviously this is  uncapped  - matter for another day

This appears developer/estate management is looking for a way to fleece plot owners in perpetuity. A term has to be defined, either 5/10 years after purchase or a specific time after the developer leaves site as its done on other developments. I've pushed this back to the solicitor and will update this thread  next week. 

OldMusicGuy

toriade said:

Yes, roads and sewers will be adopted.

That's good news, because those can become significant in cost terms. You would have to contribute to a sinking fund every year to cover repairs to roads, and also to pay for insurance.

toriade said:

Exactly, I'm fine with the estate management fees as this must be paid somehow, obviously this is  uncapped  - matter for another day

This appears developer/estate management is looking for a way to fleece plot owners in perpetuity. A term has to be defined, either 5/10 years after purchase or a specific time after the developer leaves site as its done on other developments. I've pushed this back to the solicitor and will update this thread  next week. 

Watch the management fees. That's where your financial exposure is. Our agreement capped the management fees each year and did not allow for automatic increases. This is very rare, most allow the management fees to increase every year and these can grow to a significant sum over time. The management company might also try to add spurious expenditure to the annual charges to inflate the management fees (ours did, it took a lot of work to get these excluded, including two cases escalated to the Property Ombudsman). 

toriade

Update: Appears I might have to pull out. Developer's solicitor has confirmed they won't make any change to TP1, despite confirming there is another plot on the property that can make alterations after 10 years without seeking the consent of the management company. Per developer "the agreement for the 10 years was specific to that commercial deal".

My solicitor was recommended by  the developer hence he only forwards whatever the developer says and doesn't really question them.

Any pointers to steps required in pulling out? 

HTB approved, Mortgage approved subject to valuation. Valuation date  to be agreed next-week. Should I instruct Mortgage broker to withdraw the application or should I allow the valuation to be completed. If I eventually get the mortgage offer before pulling out, does that put in a good place with the same lender if I get another property before it expires. 

toriade

Any suggestions guys? Thanks in advance.

princeofpounds

To pull out, you only need to instruct your solicitor to cease work, notify the EA/Developer, and settle your bill for the legal work incurred to date. If it's part of a negotiation, you just say your offer will expire within e.g. a week unless their negotiating position changes.

You can allow the valuation to go ahead if you like. This will cost you some money. But if you are fully approved for the mortgage, the developer knows that it really is a question of near-guaranteed sale vs. no-sale when you suggest pulling out and they will know you are not bluffing.

There is no particular advantage to running through the whole mortgage application in terms of a subsequent application for another property. Perhaps some admin steps can be skipped and certain decisions can be ported, but if you would pass anyway the difference would be incremental at best.

I am curious as to their lack of explanation over the willingness to vary one property's terms. There must have been a reason... quite possibly your solicitor or someone in his office knows what it is as well. Anyway, my reply to them would be 'well, I want the agreement for the 10 years to be specific to THIS commercial deal as well'.

RelievedSheff

It is now common place for new developments to have a management charge to cover the maintenance of the shared areas and areas of public open space. Cashed strapped local authorities no longer take on these areas as part of the S38 adoptions process so someone has to pay for it and the easiest way is via a management company.

We have been lucky and the new build estate that we bought on last year has no management charges as the local authority, Bassetlaw, did agree to adopt the green spaces and there are a lot of them.

As for the covenants, at first glance ours look very restrictive but actually when you look into them further there are very few that will actually cause any great problems. A lot relate to plot frontages and keeping the development looking clean and tidy for the first five years which will presumably be when they intend to finish building.