"Estate rentcharge" is it definite No go?

Dev_MK

Definitions from TR1
"Management company" means the transferor ( Homes England ) or such other entity being either a resident controlled management company, limited by guarantee, community interest company or other company nominated by the Transferor, or the persons or body for the time being entitled to the benefit of the rentcharge, which shall thereafter maintain responsibility for the obligations on the part of the Management Company.

"Nominal rentcharge" means a perpetual yearly estate rentcharge of five pounds per annum which shall be forever charged and issuing out of the property for the purpose of enforcing the estate Covenants."
My comment: I looked through covenants and I'm generally fine with them. 159 pounds per year that i mentioned before will most likely be including variable rentcharge. Its not information from TR1 but from one of current residents.

"Variable rentcharge"  means the perpetual yearly estate rentcharge which shall be forever charged and issuing out of the property being such fair and proper proportion of the estate services costs as may be determined from time to time by the management company acting reasonably. Variable rentcharge to be paid at the respective times and in the manner specified in schedule 4 to be forever charged upon and issuing out of the property and to be paid without any deduction or set-off whatsoever.

Membership of the Management Company
The transferee by executing this transfer applies to be a member of the "New company" and confirms it will accept membership of the "New Company" when called upon to do so by the Transferor and covenant with the new company to observe and perform the covenants conditions and obligations on behalf of the transferee contained in this transfer.

"New company"
At such time as a resident management company, community interest company or other company nominated by the Transferor ( "The New Company" ) is formed the Transferor covenants with the transferee to procure that the new company enters into a deed of covenant with the transferee to observe and perform the covenants and obligations of the Management Company contained in this transfer.

Comment: It mentions resident management company several times but still seems to leave door open for third party. At least thats how I understood it. I will have to get confirmations from developer myself but before then what you think about this ?

I have to add you all are amazing and I would like to thank you once again for all time you put into this.

Dev_MK

Forgot to add that third party company Trinity was mentioned only by one of the residents. She just bought house there and thats what was in her documents ( according to her ). She was very helpful and I have no reason to believe it wasn't true but there is nothing about Trinity in my documents. Mine are from 2017 and her's 2020.Same estate same developer etc.

OldMusicGuy

OK, so it was up to the developer (Homes England) to decide what they wanted to do - the first clause leaves it open. They can set up a resident controlled management company (by far they best outcome) or they can transfer to an "other company nominated by the Transferor" (which could be a third party management company).

It then says under "New Company": "At such time as a resident management company, community interest company or other company nominated by the Transferor ( "The New Company" ) is formed...". This again confirms that when the TR1 was written they hadn't decided what to do.

So you need to find out what was option they implemented. If one of the other residents mentioned Trinity, that is a third party management company so it seems like they took that option. A quick call to the developer would confirm that. Either light a fire under your solicitor to do this or call them yourselves. You really need to know this asap. 

GDB2222

Dev_MK said:

My solicitor seems to think their only job is to let me know there is a rentcharge and so far many many of my questions were met with patronising responses from them and asking what I am worried about ( after I clearly stated what beforehand ). Then they said it is what it is some people are fine with it some not. You decide. I'm a first time buyer with no experience dealing with solicitor but that does not seem enough to me. I keep chasing them about it. I found out that some nearby houses had paragraph added that management company must notify bank in event of rentcharge not being paid. That would allow bank to pay amount due and save us from any action against us like repossession or lease put on land. I will try do achieve the same

When your solicitor tells you that some people are fine with rentcharges, what they really mean (and should have spelt this out) is that they cannot understand how anyone would touch this with a barge pole. Nevertheless, lots of people are going ahead. 

OldMusicGuy

GDB2222 said:

When your solicitor tells you that some people are fine with rentcharges, what they really mean (and should have spelt this out) is that they cannot understand how anyone would touch this with a barge pole. Nevertheless, lots of people are going ahead. 

IMO it means the solicitor is lazy and not providing value. Ultimately it is the buyer's choice but last time I bought in this situation, the solicitor talked me through the pros and cons of the covenants to help me make the decision. They highlighted the ones of particular concern. It's typical that a builder's solicitor would take this approach but an independent one should be giving better advice, especially to an FTB.

otauna

We were recently in the process of buying a new build from Charles Church. We have an independent solicitor and she advised us categorically NOT to proceed on the basis of this rent charge. We researched into it and decided it wasn’t something we were happy to accept and walked away.

We are now happily purchasing a regular freehold home with no estate rent/service charge issues and are so so glad we walked away. 

At the end of the day it’s your decision but we decided that the potential pitfalls weren’t worth it. 

CM66

I live in a house on an estate managed by Trinity and it hasn't been that bad and houses in my street have been sold many times without issue. In 11 years i think the total amount i pay has increased by £25 so its not like they are adding on mega amounts each year. I am currently pushing Taylor Wimpey and our local council to adopt the road which i'm hoping will mean i wont have any charges to pay at all in future! But i wouldnt let it put you off buying.....

otauna

CM66 said:

I live in a house on an estate managed by Trinity and it hasn't been that bad and houses in my street have been sold many times without issue. In 11 years i think the total amount i pay has increased by £25 so its not like they are adding on mega amounts each year. I am currently pushing Taylor Wimpey and our local council to adopt the road which i'm hoping will mean i wont have any charges to pay at all in future! But i wouldnt let it put you off buying.....

I suspect if you’ve been there 11 years you only have a service charge in the deeds, not a rent charge. They are very different beasts. With a rent charge the developer/management company has the right to take possession of your home for non payment. Which means they could take your house if you accidentally miss a payment of a currently unregulated industry. Who is to say the charge won’t be £100 year 1 and £5000 year 2? I know it’s potentially unlikely, however it ‘could’ happen, which is a risk. 

GDB2222

OldMusicGuy said:

GDB2222 said:

When your solicitor tells you that some people are fine with rentcharges, what they really mean (and should have spelt this out) is that they cannot understand how anyone would touch this with a barge pole. Nevertheless, lots of people are going ahead. 

IMO it means the solicitor is lazy and not providing value. Ultimately it is the buyer's choice but last time I bought in this situation, the solicitor talked me through the pros and cons of the covenants to help me make the decision. They highlighted the ones of particular concern. It's typical that a builder's solicitor would take this approach but an independent one should be giving better advice, especially to an FTB.

I hadn't realised the OP's solicitor was recommended by the builder. I would definitely not accept that at all. 

OldMusicGuy

GDB2222 said:

I hadn't realised the OP's solicitor was recommended by the builder. I would definitely not accept that at all. 

I thought they were independent but I just re-read the thread and it's not clear. If they are the builder's solicitor, their approach is what you would expect.