New build service charges and possessory title

skm1981

We are in the process of buying a house.  We're 2 months in (only 3 in the chain), we've had a few delays with issues with my house that are now resolved, and issues with the people we're buying from because they hadn't found anywhere to live.  This has all been sorted, but my conveyancer told me yesterday that the property has a possessory title. I'm wondering why it's taken her 2 months to tell me this (guessing she's been sitting on my file for a bit), but the house was only built 3 years ago and she thought that this was odd.  I spoke to the estate agent who spoke to the sellers and they said it's to do with a strip of land at the back of the garden and it affects all the houses along that row. 

My conveyancer is now making enquiries about that, but in the meantime, she's sent me through some stuff to look through and there seem to be a couple of service charges, one is a rent charge and the other is service charge.  I don't know how much these charges are, she has asked the sellers for confirmation on this, but is this normal to pay service charges on these new build estates?  I thought service charge was a leasehold thing, not freehold.  There are also numerous things that concern me, like I have to pay the management company £250 + VAT if I want to put a shed in my garden, I can't park commercial vehicles at my property, I can't park a caravan at the property (I don't have one so this is fine), I can't park anywhere else on the estate, only at  the house I'm purchasing, to allow the person who collects the rent charge to enter the house having given sufficient notice (I wouldn't be surprised to make sure I haven't painted the walls a colour they object to).  

Another thing my conveyancer is questioning is "Why did your clients' interest take 2 years to register from purchase".

I'm on the verge of pulling out of this purchase, but a lot of the houses I've been looking at are relatively new build, so I'm just wondering is this a common thing now?  I don't like the fact that I will own my house, but I can't put something like a shed up without permission.  

Also, my conveyancer has looked through the fixtures and fittings form and has said that the current owners are taking pretty much everything that isn't nailed down.  She said she would normally expect things like curtain rails to be left at the property, but they're being taken.  I mean this part isn't a deal breaker, but the way she said it, she was giving me the impression that she was telling me in a roundabout way not to buy this house - and this makes me question whether that's because she's not confident to deal with this now there are a few issues coming up, or whether she's just being genuine and that it is strange not to leave curtain rails.

RelievedSheff

Management fees and estate fees are very common on new build estates. They are to pay for the up keep of the shared and open spaces that the local authority would not adopt. 

Restrictive covenants are also part of the parcel of buying on a new build estate. They all have them.

We were lucky and the new build estate that we bought on last year has no management or estate charges but this is very much out of the ordinary now. 

skm1981

Looking at these terms, it just makes me feel as if I would be more like a tenant than an owner.  If you don't mind me asking, which developer did you buy with?  This house is Persimmons.

daveyjp

Unfortunately on new build estates they are 'normal', but that doesn't make them right.  Legislation hasn't kept up, so mechanisms such as rent charges are being used to enforce for non payment of service charges. 

The presence of a rent charge would be enough to make me walk away.

AdrianC

skm1981 said:

My conveyancer is now making enquiries about that, but in the meantime, she's sent me through some stuff to look through and there seem to be a couple of service charges, one is a rent charge and the other is service charge.  I don't know how much these charges are, she has asked the sellers for confirmation on this, but is this normal to pay service charges on these new build estates?  I thought service charge was a leasehold thing, not freehold.

Just think about all those common parts of the estate, the grassed areas, the footpaths... Who's paying to maintain those? Not the local authority, that's for sure.
I bet the roadways aren't adopted - which means the local authority aren't paying to maintain them.
So who is? That's right. You, the residents. And how? Through those service charges.

There are also numerous things that concern me, like I have to pay the management company £250 + VAT if I want to put a shed in my garden, I can't park commercial vehicles at my property, I can't park a caravan at the property (I don't have one so this is fine), I can't park anywhere else on the estate, only at  the house I'm purchasing

They're not dissimilar to the covenants we had on our old place, built in the late 1890s.

I'm on the verge of pulling out of this purchase, but a lot of the houses I've been looking at are relatively new build, so I'm just wondering is this a common thing now?

Yep.

I don't like the fact that I will own my house, but I can't put something like a shed up without permission.

They're usually to keep a nice consistent visual frontage while there's still new-build buyers wandering around. Saves them having to deal with the "But I want a fountain in my front garden like THAT HOUSE!"
Once the developer have finished work on the estate, sold everything, and moved off... they'll probably not give a toss about things like that. Probably.

princeofpounds

Google 'fleecehold'. Developers took a lot of the tricks used to extract value from leaseholds and translated them to freeholds using covenant law instead of the lease agreement. It's not unusual, it's rarely a deal breaker on its own, but it is unappealing and for some people it's just not the right thing to buy.

The rentcharge is basically money for nothing. In many cases they can be redeemed. You should just think about this as an extra cost on top of your purchase. https://www.gov.uk/guidance/rentcharges#how-to-redeem-your-rentcharge

The service charges are also quite normal these days. Councils have taken up the practice of approving planning for new estates but refusing to adopt the communal areas. I think this is quite wrong (unless an estate actively wants to stay wholly private of course) - it effectively creates a second-class tier of housing that pays full council tax but has one of the major benefits taken away. But it is what it is. It's not usually too punitive but it will be something that is somewhat out of your control.

A lot of the restrictive covenants are not really that important. Again, I think this is a problematic area of law - developers place a whole load of them on a property to ensure they can control the environment whilst still marketing. Then when everything is sold, they usually disappear (unless a fee is to be gained) and there are no sunset clauses for these measures. Over time, everyone breaches the covenants and then you end up with messy situations where you can assume things are 98% fine, but you cannot technically exclude the developer coming back to enforce. So we end up with indemnity policies and properties in perpetual breach. Most people just take the view that it's ok to live with that, but it's hardly satisfying.

Personally, I wouldn't buy a property like this unless it was quite a bit cheaper. But thousands do each year.

skm1981

This was what I thought, it's fair enough having to pay a service charge for maintenance of the area, but I'll still be paying full council tax.  I just don't think this property is going to be for us.

AdrianC

skm1981 said:

This was what I thought, it's fair enough having to pay a service charge for maintenance of the area, but I'll still be paying full council tax.  I just don't think this property is going to be for us.

Of course you'll be paying council tax. Your council tax pays towards the things the local authority in your area do maintain. You cannot pick-and-choose which bits apply to you.

"My house hasn't caught fire, so I don't want to pay for the fire brigade. I don't have kids, so I don't want to pay towards the education authority. My granny's already dead, so I don't want to pay towards adult social care."

RelievedSheff

skm1981 said:

Looking at these terms, it just makes me feel as if I would be more like a tenant than an owner.  If you don't mind me asking, which developer did you buy with?  This house is Persimmons.

We bought with David Wilson.

It doesn't matter what developer you are looking to buy through though. It is the local authority who dictate what will and won't be adopted and the local authority who want the green spaces as part of planning. If they won't adopt them then there has to be a management company who will maintain them.

RelievedSheff

princeofpounds said:

Google 'fleecehold'. Developers took a lot of the tricks used to extract value from leaseholds and translated them to freeholds using covenant law instead of the lease agreement. It's not unusual, it's rarely a deal breaker on its own, but it is unappealing and for some people it's just not the right thing to buy.

The rentcharge is basically money for nothing. In many cases they can be redeemed. You should just think about this as an extra cost on top of your purchase. https://www.gov.uk/guidance/rentcharges#how-to-redeem-your-rentcharge

The service charges are also quite normal these days. Councils have taken up the practice of approving planning for new estates but refusing to adopt the communal areas. I think this is quite wrong (unless an estate actively wants to stay wholly private of course) - it effectively creates a second-class tier of housing that pays full council tax but has one of the major benefits taken away. But it is what it is. It's not usually too punitive but it will be something that is somewhat out of your control.

A lot of the restrictive covenants are not really that important. Again, I think this is a problematic area of law - developers place a whole load of them on a property to ensure they can control the environment whilst still marketing. Then when everything is sold, they usually disappear (unless a fee is to be gained) and there are no sunset clauses for these measures. Over time, everyone breaches the covenants and then you end up with messy situations where you can assume things are 98% fine, but you cannot technically exclude the developer coming back to enforce. So we end up with indemnity policies and properties in perpetual breach. Most people just take the view that it's ok to live with that, but it's hardly satisfying.

Personally, I wouldn't buy a property like this unless it was quite a bit cheaper. But thousands do each year.

Fleecehold is nothing to do with management charges.

Fleecehold relates to leasehold properties.

Once again the two have been completely mixed up.

RelievedSheff

skm1981 said:

This was what I thought, it's fair enough having to pay a service charge for maintenance of the area, but I'll still be paying full council tax.  I just don't think this property is going to be for us.

The estate management charges are nothing to do with your council tax. Council tax pays for council provided services in your local area. Estate charges pay for the maintenance of your housing estate areas which are private to your estate. The two are completely separate entities!!