Freehold with management fee

Myci85

All experience appreciated, the good, the bad and the ugly!

Looking to buy our first house and after years of working towards being able to buy, now we are ready to go there is a distinct lack of properties available in our budget. The only one we've found that ticks many boxes without us stretching to our financial limits is a 17 year old barn conversion that is part of a small development of about 15 properties. The property is freehold, but has a management company, which we'd have liked to avoid, but if this is our best bet then I want to be able to make a very informed decision. 

I've found out the annual fee is £540, which feels a bit steep considering there seems little in the way of communal areas, but I've no prior experience to know what would be a reasonable fee. I'm waiting for the EA to let me know what this fee covers, but it took weeks to even find out the fee, so I'm not holding my breath. How does this compare to what other people pay? Is it quite normal that the annual fee increases by a lot each year? The management company registered address is at one of the houses on the development, I'm not sure if this is a good sign that it's not some big, faceless company in charge?

I've seen some people saying that when buying a house with management company, there were extra solicitor fees etc to pay, is this to be expected? Has anyone struggled to sell a house like this because of the management fees?

Finally, is there any way to find out if the development has had its permitted development rights removed? There are a few things we'd be hoping to do that we assume won't need planning permission, but I'm now wondering if it's normal for small developments like this to have their development rights removed to protect the look of the area. 

DullGreyGuy

Fees vary massively depending on exactly what it covers... some include district heating so the fee covers maintaining the boiler, some have private roads, parks, green areas etc are covered by the fees. My mother's former place had a residents gym included, so had kit maintenance, insurance, energy etc 

There is normally a fee for the management itself and then a passthrough of the rest of the bills. Sometimes you may find the management company and the gardening firm are related others are independent. 

AlexMac

While you’re waiting for answers from your solicitor, or from other more expert forum members, you could try the Companies House website to suss out what kind of Company this is. At best, you’ll not only be able to look at past years summary accounts, but hopefully the Company Constitution or “Mem & Arts” (the memorandum and articles of association); membership and control arrangements, and who the Directors or key people are.

in the case of a couple of (shared) Freehold Management Companies I’ve been a member, treasurer or Director of, you could see all this online (I accept that this is a different kind of company from a freehold one, but presumably they are a registered one?}

Once you you have names, and if the Company secretary or director or members are really living on the estate, I know what I’d do!

Albeit that you’ll only get contractually binding answers ( including whether there are any limits on how the Charges will rise in future) via your solicitor.  

£500-odd seems reasonable (unless it automatically escalates). Given that in my (not directly comparable) experience of owning three “shared freehold” flats and two where the Council is the freeholder, I’ve paid between £450 - £1,500 annually. But that included building insurance for the whole block, routine maintenance of ( in three cases) 100-plus year old buildings, and in a couple, grounds maintenance. 

Olinda99

just be wary of future increases - it's not called 'fleecehold' for nothing

daveyjp

Assuming all pay equal amounts £540*15 is £8400 a year, not an insignificant amount.  I'd want a full breakdown of what it is paying for as its freehold so no common insurance, buildimg maintenance etc.

However on a rural barn conversion it could be items like private water system maintenance, waste water treatment, private streetlighting lighting etc etc.

Myci85

Olinda99 said:

just be wary of future increases - it's not called 'fleecehold' for nothing

Yes this is my main concern with buying somewhere subject to management fees as I've read horror stories about the increases. 

Myci85

daveyjp said:

Assuming all pay equal amounts £540*15 is £8400 a year, not an insignificant amount.  I'd want a full breakdown of what it is paying for as its freehold so no common insurance, buildimg maintenance etc.

However on a rural barn conversion it could be items like private water system maintenance, waste water treatment, private streetlighting lighting etc etc.

The EA did mention she thought it may include private drainage etc. I've asked for the breakdown of what it covers, but I think it's hard because the vendor is actually a housing developer as the property was part exchanged by the last occupant, so there isn't a vendor who lives there and can easily give the information. 

Myci85

AlexMac said:

While you’re waiting for answers from your solicitor, or from other more expert forum members, you could try the Companies House website to suss out what kind of Company this is. At best, you’ll not only be able to look at past years summary accounts, but hopefully the Company Constitution or “Mem & Arts” (the memorandum and articles of association); membership and control arrangements, and who the Directors or key people are.

in the case of a couple of (shared) Freehold Management Companies I’ve been a member, treasurer or Director of, you could see all this online (I accept that this is a different kind of company from a freehold one, but presumably they are a registered one?}

Once you you have names, and if the Company secretary or director or members are really living on the estate, I know what I’d do!

Albeit that you’ll only get contractually binding answers ( including whether there are any limits on how the Charges will rise in future) via your solicitor.  

£500-odd seems reasonable (unless it automatically escalates). Given that in my (not directly comparable) experience of owning three “shared freehold” flats and two where the Council is the freeholder, I’ve paid between £450 - £1,500 annually. But that included building insurance for the whole block, routine maintenance of ( in three cases) 100-plus year old buildings, and in a couple, grounds maintenance. 

Thank you. I've tried to do a bit of digging already, found the year accounts but all they seem to show is how much is sat in the account each year, which seems to keep increasing. I'm not sure if this is a good or bad thing! As in, I guess they could be building up a sinking fund for if any big repairs are needed, relaying the paving and access roads etc. It doesn't seem to show what outgoings there are. 

DullGreyGuy

Myci85 said:

Olinda99 said:

just be wary of future increases - it's not called 'fleecehold' for nothing

Yes this is my main concern with buying somewhere subject to management fees as I've read horror stories about the increases. 

Horror increases in fees is normally because of major repairs being needed and so it really depends what communal property there is that needs maintaining. Our last place, a 1980s built flat, was share of freehold so no greedy management company but service charges for a 2 bed flat were £8,000 a year however there were c10 lifts that needed major overhaul, all the wooden window frames were rotten and the roof had a large amount of problems. The quote for the scaffolding alone had come in at over £1m 

In a freehold situation you aren't going to have to pay for communal windows, lifts or roofs etc (unless there is a gym like my mothers old place) so fees should be much lower and less likely to get really big numbers however you also have less protections than a leaseholder would have. 

Myci85 said:

AlexMac said:

While you’re waiting for answers from your solicitor, or from other more expert forum members, you could try the Companies House website to suss out what kind of Company this is. At best, you’ll not only be able to look at past years summary accounts, but hopefully the Company Constitution or “Mem & Arts” (the memorandum and articles of association); membership and control arrangements, and who the Directors or key people are.

in the case of a couple of (shared) Freehold Management Companies I’ve been a member, treasurer or Director of, you could see all this online (I accept that this is a different kind of company from a freehold one, but presumably they are a registered one?}

Once you you have names, and if the Company secretary or director or members are really living on the estate, I know what I’d do!

Albeit that you’ll only get contractually binding answers ( including whether there are any limits on how the Charges will rise in future) via your solicitor.  

£500-odd seems reasonable (unless it automatically escalates). Given that in my (not directly comparable) experience of owning three “shared freehold” flats and two where the Council is the freeholder, I’ve paid between £450 - £1,500 annually. But that included building insurance for the whole block, routine maintenance of ( in three cases) 100-plus year old buildings, and in a couple, grounds maintenance. 

Thank you. I've tried to do a bit of digging already, found the year accounts but all they seem to show is how much is sat in the account each year, which seems to keep increasing. I'm not sure if this is a good or bad thing! As in, I guess they could be building up a sinking fund for if any big repairs are needed, relaying the paving and access roads etc. It doesn't seem to show what outgoings there are. 

What you want is the Profit & Loss accounts which will show incoming and outgoings.

Micro companies only have to submit their unaudited balance sheet which will just show their liabilities and assets -v- last year. Micro is under 10 employees or under £632,000 revenue. Small businesses, under £10.2m revenue or 50 employees haven't had to provide a P&L or directors statement either but there is legislation going through that will change that but no timeline for implementation.