New build freehold “management fee”

SharkMoney

New build development near us is selling houses freehold with £275 annual fee fixed for 5 years. I don’t have a problem with this but concern is over what happens after 5 years. It’s a house not a flat, are flat service charges different?

daveyjp

Depends what the legal pack and transfer documents say.

Flat service charges are very different.  Don't confuse the two.

Unicorn_cottage

Don't get involved. I used to work for a company that did green space management on new build developments. It is a nightmare. It is unnecessary risk.

princeofpounds

Leasehold flat service charges and leasehold house service charges are not fundamentally different. The freeholder arranges work to maintain the common areas (whatever they may be) and bills leaseholders for it, all in accordance with the terms of the leases and statute.

However, often people confuse leasehold service charges with:
a) ground rent - which is simply a payment due from a leaseholder to the freeholder
b) rent charges, which are a payment due from a freeholder to someone (usually a previous freeholder who developed the site) c) freehold with service charge obligations, which are similar in effect but based on a different legal arrangement (and often confusing as many people believe that freeholds cannot have such obligations).

Your terminology is a imprecise with regards to the categories above so we can't be sure what you mean. Is this freehold or leasehold, a service charge or some kind of rent, a commitment by a freeholder, managing agent or receiver of rent? Etc.

But I'm willing to bet that whatever the situation is, the cost will go up after 5 years...

OldMusicGuy

You need to understand the way maintenance fees are calculated, how the common areas are managed (eg residents management company) and also find out things like are the roads going to be adopted by the LA before you commit to anything. The EA will plead ignorance and try not to give you any info on these until you have reserved a plot and got emotionally invested in the property, by which time you may overlook things in the TP1 that will come back to haunt you.

I lived for 20 years in a freehold house with this arrangement and am just about to buy another with a similar setup. It needn't be too bad but you must be fully aware of what you are letting yourself in for before you commit. And I can guarantee that as soon as the five years is up, the management company will look for all kinds of ways to increase the annual charge (unless it is a residents management company, in which case the residents decide what the charges are).  

RelievedSheff

It is not uncommon on new build estates to now  have a management charge to cover the maintenance of the open spaces and shared areas on these developments. This has come about as the local authorities, in most cases, will no longer take responsibility for these areas. 

We were lucky when we bought last year as our estate has no management charges but this is very uncommon and not the norm.

As has already been said expect the charge to rise after the first five years. By how much is unknown as these charges are unregulated.

Swami_Trinel

I've just pulled out of a purchase for this reason, although there was no mention of it being fixed for any length if time.
The detail in the TP1 stated that the entire running costs of the management company were to be assessed annually and divided between the freeholders. The whole costs: including their employee pension, "admin fees", etc. Most objectionable, was the clause that stated if the management company felt the freeholders contribution was inequitable they reserve the right to reassess and charge more: This process can be repeated as often as they deem necessary. This isn't to mention the other spurious charges imposed in freeholders such as an "admin fee" for giving permission to erect a shed or make other similar changes and the fee of (no less than) £75+VAT when seeking the property. 
Don't get emotionally invested in the property until you have seen the TP1 and all the conditions and you're satisfied that you're not going to be regretting the decion in 5+ years time. If you're happy with everything, by all means fall in love with it, but until then your judgment may be clouded if you set your heart on it. 

Nymbus

SharkMoney said:

New build development near us is selling houses freehold with £275 annual fee fixed for 5 years. I don’t have a problem with this but concern is over what happens after 5 years. It’s a house not a flat, are flat service charges different?

Can I ask why you don’t have a problem with a charge? We all pay council tax so why should some people pay an extra fee that others do not have to pay? 

I won’t buy a new build for this reason and in fact we are looking to move and if a property we see listed and we are interested in  is likely to have been built in the past 15 odd years, we ask the agents to confirm first if there is a fee. Twice we have refused to view a property because of the fee. I’m just not interested in a property with a charge.