New build freehold - Estate Rentcharge

anselld

NameUnavailable said:

anselld said:

One of the many perils of buying a newbuild.  Plenty of people will tell you not to entertain it.  On the other hand the residents need to pay for the upkeep of the estate somehow so if it really is the only place to meet your needs then so be it.

Rent charge is different to a management charge (which is for upkeep of communal grounds, private roads etc).

Lenders can ask for an indemnity policy so it shouldn't be a deal breaker (if that's what we are talking about).

In the context of a new build estate it must be an estate rent charge which is exactly for the purpose of collecting communal maintenance charges.

mat1964

I sent my (new) solicitor an email last night (Easter Monday) explaining the situation and he replied 8:30am this morning which I thought was pretty impressive.  He has set out the main concerns, what should be done, and asked me to get the sales office to ask their solicitors to send an example TP1 form today and he will sort it out.  

For anyone else who might have this situation now or in the future, this is part of what he said:

"I would firstly say that estate rent charges and indeed service charges generally have become very commonplace on modern developments. However you are correct to identify one of the major concerns that estate rent charges give rise to. I will really need to see the proposed transfer deed to see how the developer proposes to deal with the rent charge. From my point of view I will be looking for a provision in the deed which excludes section 121 (3) and (4) of the Law of Property Act 1925. It is these provisions that enables a rent charge owner to take possession of a property and grant a lease to trustees in respect of any rent charge owing for forty days or more. 

In the worst case scenario, namely that the deed does not exclude these provisions and the developer refuses to amend the deed, apart from withdrawing from the transaction, your main defence to prevent such action is to ensure that the rent charge is paid on time and certainly within the first forty days, even if you dispute the figure. You can take the dispute up with the management company after you have paid. Also it would be necessary for me to report the estate rent charge to your mortgage lender and advise it that the right of the estate rent charge owner to take possession applies. Please note that many mortgage lenders have specific provisions relating to estate rent charges, typically that the management company that imposes the rent charge should be owned by the residents of the development, that the relevant sections of 121 LPA 1925 are excluded, and that the deed requires the management company to serve prior notice on the mortgage lender prior to commencing any action."

Matt9300

SmoggyGoose said:

Check with the local council if there is an application to adopt the roads. Some developments there will be a charge for a year following completion, after which the roads are adopted by the local council and no charges will apply.

I have just been researching the Service Charge on my Estate and within the planning application it states:

A) MAINTENANCE GENERALLY. Maintenance shall commence from the completion of works on site and shall cease 12 months following the completion date. The contractor shall be responsible for the timing of visits to ensure the site has a well maintained appearance. The Contractor's maintenance rate shall include for all the following items:- 

However I have contacted the managment company asking if they are maintaining the site for one year and they believe the agreement to be in perpetuity, which to me, is going against what was agreed as part of the succesful planning application. 

If anyone has advice on where to go with this I would be grateful.

lizzyliz_2

mat1964 said:

I sent my (new) solicitor an email last night (Easter Monday) explaining the situation and he replied 8:30am this morning which I thought was pretty impressive.  He has set out the main concerns, what should be done, and asked me to get the sales office to ask their solicitors to send an example TP1 form today and he will sort it out.  

For anyone else who might have this situation now or in the future, this is part of what he said:

"I would firstly say that estate rent charges and indeed service charges generally have become very commonplace on modern developments. However you are correct to identify one of the major concerns that estate rent charges give rise to. I will really need to see the proposed transfer deed to see how the developer proposes to deal with the rent charge. From my point of view I will be looking for a provision in the deed which excludes section 121 (3) and (4) of the Law of Property Act 1925. It is these provisions that enables a rent charge owner to take possession of a property and grant a lease to trustees in respect of any rent charge owing for forty days or more. 

In the worst case scenario, namely that the deed does not exclude these provisions and the developer refuses to amend the deed, apart from withdrawing from the transaction, your main defence to prevent such action is to ensure that the rent charge is paid on time and certainly within the first forty days, even if you dispute the figure. You can take the dispute up with the management company after you have paid. Also it would be necessary for me to report the estate rent charge to your mortgage lender and advise it that the right of the estate rent charge owner to take possession applies. Please note that many mortgage lenders have specific provisions relating to estate rent charges, typically that the management company that imposes the rent charge should be owned by the residents of the development, that the relevant sections of 121 LPA 1925 are excluded, and that the deed requires the management company to serve prior notice on the mortgage lender prior to commencing any action."

@mat1964 just wanted to ask where you got to with this, as I am in the process of buying a new-ish build house and the lender have asked for a deed of variation to remove the rights under subsection (3) and (4) or indemnity insurance. The developer isn’t really playing nice so looking like indemnity insurance but I’m not sure I want to go down that route.

thanks