Estate charge when estate is established

DaisyMay2023

I would like to buy a freehold house. I do not need a mortgage but will be on a pension.  It is on a private estate with a management charge which all the properties contribute to. In going through the conveyancing I have discovered that the estate is around 40 years old. The management company is responsible for road, visitor parking, retaining walls, drains. So quite a bit. The management company has kept everything nice looking, but I suspect the actual infrastructure is getting in need of major repair or replacement. The problem is that there is no sinking or reserve fund. 

In keeping charges down for residents and former residents, there is no money in the pot now big things need doing. So I would be liable for 3% of the charges if I buy it. Trying to ascertain what the liability may be so I can make an informed decision, but suspect the directors of the management company (who are residents) simply won’t know. Is there an easy way to calculate liabilities - what should have been put aside over 40 years? Some standard formulae?

All I read on estate charges seems to relate to new estates and keeping the contributions down, not worrying that owners are not paying enough. I suspect I won’t be popular for pointing this out, which is ok if I don’t buy but awkward if I do. Only resolution I can see is a reduction in the price to cover the historic liabilities pertaining to the house. But even if that gives me the money to make a substantial contribution, it doesn’t account for the rest of the owners. Any ideas?

eddddy

DaisyMay2023 said:

Is there an easy way to calculate liabilities - what should have been put aside over 40 years? Some standard formulae?

There's no standard formula - it depends on what the deeds say you have to contribute towards, and the condition of those 'things'

For example,  the deeds might say you have to contribute towards maintenance of private estate roads, pavements, parking areas, street lamps, drains, play areas, benches, fences, green spaces, shrubbery, electric gates, ponds, water features, litter picking, leaf sweeping, etc - or maybe just a small subset of those.

Then you have to assess the condition of those things, to decide what maintenance they might need, and how much it might cost.

DaisyMay2023 said:

The problem is that there is no sinking or reserve fund. 

I'm not always a huge fan of reserve funds.

Rather than pay, say, £200 a year into a bank account that somebody else controls, I'd rather save £200 a year in my own bank account which I control.

Is the management company a professional 3rd party company, with indemnity insurance (in case the money 'goes missing') and a good track record?

If the management company is an ad-hoc company set up by residents (i.e. a bunch of amateur strangers), I would be very dubious about giving them control of my money, as I don't know anything about them. For example:

• Are any of them convicted fraudsters?
• Are any of them in severe financial difficulties, so be tempted to steal money?
• Do they understand what they should/shouldn't be spending my money on?
• Are they the kind of people who stick to the rules, or bend the rules hoping that nobody will find out?

And there are all the questions about who is authorised by the bank to access the bank account, do withdrawals require just one person's consent, what is the process for making decisions about how money is spent, etc?

DaisyMay2023 said:

Only resolution I can see is a reduction in the price to cover the historic liabilities pertaining to the house. 

You can certainly use that as a reason to reduce your offer - perhaps combined with a list of maintenance issues that you think might arise soon.

Obviously, it's up to the seller, whether they accept your reduced offer.