Fleecehold Massive Hike in Fees

bealine99

We happily moved into our new build "Berkeley Homes" house two years ago.   We were fully aware of the Fleecehold Management Fees and almost pulled out of our purchase.   Our solicitor was concerned at the high management fee and we delayed Exchange of Contracts while we asked our solicitor to clarify some areas of concern........this is the email and her responses, which came from the developer's solicitor:

Dear Solicitor Y

Thank you for your Email and the Contract received in the mail on 9th April 2021. Please note the incorrect spelling of "xyz Grove" on Line 3 of the opening page headed "Contract For Sale". A "d" has been added erroneously.

Thank you also for highlighting your areas of concern surrounding the Estate Maintenance Charge which, at £713.95 pa, does seem excessive. We had no idea that this would be held as a "Charge over the Property" and, having read horror stories concerning "cowboy" Maintenance Companies who have attempted to repossess properties without even advising the owners of a debt, we would like to seek assurances from Berkeley Homes before committing. As we are purchasing a Freehold property without recourse to a mortgage, we do not want any third party at all having the right to a financial interest in our unencumbered property. We feel this should have been adequately explained by Berkeley Homes at the point of sale and, therefore, we are requesting that the Contract is amended accordingly. In addition, please, we are seeking the following answers with regards to the Estate Maintenance Charge:

Unfortunately this is standard for all new build matters with a maintenance charge. Management company cannot just seek entry to the property. You have to be in breach of the conditions ie that you have not paid your service charges for them to take any action.

1. Can Berkeley Homes advise, please, the relationship between itself and its subsidiary St Edward and the subsidiary of St Edward, SEH Manager. SEH Manager is referred to as the company administering the Estate Maintenance. At what point does Mainstay Property Management become involved?

Berkeley Homes is a very large developer and like many developers they have sister companies and subsidiary companies. St Edwards and St James are a subsidiary of Berkeley homes. I am asking them when Mainstay will be become involved but is usually once the first completions have taken place.

2. Mainstay Property Management have a very mixed bag of reviews on Trustpilot and other independent review sites, including some, frankly, horrific tales. What safeguards, if any, are Berkeley Homes putting in place to ensure residents see the estate looked after properly and that increases in the charges are kept within the RPI guidelines? This is of concern as, purchasing the property with a view to retirement, we do not wish to have a disproportionate amount of our disposable income swallowed up by hikes in Estate Charges.

Any rises in service charges have to be accounted for and detailed accounts have to be provided each year.

3. If, for any reason, we wish to sell our home, or our Executors end up selling after we pass away, is there a "Pack" required from Mainstay before the property can be sold. If so, what is the current cost of this "Pack" and how long does it take to obtain? There are some very disturbing tales of sales falling through because Mainstay have hitherto failed in this regard and the administrative charges for providing a few photocopies have been hideously expensive.

When a property has maintenance charges it is usual for certain documents to be provided on sale of the property for the Buyers solicitors. The paperwork for a freehold is a lot less than leasehold paperwork. Charges vary with all management companies and can range for £50 to £500.

We are sorry for throwing these questions into the mix at this stage, but the area of excessive Estate Maintenance Charges is of grave concern to MP's who have even coined the phrase "Fleecehold" to describe it.

Many thanks

Kind regards

Mr and Mrs Bealine99

Now, the Management Company "First Port" have demanded a 28.92% increase in Estate Management Fees based on a spurious estimate and without providing any accounts for the previous two years.   When we have asked for the accounts, First Port have said they will not be available for six months.   We are all very concerned and are in the process of setting up a Residents Association.

As Berkeley Homes Solicitors gave an assurance that detailed accounts have to be provided each year, do I have any legal course of redress against Berkeley Homes?

As Freeholders, if we have adequate numbers joining the Residents Association, do we have any rights to take over Management ourselves please?

Thank you for your input. 

comeandgo

For takeover management it will depend on the deed conditions.  We looked into it for our estate but to be honest getting money from all the householders was our stumbling block, at least first port have the legalise behind them for non payers.  They do have to provide accounts but is there a time scale for provision?  Ask for a copy of draft accounts as they can be produced without the same detail as final accounts which can take up to a year.  

Eschatologist

We recently pulled out of a purchase because we feared this would happen. Freeholders have no rights what so ever when it comes to service charges. Read this it doesn't look like the law is going to change anytime soon and I can only see service charges going up due to inflation etc.

Tiglet2

OP, you should edit your post and delete the identifying names

Jonboy_1984

Coming from a leasehold flat we used to get a service charge demand at the start of the financial year along with details of the BUDGET used to calculate it.

About six months after the end of the financial year we then received the ACCOUNTS with a reconciliation to the original budget (and often a credit note for the difference to apply against the following year).

Might be worth asking for the budget rather than accounts just to be clear on what you want to see.

Tiglet2

Bealine99, I'm glad to see you have altered the identifying parts to your original post, however, I did a google search of the development and found that it was newly built in 2009.  Surely the management of the estate should be well established by now and with published accounts for the previous three years?

daveyjp

There is no requirement to provide accounts and no freehold tribunal to challenge the charges, so you are down to litigation and court action if you think you are being overcharged.

This response:

Any rises in service charges have to be accounted for and detailed accounts have to be provided each year.

Is complete 'word salad' as it gives no specifics whatsoever.

comeandgo

Tiglet2 said:

Bealine99, I'm glad to see you have altered the identifying parts to your original post, however, I did a google search of the development and found that it was newly built in 2009.  Surely the management of the estate should be well established by now and with published accounts for the previous three years?

It is usually after final house sold that the management company take over, there is nothing for them to do while diggers are churning up the ground.

Tiglet2

comeandgo said:

Tiglet2 said:

Bealine99, I'm glad to see you have altered the identifying parts to your original post, however, I did a google search of the development and found that it was newly built in 2009.  Surely the management of the estate should be well established by now and with published accounts for the previous three years?

It is usually after final house sold that the management company take over, there is nothing for them to do while diggers are churning up the ground.

Yes, I understand that.  However the letter refers to Mainstay Property Management, not the current management company, First Port.  So, that letter isn't current.

bealine99

Just to clarify, Mainstay was taken over by First Port in June last year.   The Property Manager, however, remains the same.

Postik

I'm sorry this has happened but when people purchase these fleecehold properties you really are taking a chance and leaving your wallet wide open.  There is nothing you can do other than take them to court, and the really perverse thing is if they lose, they can put their losses through the business as an expense, so you then end up paying for it via your management fee!

I think accounts are due 9 months after the company's year end.  6 months if it's a public limited company.  So they don't have to file them the day after their year end - it takes time to prepare them.  When you download them you might have trouble making sense of them unless you're an accountant, and I wouldn't expect them to go into minute detail, they will just contain headline figures.

The other mistake was believing any reassurances whatsoever from Berkley's solicitor.  They are on Berkley's side and just want to sell you a house.

Any rises in service charges have to be accounted for and detailed accounts have to be provided each year.

I really don't think this statement helps you.  Any profit, loss or expenses have to be "accounted for" by a business.  But as far as official accounts go, this can simply be a line entry.  So if the service charge goes up, then the figure in the accounts needs to go up.  They could argue this is being "accounted for".  The fact that the management company need to provide "detailed accounts" each year is the same as any other limited company in the UK.