Estate Management Companies Contract

OldChestnut

Hi all, many new estates these days seem to have some sort of management company employed to maintain public open spaces. These seem to be appointed by the developer and maybe in agreement with the local authority. The service provided by these companies is the subject of huge debate across many websites and forums. I'm not unhappy with the service they appear to provide and I bought my house in the full knowledge that this would be the case. 

My gripe is that there appears to be no review of the performance of these companies and no opportunity for other companies to compete for this business at some point in future, say every 5 or 10 years. I'm sure that would keep them all on their toes. I haven't managed to establish whether this is the case or not or if once a contractor is appointed then that's it, ad infinitum, which seems grossly unfair. I don't know of any other business service that would have that luxury. I feel that this type of estate management is here to stay but should be conducted in a competitive environment.

Can anyone advise if these companies have such luxurious contracts or are others able to compete from time to time ?

Thanks 

eddddy

Is your property freehold or leasehold?

• If your property is leasehold you have a number of legal rights that you can use to deal with "bad" management companies..

• Or if your property is freehold, but there are leasehold properties in the development, you can ask the leaseholders to use some of their legal rights to deal with a "bad" management company.

• If your property is freehold, the government are talking about reforms to give freeholders some of the same legal rights as leaseholders. (But they've been talking about it for years - so who knows if/when that will happen?)

If developers wanted to, I'm sure they could include terms in the deeds that said management companies have to compete to renew their contracts every 5 or 10 years.

So it would be down to buyers to 'force' developers to do that by saying "I'm not going to buy one of your properties unless you include those terms in the deeds". (Or the government introducing new laws that make it mandatory.)

Postik

Haven't there been instances where directors of the developer are also directors of the management company?

The whole thing is an absolute swizz and as far as I'm concerned the local authorities are complicit in ripping people off, charging them full council tax but refusing to cut the grass knowing full well the residents will be held to ransom by these dodgy setups.

I could be wrong but I believe it's usually enforced by an estate rent charge or deed of covenant and only the developer can change the management company. That's assuming the management hasn't been handed over to the residents which sometimes happens on very small developments.

I don't think the developer is bothered about keeping the management company on their toes. They're either in cohoots with them, or if not then they're not bothered once the last house is sold.

eddddy

Postik said:

Haven't there been instances where directors of the developer are also directors of the management company?

The whole thing is an absolute swizz and as far as I'm concerned the local authorities are complicit in ripping people off, charging them full council tax but refusing to cut the grass knowing full well the residents will be held to ransom by these dodgy setups.

I could be wrong but I believe it's usually enforced by an estate rent charge or deed of covenant and only the developer can change the management company. That's assuming the management hasn't been handed over to the residents which sometimes happens on very small developments.

I don't think the developer is bothered about keeping the management company on their toes. They're either in cohoots with them, or if not then they're not bothered once the last house is sold.

It's probably worth pointing out that nobody is forced to buy properties on these developments.

For example, if you don't like the idea of having to pay council tax, and then pay to have the grass cut - don't buy a property with that requirement.

(But perhaps there's an argument that developers don't make that kind of stuff clear enough in advance to buyers - so buyers don't realise. And they get a surprise when they find out.)

propertyrental

I'm buying a (freehold) property on a private estate of around 50 properties. But the estate land (and surrounding woodland) is owned by a company where the shareholders are the residents. All shareholders must be property owners on the estate. 

The (residents') company then employs a management company to collect the modest fees and provide the services. If the management company started charging unjustifiable costs for eg landscaping, or not provide the services, the residents would simply fire them.

If the set-up were different, with residents having no say or control, I would not have purchased.

Postik

eddddy said:

It's probably worth pointing out that nobody is forced to buy properties on these developments.

For example, if you don't like the idea of having to pay council tax, and then pay to have the grass cut - don't buy a property with that requirement.

(But perhaps there's an argument that developers don't make that kind of stuff clear enough in advance to buyers - so buyers don't realise. And they get a surprise when they find out.)

I partly agree, but there is a housing shortage and sometimes lack of choice.

You are correct that it isn't made clear. Developers often gloss over it and say, "It's just £150 a year for cutting the grass" and then later on it transpires the fee is doubling because there are balancing ponds, fences, woodland and play areas.

I asked a developer once, how much will the fee increase by each year, and they said by inflation. I asked if it was guaranteed not to go up by more than inflation, and they said no that's not guaranteed! Basically as a freeholder they have free access to your wallet and there's nothing you can do about it.

I did read that all these things (fences, footpaths, play areas) are stipulated as a condition of planning consent, but then at another level the council will not adopt anything that isn't simply a road or a grass verge. I don't know how true that is, but it sounds feasible.

flashg67

My last freehold house had a management co for the shared/public areas. This was originally managed by the builders until they left site then was handed over to the residents to manage. We did appoint a firm to manage it at one point but eventually decided it was cheaper and probably more efficient for the residents to manage it (as long as you have some willing volunteers). There were a few who refused to pay the fees but they soon found they had to make up any shortfall if they decided to sell...