Fleecehold Valuation V Freehold

masjntt1977

Hi

Would a freehold house subject to an estate service charge be valued differently to a comparable freehold property that isn’t subject to an annual charge?

Hope this makes sense 
Thank you 

user1977

Depends how much the annual charge is. But it doesn't usually amount to much - would, say, £200 a year really affect what you'd pay for the house? And what are you comparing it to, because every property in a development is going to be similarly affected (or not).

masjntt1977

It’s not a new build it’s about 25 years old and it’s a small road if approx 12 houses. 

The service charge I’m told has never been over £300.
House and Location tick all the boxes but - I ve read that is risky to buy fleecehold as management companies can charge what they want and you have no rights to contest etc

I ve also read that they can be difficult to sell on as mortgage lenders are wary of these type of sales so wondered if they may be valued differently to a freehold not subject to a service charge 

I would be purchasing as a cash buyer and not sure whether to offer lower in view of the financial risks and potential resale difficulties. 

BobT36

It's up to you, but I personally wouldn't buy a house that has any sort of "service charge" (fleecehold stuff) on it. I really don't want to support that behaviour as I'm sick of buying things, then have to keep paying, paying and paying nowadays. Then as you mentioned there's the risks with it going up and possible difficulties with selling. It's all just so they can package up the "fees" and sell them as an investment product to make someone else rich, too. 

Each to their own, but I really would even pass up the "perfect" house for this. It's bonkers that you can't just buy and own anything nowadays, everything is a "service" that you have to continually pay for, then that requires admin on your end that just all piles up. 
With it becoming more commonplace, it does worry me for the future, though. 

Jonboy_1984

For me personally (having had a leasehold flat previously, and wanting to escape the uncontrollable cost element of life) they were zero valuation, not even worth bothering to view property’s when looking last year…

eddddy

masjntt1977 said:

Would a freehold house subject to an estate service charge be valued differently to a comparable freehold property that isn’t subject to an annual charge?

There are so many factors that influence the 'desirability' of a house, and therefore it's value, that I'm not sure you can isolate the service charge.

FWIW, I frequently visit somebody living on an estate with private roads, communal landscaped grassed areas, multiple play areas (one for under 5s, one for under 11s, etc), benches, water features, sculptures, etc.  (Another estate nearby has communal 'play fountains' for children to run through.)

I imagine that the service charges are huge. But I also imagine that the communal facilities (and resulting service charges) increase the value of the houses and flats, rather than reduce them. 

But I guess that's not always the case.

masjntt1977

Thank you for your thoughts I am just trying to ascertain if an agent / surveyor would value a fleecehold property the same as a comparable non fleecehold house, or if it’s valued lower due to the annual estate charges 

user1977

I've never heard of it making a difference to the objective market value. As you'll see above, some buyers may be wary, but you could say the same about many other "features" of any property.

Aren't you getting the property valued anyway?

masjntt1977

user1977 said:

I've never heard of it making a difference to the objective market value. As you'll see above, some buyers may be wary, but you could say the same about many other "features" of any property.

Aren't you getting the property valued anyway?

Thank you, I have read things that these types of properties can be difficult to sell, can lead to a reduction in asking price etc
I wasn’t made aware of the service charge by the agent I found out accidentally from a different property brochure from a previous agent that they used.
 I’m not sure whether to factor the potential issues with a lower offer or if the property has been priced with that already factored in.

I would have a survey but that would be after an offer made / accepted etc 

user1977

masjntt1977 said:

user1977 said:

I've never heard of it making a difference to the objective market value. As you'll see above, some buyers may be wary, but you could say the same about many other "features" of any property.

Aren't you getting the property valued anyway?

I would have a survey but that would be after an offer made / accepted etc 

Yes, that's normal (because of the weird way people do things in England & Wales...) - but it gives you the sanity check that the price isn't too far adrift from market value.

eddddy

masjntt1977 said:

Thank you for your thoughts I am just trying to ascertain if an agent / surveyor would value a fleecehold property the same as a comparable non fleecehold house, or if it’s valued lower due to the annual estate charges 

Regarding a valuation for mortgage purposes, as an example, Nationwide provide pretty specific instructions to conveyancing solicitors: 

Refer to Issuing Office (Valuer will consider any impact on valuation figure and marketability):
...
- Estate Rent Charges greater than £500 p/a (please provide details of what the charges cover)
- Service Charges greater than 0.5% of property value p/a (please provide details of what the charges cover)
- Anything that appears onerous, unusual or out of the ordinary

Link: https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/question-list/1852/

(Other mortgage lenders instructions vary and are sometimes a little less specific.)

So essentially, it's up to the valuer to decide whether a high service charges will cause a problem selling the property in future.

The valuer will probably look at things like:

• Whether the service charge is unusually high - compared to other similar properties in the area
• Whether the service charge is unusually high - compared to the communal facilities provided 

For example, if the service charge for a particular house is £2000 per year, but most other houses in the area with similar amenities have service charges of only £300 per year - the valuer might decide that particular house will be harder to sell.