Opinion: Fleecehold as a high risk investment?

km1500

well they did it with leasehold ground rent ie not applying it to existing gound rents !

RAS

Legislation is rarely retrospective. 

RHemmings

daveyjp said:

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

Around my way, I have several times seen all the roads on an estate up for sale. Whoever would buy those roads will probably be looking for some way to make money out of them. And, the homeowners and users of the roads are quite likely to be the targets of that. 

If someone owns all the roads, then is it legal for them to introduce whatever parking restrictions they want, and then enforce those as an income stream? 

PRLB

Dear colleagues,

After almost three months since we became aware that a Deed of Variation was required and began this process, our purchase has unfortunately reached an unsuccessful conclusion.

The managing company (Penarth Heights, Cardiff) took nearly three months to respond and provide the Deed of Variation for signing. We had a planned completion date for this week, pending the final signature from the managing company. When the management company finally received the documents, they rejected the proposed Deed of Variation and instead suggested a new format. As explained by our solicitor:

“The amendments they have suggested do not comply with your mortgage lender’s requirements. You may recall we previously raised a legal issue where the rent charge owner has the power to impose a lease on the property if charges remain unpaid for a certain period. This has led some mortgage lenders to refuse lending on such properties unless these rights are explicitly excluded.
The management company now proposes only to give the lender notice before taking any action, allowing the lender time to settle any arrears, should they choose to do so.”

In essence, the management company is unwilling to relinquish a right—based on a 100-year-old law—that allows them to take control of a property if the management fees are unpaid. This suggests that exploiting this archaic provision may be a key part of their business model. As a result, we are unable to secure a mortgage under these terms. Even if a lender were to accept these new conditions, we would likely face difficulties reselling the property, as future buyers could encounter the same mortgage issues. This means the liquidity of this property is greatly reduced, as well as the buyers pool, and, as a consequence, the competition for it and the price we are likely to be able to sell it for in the future.

The conclusion of this long and stressful experience—during which we’ve lost both time and money—is that the management company appears to have no genuine interest in supporting the freeholders it is supposed to serve. "Fleecehold" properties carry significant risks and should be avoided wherever possible, unless the freeholders have taken ownership of the management company themselves.

The situation is even worse for the seller—an elderly lady looking to downsize and access funds for retirement—who now finds herself stuck with an effectively unsellable home.

Thank you all for your messages and support throughout this process.

Best regards,

mlz1413

I moved to a 'fleecehold' last year. The house and estate are 10 years old and the management fee hy Orbit Homes has remained at £220 pa since new.
The estate is ready for the council to adopt, which was very much standard procedure when built.  But I doubt it will ever happen as councils are under so much pressure anyway. 

Lots of houses sell on our estate and many very quickly.  

I know as.the playgrounds.get older there will be repairs costs,  but there are a lot of houses to share that cost.

So maybe the size of the estate is a consideration compared to the facilities it has.

ExEstateAgent

PRLB said:

Dear colleagues,

After almost three months since we became aware that a Deed of Variation was required and began this process, our purchase has unfortunately reached an unsuccessful conclusion.

The managing company (Penarth Heights, Cardiff) took nearly three months to respond and provide the Deed of Variation for signing. We had a planned completion date for this week, pending the final signature from the managing company. When the management company finally received the documents, they rejected the proposed Deed of Variation and instead suggested a new format. As explained by our solicitor:

“The amendments they have suggested do not comply with your mortgage lender’s requirements. You may recall we previously raised a legal issue where the rent charge owner has the power to impose a lease on the property if charges remain unpaid for a certain period. This has led some mortgage lenders to refuse lending on such properties unless these rights are explicitly excluded.
The management company now proposes only to give the lender notice before taking any action, allowing the lender time to settle any arrears, should they choose to do so.”

In essence, the management company is unwilling to relinquish a right—based on a 100-year-old law—that allows them to take control of a property if the management fees are unpaid. This suggests that exploiting this archaic provision may be a key part of their business model. As a result, we are unable to secure a mortgage under these terms. Even if a lender were to accept these new conditions, we would likely face difficulties reselling the property, as future buyers could encounter the same mortgage issues. This means the liquidity of this property is greatly reduced, as well as the buyers pool, and, as a consequence, the competition for it and the price we are likely to be able to sell it for in the future.

The conclusion of this long and stressful experience—during which we’ve lost both time and money—is that the management company appears to have no genuine interest in supporting the freeholders it is supposed to serve. "Fleecehold" properties carry significant risks and should be avoided wherever possible, unless the freeholders have taken ownership of the management company themselves.

The situation is even worse for the seller—an elderly lady looking to downsize and access funds for retirement—who now finds herself stuck with an effectively unsellable home.

Thank you all for your messages and support throughout this process.

Best regards,

This is a completely different matter to the one you originally posted about. 

Pretty much all new builds on estates will have management charges for upkeep of roads, lighting etc. 

pieroabcd

PRLB said:

including the fact that a home is not just an investment but also a place to live

I would reverse that statement and say that a home is not only a place to live, but an investment: a way to protect the money that you spent and increase it.
I consider my house as the moneybox that I live in.
For me I preferred to buy a 95 years old freehold house (without  fees) instead of a new build for a very simple reason: I want to have exclusive control on the house, not to be at the mercy of someone else's decisions as if I were renting (that is unavoidable when fees apply, even if you "take part" to it).
Ease of resellability comes as a very straightforward consequence of this exclusivity.

ReadySteadyPop

pieroabcd said:

PRLB said:

including the fact that a home is not just an investment but also a place to live

I would reverse that statement and say that a home is not only a place to live, but an investment: a way to protect the money that you spent and increase it.
I consider my house as the moneybox that I live in.
For me I preferred to buy a 95 years old freehold house (without  fees) instead of a new build for a very simple reason: I want to have exclusive control on the house, not to be at the mercy of someone else's decisions as if I were renting (that is unavoidable when fees apply, even if you "take part" to it).
Ease of resellability comes as a very straightforward consequence of this exclusivity.

Not a great idea to think of a house as a "moneybox" in my opinion, for many it is a "debt-box", that is another story though, but even with freehold you are controlled by the market as you need a buyer and a house is the most illiquid asset there is, especially in difficult markets, many people recently have lost all the money they spent on "improvements" for example.

pieroabcd

ReadySteadyPop said:

pieroabcd said:

PRLB said:

including the fact that a home is not just an investment but also a place to live

I would reverse that statement and say that a home is not only a place to live, but an investment: a way to protect the money that you spent and increase it.
I consider my house as the moneybox that I live in.
For me I preferred to buy a 95 years old freehold house (without  fees) instead of a new build for a very simple reason: I want to have exclusive control on the house, not to be at the mercy of someone else's decisions as if I were renting (that is unavoidable when fees apply, even if you "take part" to it).
Ease of resellability comes as a very straightforward consequence of this exclusivity.

Not a great idea to think of a house as a "moneybox" in my opinion, for many it is a "debt-box", that is another story though, but even with freehold you are controlled by the market as you need a buyer and a house is the most illiquid asset there is, especially in difficult markets, many people recently have lost all the money they spent on "improvements" for example.

When you have repaid the mortgage the house is no more a debt.
It's up to you to make the total cost not exceed the market value (for example I decided to repay early as much as I could to minimise the interest).
Think of the alternative: paying someone else's mortgage by paying their rent. Isn't the house still a moneybox compared to a rent that is 100% lost money?
Even if you sell for a loss it's definitely much less than 100%, unlike with a rent.

ReadySteadyPop

pieroabcd said:

ReadySteadyPop said:

pieroabcd said:

PRLB said:

including the fact that a home is not just an investment but also a place to live

I would reverse that statement and say that a home is not only a place to live, but an investment: a way to protect the money that you spent and increase it.
I consider my house as the moneybox that I live in.
For me I preferred to buy a 95 years old freehold house (without  fees) instead of a new build for a very simple reason: I want to have exclusive control on the house, not to be at the mercy of someone else's decisions as if I were renting (that is unavoidable when fees apply, even if you "take part" to it).
Ease of resellability comes as a very straightforward consequence of this exclusivity.

Not a great idea to think of a house as a "moneybox" in my opinion, for many it is a "debt-box", that is another story though, but even with freehold you are controlled by the market as you need a buyer and a house is the most illiquid asset there is, especially in difficult markets, many people recently have lost all the money they spent on "improvements" for example.

When you have repaid the mortgage the house is no more a debt.
It's up to you to make the total cost not exceed the market value (for example I decided to repay early as much as I could to minimise the interest).
Think of the alternative: paying someone else's mortgage by paying their rent. Isn't the house still a moneybox compared to a rent that is 100% lost money?
Even if you sell for a loss it's definitely much less than 100%, unlike with a rent.

For the average buyer now that is 30 years of debt payments with probably volatile mortgage debt costs going forward?