Freehold house with maintenance charge

OldMusicGuy

ONEONEONE said:

Alot of 'fleecholds' will not allow a residents association to take over the service charge arrangements as deeds dictate the management company for now and forever - there are different arrangements for these private estates as per the TP1 when you buy the property. There is also often no ombudsman option available to fleechold properties (will depend if the management company has voluntarily signed up to it or not)

You misunderstand me. I know that currently residents cannot form a management company. However, a residents' association (NOT management company) can represent ALL the residents to the Ombudsman. If you do not have a residents' association and you want to complain to the Ombudsman, every resident will have to do so individually. This really complicates getting things sorted out (believe me, I know!). Once you have a residents' association, that can act for all the residents in dealings with the Ombudsman, which makes getting money back easier (and means everyone gets reimbursed). But until the law is changed, on a freehold estate, a residents association cannot take over the running of the common areas via an RMC (like leaseholders can do).

That's why anyone buying a freehold with maintenance charges needs to understand the differences between these things and what action they can take. Finding out who the management company is (or if there is a residents management company, which is preferable IMO) also makes sense because you can see if they are covered by the Ombudsman. If not, avoid at all costs. 

NeilCr

OldMusicGuy said:

Titus_Wadd said:

This year's maintenance bill estimated work costing us nearly £5k.  They're short of money and they are banking on us not challenging it.  But if we don't nip this in the bud they'll keep inflating the bill.  So we'll be seriously considering selling my car, no holidays for decade and no helping our kids get on to the property ladder!  

I agree that you need to be very cautious when buying a property with a "fleecehold" situation. However, in your circumstance (and to anyone else thinking of doing this), form a residents' committee, challenge the work being carried out and don't be afraid to use the Property Ombudsman. It's time consuming but it can help keep the work done at a realistic level.

However, you must know what you are letting yourself in for when you buy. 

Weathergirl_76 said:

I don’t know too much about these circumstances, but I thought companies were not allowed to increase fees without justification? 

That's not quite true. They will be governed by the terms of the maintenance agreement that forms part of the contract of sale. There are no standard terms for this. The way many work is that the management company carries out the required work and can also charge a management fee which is calculated as a %age of the work done. So the more work they carry out, the higher the management fee. So the way it works is they do whatever they want on the estate, the residents have to pay, and you can then try to challenge it later. In some cases, if you refuse to pay, the estate rentcharge provisions have serious legal implications for the homeowner.

So if you think what they do isn't "reasonable", you will have to pay upfront and dispute it later. We did this in my last place which involved escalating things to the Ombudsman twice. It took a lot of time and effort. 

In my last place, for the first 10 years the management company did very litle. They were then acquired and all of a sudden we started getting bills for things like health and safety inspections (which we had never had before), which they then used as justification for filling in a hole for a basketball post that one of the residents had in their front garden because it was a "trip hazard".  Our charges started to go up every year whereas they had been pretty static before that. 

Agree, in general

Just one point. Our MA charges a flat fee per property rather than a percentage of spend. From the work we did when we were changing MAs others do the same 

ONEONEONE

OldMusicGuy said:

ONEONEONE said:

Alot of 'fleecholds' will not allow a residents association to take over the service charge arrangements as deeds dictate the management company for now and forever - there are different arrangements for these private estates as per the TP1 when you buy the property. There is also often no ombudsman option available to fleechold properties (will depend if the management company has voluntarily signed up to it or not)

You misunderstand me. I know that currently residents cannot form a management company. However, a residents' association (NOT management company) can represent ALL the residents to the Ombudsman. If you do not have a residents' association and you want to complain to the Ombudsman, every resident will have to do so individually. This really complicates getting things sorted out (believe me, I know!). Once you have a residents' association, that can act for all the residents in dealings with the Ombudsman, which makes getting money back easier (and means everyone gets reimbursed). But until the law is changed, on a freehold estate, a residents association cannot take over the running of the common areas via an RMC (like leaseholders can do).

That's why anyone buying a freehold with maintenance charges needs to understand the differences between these things and what action they can take. Finding out who the management company is (or if there is a residents management company, which is preferable IMO) also makes sense because you can see if they are covered by the Ombudsman. If not, avoid at all costs. 

Sorry, yes I misunderstood you there - you make some really good points. Looking into it sadly the one I'm looking to buy doesn't look as if it's part of the ombudsman scheme, darn! 

ONEONEONE

ONEONEONE said:

OldMusicGuy said:

ONEONEONE said:

Alot of 'fleecholds' will not allow a residents association to take over the service charge arrangements as deeds dictate the management company for now and forever - there are different arrangements for these private estates as per the TP1 when you buy the property. There is also often no ombudsman option available to fleechold properties (will depend if the management company has voluntarily signed up to it or not)

You misunderstand me. I know that currently residents cannot form a management company. However, a residents' association (NOT management company) can represent ALL the residents to the Ombudsman. If you do not have a residents' association and you want to complain to the Ombudsman, every resident will have to do so individually. This really complicates getting things sorted out (believe me, I know!). Once you have a residents' association, that can act for all the residents in dealings with the Ombudsman, which makes getting money back easier (and means everyone gets reimbursed). But until the law is changed, on a freehold estate, a residents association cannot take over the running of the common areas via an RMC (like leaseholders can do).

That's why anyone buying a freehold with maintenance charges needs to understand the differences between these things and what action they can take. Finding out who the management company is (or if there is a residents management company, which is preferable IMO) also makes sense because you can see if they are covered by the Ombudsman. If not, avoid at all costs. 

Sorry, yes I misunderstood you there - you make some really good points. Looking into it sadly the one I'm looking to buy doesn't look as if it's part of the ombudsman scheme, darn! 

Can I ask a question of you as you know a lot about this stuff. As a last hail mary, seeing as the property i'm buying isn't look great in terms of favourability, I have seen part of the deeds and they make mention of managing the estate on a 'not-for-profit basis' and with the principles of 'good estate management' - are those terms in any way legally enforceable? In the same section it does go on to detail what you can and cannot challenge and to be honest they rule out quite alot eg: you cannot challenge if the work can be done cheaper etc. This is probably one for the solicitor but they mentioned the ombudsman which this company do not sign up to. 

OldMusicGuy

NeilCr said:

Just one point. Our MA charges a flat fee per property rather than a percentage of spend. From the work we did when we were changing MAs others do the same 

I assume you mean the management fee part of the charges rather than the overall cost? Just for clarity, the way our management scheme worked was that each property paid a share of the total costs spent on the estate with a management fee on top, which was calculated as a percentage of the total spend. There was no fixed escalation for the management fee either, and I think this may be uncommon, as most management fees seem to have an annual escalation built in (ours did not, which the new management company was surprised about).

ONEONEONE said:

Can I ask a question of you as you know a lot about this stuff. As a last hail mary, seeing as the property i'm buying isn't look great in terms of favourability, I have seen part of the deeds and they make mention of managing the estate on a 'not-for-profit basis' and with the principles of 'good estate management' - are those terms in any way legally enforceable? In the same section it does go on to detail what you can and cannot challenge and to be honest they rule out quite alot eg: you cannot challenge if the work can be done cheaper etc. This is probably one for the solicitor but they mentioned the ombudsman which this company do not sign up to. 

Those terms are legally enforceable if you are prepared to take the management company to court and challenge them about what is "reasonable". This means you will have to pay all the legal costs to do this and you may not win. So very high risk indeed, and in reality I don't think anyone would ever try this. You would also need to get all the residents to agree to taking legal action unless you want to pay all the legal costs yourself. Using the Ombudsman was slow and painful but it did work.

Personally this sounds like the worst possible situation. However, at the end of the day it's a trade-off between how much you like the house and the likelihood of how much these costs will escalate. You may also have issues selling the house - after my experiences in our last place I would rule your house off any potential purchase list. We just bought a new build and one of the clinchers for me was that all the estate roads are adopted by the council and there is an RMC in place.