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You are here: Home / News / We are being ripped off by private estate charges by developers and property predators just like leaseholders, says HORnet

We are being ripped off by private estate charges by developers and property predators just like leaseholders, says HORnet

October 27, 2017 //  by Sebastian O'Kelly

Thousands of homeowners on new build estates are facing escalating management charges for unadopted roads and patches of ground.

Speculators are hoovering up these assets for the lucrative income streams, enforced through covenants on freehold houses and lease terms in leasehold properties.

A campaign group called the HomeOwners’ Rights Network is asking the All Party Parliamentary Group on leasehold and commonhold reform, of which LKP is the secretariat, to consider these issues.

They have been highlighted by many homeowners in the National Leasehold Campaign Facebook group, which predominantly represents leasehold house owners in the North West.

Even when homeowners buy their freeholds they are faced with an array or charges and consent fees that developers have sneaked into their leases or deeds.

It would seem that at every opportunity where developers have power over homeowners they seek to abuse it by monetising practices.

The HORnet group has more than 2,000 members.

LKP has asked for specific information of sites: who owns it; what the charges are; what are they for; when were they introduced; what reason did the council give for not adopting the common areas.

Here is HORnet’s submission to the APPG:

For: APPG on Leasehold and Commonhold Reform

By: HomeOwners Rights Network www.homeownersrights.net
24th October 2017

Unadopted New Build “Private” Estates – A case for common hold?

Homeowners on new build estates are bound to pay through a charge on their property for the maintenance of privately owned land designated as public open space on their development.

This is in addition to full council tax.

They have no choice of service provider, which is accountable to the landowner and usually the same organisation, the developer or a land owning management company.

They have no right to manage.

They have no consumer rights or alternative dispute resolution.

They are not fully informed when signing their deeds.

There is no cap on these service charges. The proportion of charge spent on delivering actual maintenance work is usually less than half the total cost to the homeowner.

There is no quality control on development or maintenance of the estates. Councils are unable to monitor and enforce standards agreed under section 106.

Once the houses are all sold, the charges usually rise and the standard of maintenance falls.

Unadopted estate land is either retained by the developers or sold on to land owning management companies.

Background:
For the past 10 years, during which time 1.3 million new homes have been built (Government statistics), the public open spaces on residential developments required by planning regulations have not been handed over to councils for adoption.

Instead the developers have created an estate rent charge under the Law of Property Act 1925. This forces payment of
unfair and unreasonable service charges on the unsuspecting home owners who don’t realise immediately that the charge is on their property or that a lease can be taken out on it in the event of non payment (for any reason).

Incomplete and poor legal advice has contributed to this problem, just as with the leasehold scandal [concerning leasehold houses and onerous ground rent clauses].

The rent charge (land) owner forms a management company which is responsible to them and not the home owner who pays the charges. This means the company can be run without
regard to obtaining value for money, and the home owners have no redress.

Should home owners challenge the company in court, win or loose, the company can charge back its legal costs to residents.

This group of home owners does not have any special legal status, although it cannot be said they are either leaseholders or freeholders by the usual definitions – hence the term
“fleecehold”.

The result is that they are not recognised and therefore have not been given any regulatory or legal protection. There is no reduction in council tax, so they end up paying two bills.

The people affected are often in the “middle income poverty trap” – they are working flat out to just scrape along and could do without an extra bill that can and does spiral upwards, especially after the last house is built.

The bigger picture involves retention of land by investors (similar to leasehold) together with the back door privatisation of green open space and land banking.

Developers can and do submit plans to build more houses on the open space than originally agreed with the local
authority – something which is not possible if the land is handed over for adoption.

Freehold houses with a rent charge can have a statutory lease taken out on them under the Law of Property Act thus dispossessing the home owner.

A new asset class consisting of private estates has been created.

We believe that the growth of leasehold tenure on these
estates has been implemented partly to protect this new asset.

Whilst we accept that large commercial house builders are in a position to deliver the numbers of new homes required, government needs to be much more aware that shareholder value is their main concern and create an environment where exploitation of homeowners and taxpayers (through Help to Buy) is not possible.

Feudal land laws together with weak negotiation and enforcement by planners have contributed to new homes that are of poor build quality and have onerous charges placed upon them.

In addition to poor home build quality (identified by the APPG for Excellence in the Built Environment 2016) there are now many estates with unadopted roads and poor landscaping
as the estate itself is not developed or maintained to adoption standards.

This is a potential cause of blight in years to come.

A land owning management company can sell off parcels of land for small scale development years after the estate is completed.

There is an example of this in Scotland where the play park has been sold and the purchaser has applied for permission to build two houses.

There are very real practical problems with privately owned public open space that have not been addressed, for instance enforcement of Dog Fouling penalties, road safety and
traffic enforcement, public order and fly tipping.

HorNet – NO to fleecehold!

Are You: A freeholder or leaseholder living on a private estate? Stuck with a service charge you cannot influence? Being bullied or harassed if you with hold payment for poor service or high charges? As angry as a hornet? You ARE one of us, so join our campaign to get a fair deal.


Potential solutions :

1) Compulsory adoption of all new estates, retrospective adoption for established ones. This solution has the advantage of putting public access land back into public ownership and creating fairness for all estate homeowners regardless of when their estate was built. New build estates provide new areas of public amenity space. Local councils could explore novel ways of funding maintenance with their communities, just as they are doing over public parks e.g. Community Trusts.

2) Legislate for a commonhold model proven to work elsewhere in the world to include estate land, especially for truly private gated communities that have no public access.

Common hold has the huge advantage that management services would be commissioned by the homeowners creating direct accountability for quality and value for money.

Lack of direct accountability and competition in this market has
lead to abuse and poor quality – something which we believe will be exposed by the Grenfell Tower enquiry.

The concerns currently being looked at by the government
over managing agents would largely be addressed by market forces, so the need for regulation diminished.

Land and property law reform is long overdue.

Brexit presents an opportunity to bring property law in England and Wales into the 21st century, modernising it in line with the rest of the world.

3) Whether estates are adopted, transferred to the homeowners in common or remain in private hands, developers must be required to finish estate land and facilities to adoption standards. Council planning and enforcement would need to be strengthened and supported.

4) Regulation of the status quo: Recognise in the law this group of homeowners as distinct from “normal”
freeholders and leaseholders and give them at least a cheap alternative dispute resolution process like the Home Owners Housing Panel in Scotland, or at best full consumer rights.

Limit the amount of costs which can be recovered through the service charge in the event of a legal challenge by the home owner(s).

Bring into being the “land obligation” suggested by the Law Commission in the place of rent charges.

Regulate land owning management companies, as in Scotland through the Factoring Act. This alone does not however address the issue of monopoly provision – there would also need something equivalent to leaseholders rights to
purchase their freehold.

The link between owning the land and managing it needs to be broken for choice and competition to be enabled in this market.

Implement the recommendations of the APPG On Quality in the Built Environment to include estate management.

These include a mandatory Consumer Code, standardised sale documents and a New Homes Ombudsman. Estate land and facilities to be constructed to an agreed standard which is
independently audited prior to hand over to the management company.

HorNet (homeownersrights.net) is a network of home owners on private estates with over 2,000 members from all over the UK.

We have a voluntary register of estates and members
have contributed details of 180 developments so far, representing over 30,000 households both leasehold and freehold.

We are in a good position to provide evidence of the adverse effects of the implementation of this model on estates and homeowners.

Related posts:

Labour MP Helen Goodman fights ‘fleecehold’ rip-offs with Private Members’ Bill ‘Fleecehold’ estate management contracts are the latest fiddle from taxpayer-subsidised house builders Average service charges are £1,863, but rise to £2,777 for new builds Estate agents say extortionate charges are blighting the lives of 10% of leaseholders ‘Fleecehold’ property trap returns to parliamentary agenda with new private member’s bill

Category: APPG, Fleecehold, Latest News, NewsTag: APPG, Fleecehold, HomeOwners Rights Network, HorNet

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Reader Interactions

Comments

  1. Kim

    October 27, 2017 at 2:08 pm

    OMG.! This lot of nefarious carpetbaggers and their venal ‘Managing Agents’ had better get ready for a revolution. These rachmanist practices have no place in modern world.

    The pickings are so lucrative is it any wonder folks in the ‘Industry ‘ are panicked…………

    The Agent who claims havd harassed her and effected her livelihood has referred to LKP as a ‘Blog’? LKP is the ONLY salvation for leaseholders who are being oppressed and cheated.

    I honestly believe that the actions of the unscrupulous Freeholders/ Agents out there are responsible for the rise in depression- Mental Illnesse amongst the population. This is a disgrace and something MUST be done to stop this spivvy activity.

    I propose a march on Downing Street when the petition is handed over.

    EVERYONE must get on board.

    • Kim

      October 27, 2017 at 5:08 pm

      Cont…
      “Potential Solutions “

      (2) Para 4

      I certainly don’t believe that the need to regulate Managing Agents could ever be diminished.

      As I have stated in previous posts, one may have shared Freehold/ Commonhold , but if the directors of the company are worse than useless and fellow shareholders apathetic ,that leaves space for a venal Managing Agent to operate and thrive.

      Regulation is Imperative. Agents cannot be trusted to regulate themselves. It has been proven!
      They believe themselves to be all powerful which is why they believe they can silence their employers ( me) by threats.

      I do hope that was some sort of typo and you are not giving Agents a ‘ Get out of Jail’ card?

  2. Fleecehold reform

    October 27, 2017 at 4:54 pm

    Anything to do with property and home ownership should have been regulated years ago. Poorly managed estates / buildings should revert to council control. Instead rich people own these assets and use them to exploit and diminish the quality of life of everyone who has to pay for them. It’s an outrage really, but when I took the shoddy lawyers who ‘managed’ our house to FTT everyone, shuffled papers in discomfort and looked the other way.

    We have very low standards in this country, we put up with appalling treatment and the law is keen to ‘protect ‘ the investor who fleeces the people who are trying to live and get by.and pay our taxes, full whack.

    I never thought I’d say this and I realise many complain about leaseholds owned by local councils, Council management is preferable, to being fleeced by mysterious entities with no accountability.

  3. David McArthur

    October 29, 2017 at 10:25 am

    MONETISE, “earn(?) revenue from an asset”. MODERN GROUND RENT, “astronomical revenue earned from a freehold asset – not to be confused with the old fashioned ground rent were returns, whilst easy picking, are often derisory for an investor”. ENTREPRENEUR, “this word is a tricky creature to define, sophisticates have hijacked the word and often use it to avoid legal offence (libel and slander). However a satisfactory definition follows, “An amoral/immoral/sociopathic individual with no divine talent, originality, nor creativity, who exploits the divine talents, originality, and creativity of others – one who takes but does not give. Leasehold is their preferred area of activity at present”. TWAT(S), “person or persons who (loosely) conspire together to deceive home buyers with regards to terms of sale when purchasing a house or flat – developers, builders, lawyers, surveyors, freeholding companies, ground rent buyers. GOVERNMENT, “A misnomer. Government is, in name only, an elected body which, in theory only, governs for the collective good of the country and its citizens. The reality is somewhat different, government acts to benefit an elite, which it is a part of, and to the detriment of ordinary citizens”.
    I am grateful for the assistance of Stephen in helping me to compile this short glossary of words.

  4. Kim

    October 30, 2017 at 8:13 pm

    Dear all including “HORnet”members ( all 1,900+) I urge you to keep circulating the online petition set up by Katie Kendrick of the NLC.

    Here’s the thing – 1,900 members ( HORnet). 8,000 plus members ( NLC) Why the bejasus haven’t we garnered AT LEAST 9,900 signatures?

    Come on people, step up to the plate and sign the petition. If you are apathetic then why on earth do you believe that the spivs; rogues and downright crooks working in Residential Property will take you seriously.

    How hard is it to sign an online petition. Of one thing you can be certain- If you do not pull together and be consistent then you will only have yourselves to blame. Put up or shut up.

    SIGN THE PETITION AND SHARE WITH YOUR ASSOCIATES.

    THANK YOU!

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