The Daily Mail claims today that up to 1.3 million homeowners could be trapped in freehold contracts that tie them to rising and unregulated fees.
Many new-build estate residents who already pay council tax are being charged uncapped ‘management fees’ if their local authority does not take on the upkeep of the area.
LKP says this is ‘the new leasehold scandal’: an unholy alliance between plc house builders yet again creating long-term investment assets in their customers’ homes – and local authorities saving some cash by not doing their jobs.
The non-adoption of new estates unfairly hits young first-time buyers who have to pay whatever charges a property management company dreams up, as well as full council tax.
Older owners in period properties, on the other hand, are spared the charges.
“It is long overdue that buyers of new homes get thoroughly bolshy about these made-up charges,” says LKP’s Sebastian O’Kelly.
Many new-build residents are being charged uncapped ‘management fees’ ‘New leasehold scandal’ means homeowners struggle to sell or remortgage Developers say charges cover the cost of maintaining roads and green spaces But councils say many developers are simply trying to make more money Up to 1.3 million homeowners could be trapped in freehold contracts that tie them to rising and unregulated fees, Money Mail has discovered.
Campaign group Hornet says it knows of at least 110,000 households which now have to pay these fees — typically around £250 a year.
Cathy Priestley, of Hornet, says: ‘This is the new leasehold scandal, we’ve been told some homeowners are struggling to sell, and in some cases building societies are refusing to accept re-mortgage applications.’
And Beth Rudolf, director of the Conveyancing Association, says more freehold homes are being sold with estate management charges.
She says: “The Government is banning leasehold houses because of all the abuse, but it’s a bit like whack a mole — every time you think you’ve sorted out one area, another one pops up.
“We are expecting it to become more common now that the Government has banned leasehold houses, builders will be looking to replace lost revenue.’
The article featured Stuart McCarroll, Oxford University finance manager and his partner Vicky MacGregor, a nurse, who paid £350,000 for three-bed semi in Witney, Oxfordshire, in June 2016.
Their management company tried to charge £10,000 for gardening on the development — quoting a firm based 80 miles away.
The couple’s home is one of 36 homes on Cala Homes’ Spring Meadow site. The couple, both 37, currently pay £385 in service charges.
In 2017, management firm Remus told residents it had been quoted £10,000 for gardening by a firm in Birmingham.
Stuart says: ‘We refused to pay and eventually the company used a local firm that charged £3,900.We wanted to buy freehold because we wanted security for our family home but now we worry about charges rising.’
Remus said the quote, from the development’s original gardener, was only listed for reference.
Cala Homes says: ‘We do not sell management contracts or receive income from them.’
Labour MP Helen Goodman, who estimates 1.3 million households are affected, is seeking a change in the law for new estates where management of streets, verges and public open spaces has not been taken over by the local council.
She told the House of Commons in November last year that management companies appointed on estates had the ‘opportunity to mismanage and overcharge with impunity’
She told MPs: ‘The fees are high, rising, uncapped and unregulated. One constituent told me their fee had risen from £60 to £134 in four years. Another constituent faced a 50 per cent rise in one year.
‘All of this looks like just another way for property developers to screw more money out of hard- pressed households. It really is a private new-build tax.’
Labour’s Clive Betts, chairman of the Commons housing, communities and local government committee, says he believed some estate charges were acceptable if they were explained properly to property buyers.
He adds: ‘I’m very concerned about the growing number of freeholders being made to pay charges, because it seems to me that since leasehold homes have become more difficult for developers to sell they are now simply looking for other ways to keep up their income streams.
‘That is completely wrong and the Government needs to intervene to take action to stop it.
‘Any fees should be clearly explained and freeholders should have a right to challenge them.’
Sebastian O’Kelly, a spokesman for the Leasehold Knowledge Partnership, warns that residents on new estates were at risk of becoming ‘second class citizens’.
He adds: ‘You’re going to have a situation where some people who pay council tax will get all the services they are entitled to, while others living in newer homes will be paying their council tax but will only get some services — and on top of this will have to pay estate fees.
‘Councils should not be allowing these management companies to be set up just to shirk their responsibilities. This is not how you create communities.’