Opinion: Fleecehold as a high risk investment?

PRLB

Dear all,
Like many others on this forum, I discovered late in the buying process that the property I’m purchasing is a fleecehold—a freehold with ongoing estate charges. I’m now at a crossroads, trying to decide whether to proceed or pull out.
I’ve read through many of the discussions here, which have been incredibly helpful in understanding the issues, consequences, and implications (including the fact that a home is not just an investment but also a place to live). However, much of the content is a few years old, and I wanted to ask for your updated views on the current situation.
Specifically, I’m struggling to assess whether fleecehold properties are more likely to lose value or become harder to sell in the future—say, over the next 5 to 10 years - than other properties. I realize this involves a lot of speculation, but input from those with more experience would be greatly appreciated.

For context, the property in question is in Penarth Heights, Cardiff. For simplicity, let’s assume that the estate charges remain relatively low and the service provided is adequate. So, the impact of being a fleecehold would come primarily from broader buyer perception and general UK trends, rather than issues specific to this development.

My current opinion is that, even if everything runs smoothly with the estate management in Penarth, there’s a significant risk that public sentiment will increasingly turn against fleeceholds—leading to potential devaluation or reduced marketability. I also feel that meaningful legal reforms to protect fleecehold homeowners are unlikely to be significant in the next 5–10 years.

Given that this purchase is a major financial decision, and ease of resale is important to me within the next decade, I’m leaning toward viewing fleecehold as a high-risk investment.
I’d really value any thoughts or insights from others who’ve faced similar decisions.
Best regards,
Paulo.

eddddy

The issue is that, when new developments are built, councils are becoming less willing to adopt the roads, green spaces, play areas, etc.

I doubt that situation will change. So if people want to live on new developments (with roads, green areas, play areas etc), they will have no choice except to pay estate management charges.


Legislation was planned to protect freeholders from unreasonable estate management charges. Unfortunately, the legislation has got bogged down (for other reasons). But perhaps it will eventually emerge in the next few years.

Emmia

Personally as someone in a leasehold flat I wouldn't buy/consider a property on an estate/development with service charges. The next place will be a straight freehold.

The kind of properties I like, though won't be on new build estates like this.

The answer, if you don't like the lease aspect, is simply not to buy.

daveyjp

Very much down to the detail of what the payment goes towards.

If its cutting a small area of grass kids play on at £100 a year its a different approach than a purely private development.  On private development the maintenance costs of roads, pavements, drainage, sewers, foul water treatment, sustainable drainage system, streetlighting, broadband ducting, play areas could all be paid for by the homeowners.  A schedule of what is and isn't paid for is therefore vital, if there are any cover all clauses such as 'and any other costs deemed necessary' be wary.

Also be aware of whether the management company are likely to introduce private car parking 'management', especially if roads are private.

https://forums.moneysavingexpert.com/discussion/6613087/pcns-issued-on-private-freehold-bays#latest

km1500

I would be wary

one thing you know for certain is that the fees will go up  not down and it certainly puts buyers off

that's not to say you would never sell it but definitely people are getting more wary of fleecehold as it gets more and more publicity

One option other than walking away would be to change your offer with a substantial discount eg 10-15%

In my view you should have been told this up front by the estate agent and the fact that they are hiding it until the latest possible stage in the hope that you won't walk away speaks volumes

incus432

We recently moved to a house on a 2016 development where there are management charges of c £150 pa for upkeep of playgound, common green areas etc. The road and sewerarge are being adopted by Council. Neither we notr any of the neighbours have any problems with this at all. 'Fleecehold' is a very loaded term and it is a serious stretch to use it for these developments.

GixerKate

I understand your worry and I think it depends on how the management company is set up.

5 years ago we bought a new build house and as is the norm now, it comes with a service management fee for management of the green spaces and playground.  The road and drains are being adopted (still going).  The residents are in the process of taking over the management company which is taking ages but does mean the control (and charges) is going to be with the residents not with a crap estate management company who just want to charge for doing nothing.  I've had a few posts here trying to figure out how to deal with this as the third party management company in place are awful.

Knowing what I know now, would I still buy my house?  Absolutely, no regrets at all and if we move again I will certainly consider new builds again.  The main difference though is that we have the option of taking over the management company and the roads/drains are being adopted.  I've noticed that more and more new build estates aren't getting their roads and drains adopted, and I've heard that on some estates its not possible for residents to run the management company so completely out of control of what could be charged.  Now that would make me walk away.

ReadingTim

It's all very well to debate this in academic isolation, but what are your alternatives?  Could you buy 'proper' freehold, or is it likely to be a more traditional leasehold?  Would you want to?  

I appreciate the comment about resale within the decade, but you do have to live somewhere in the meantime - how does this place stack up against the others you've considered?  

Sometimes you don't get to have the best choice, just the least bad one, and you have to go with that for the time being....  

RAS

As GixerKate mentions new builds with some sort of annual payment for unadopted common facilities is usual for recently built estates.

What's important to understand is

what the common areas are,
who the management company are going to be,
whether the management can revert to a homeowners' group

If this is a large estate, what facilities are included in the common areas, a few bit of grass some of which might be highway land? Or a children's playground, flood mediation and wildlife areas? A mixed development with some houses owned by LA or an HA and others private?

In many cases the builder pays until the final property is built and then hands over to an owners' management Committee. Not much different to a small parish council, really.

In others they set up a management company and may sell on to someone with no other interest in the estate. Not so good. 

ReadySteadyPop

PRLB said:

Dear all,
Like many others on this forum, I discovered late in the buying process that the property I’m purchasing is a fleecehold—a freehold with ongoing estate charges. I’m now at a crossroads, trying to decide whether to proceed or pull out.
I’ve read through many of the discussions here, which have been incredibly helpful in understanding the issues, consequences, and implications (including the fact that a home is not just an investment but also a place to live). However, much of the content is a few years old, and I wanted to ask for your updated views on the current situation.
Specifically, I’m struggling to assess whether fleecehold properties are more likely to lose value or become harder to sell in the future—say, over the next 5 to 10 years - than other properties. I realize this involves a lot of speculation, but input from those with more experience would be greatly appreciated.

For context, the property in question is in Penarth Heights, Cardiff. For simplicity, let’s assume that the estate charges remain relatively low and the service provided is adequate. So, the impact of being a fleecehold would come primarily from broader buyer perception and general UK trends, rather than issues specific to this development.

My current opinion is that, even if everything runs smoothly with the estate management in Penarth, there’s a significant risk that public sentiment will increasingly turn against fleeceholds—leading to potential devaluation or reduced marketability. I also feel that meaningful legal reforms to protect fleecehold homeowners are unlikely to be significant in the next 5–10 years.

Given that this purchase is a major financial decision, and ease of resale is important to me within the next decade, I’m leaning toward viewing fleecehold as a high-risk investment.
I’d really value any thoughts or insights from others who’ve faced similar decisions.
Best regards,
Paulo.

Spot on   

PRLB

Hi all,

Thanks for the detailed responses and opinions.

So my feeling after reading all and other material is there is a general consensus fleecehold adds no generic benefit while it adds a generalized risk. 

Of course, with individual property conditions (really good house-location-price and when managing conditions are well established) potentially outweighing risks very frequently. So not really a full red-flag, but definitely a yellow flag for when purchasing.

After reading more, I got the impression some legislation will soon (2-3 years) come out, but its just a feeling. Also, with millions in fleecehold conditions and being unlikely councils will start doing their jobs and adopting new builds or forcing new builds to be built to council standards, normalization of Fleecehold may well happen

Worst case scenario for me is if a legislation passes that all new builds need to be adopted (i.e. abolition of Fleecehold) but that ones build under fleecehold can continue unadopted. This would create a two tier system of good vs bad new builds. I think this is unlikely too happen - too much people under this condition, so would be political suicide to pass a law like this, not changing anything (and normalization) is more likely. Any opinions?

Thanks again, this has been really useful!