To be spooked by this as the new cladding crisis to come?

[whayonrag]

We want to buy a new home on a site of 20 houses. The management fee is 250 a year. I know basic stuff about this, like the fees can change etc. I have been googling and read some absolute horror stories about costs getting out of control and how it will in years to come become the new cladding crisis as people won’t be able to sell their homes is this correct? I know mumsnet isn’t the pinnacle of advice for this stuff but I’m really panicking and feel disappointed as we love the area and house otherwise and to be honest there’s barely anything else for sale!

Yes, I seem to be reading more and more stories of management fees tripling in two years etc.
it has definitely put me off buying anything that has a management charge. A lot of the retirement flats seem particularly bad!

Read the contract thoroughly and if you don't understand it, talk to someone who does! Yes, some management fees are exploitative so you need to be careful about what exactly you are signing up for.

@MouldyMermaid how can you know it won’t change in the future though? That’s my main concern

Buying a new build in general is probably more risky than buying a home with any fees attached. Avoid if possible!

And freeholder owners who live abroad, bought the land as an investment, don't communicate with their leaseholders and so leases cannot be extended. In the meantime, leaseholders are pulling out their hair and their leases are getting shorter and shorter.

Sorry if this sounds obvious, but I've come across people who didn't ask the question.

There was a bit of a scandal a few years ago where houses (not just flats) on new estates were being sold on a leasehold basis, and buyers were being told that they would be able to buy the leasehold for a few thousand in a few years time.

In the meantime the developers sold the leasehold to a third party company who exponentially increased ground rents.

It also meant that house owner would need to seek permission of the leaseholder to build a conservatory or extension etc .

They may have tightened up on this but check it anyway.

The house is freehold but the management fee is for the road/general area. Does that make a difference?

I pulled out of a new build house purchase at the last minute due to some very shady dealings relating to management fees. I'm very relieved I did! The people who did buy have had a nightmare and a lot of the houses are not selling.

What scares me is how so many other people try to normalise what is obviously exploitation and potentially financial mismanagement.

I can only assume the penny hasn't dropped for them yet or misery loves company.

Please be very very careful. It could be a very costly mistake.

Have a quick read of this OP

https://www.thesun.co.uk/money/24517079/freehold-estate-management-charges-leasehold-homes-fleecehold/

Freehold ground maintenance charges are a big problem

Yes I think that's quite common on new estates where the local authority doesn't adopt the roads, so the residents are responsible for lighting and maintenance etc through the management fee. Not sure how much control there is over the fee though, but like the poster above, there have been issues.

You need a solicitor to look at things very closely . And not a solicitor that's appointed by the building company for a discounted rate which they sell to you as a perk (another trick I've seen).

OP the contract should set out the circumstances in which management fees can be increased. If you need to, you should get independent legal advice on EXACTLY what this means - don't just assume it will be reasonable and that it will be OK.

I have a house in this situation.

The house is owned freehold but there are leasehold requirements for upkeep of the general estate it's on.

My solicitor looked into it and there were controls on how much it could go up by.

It's a couple of hundred a year at the moment (and honestly they don't do much for their money) but they can't put it up a ridiculous amount.

Get your solicitor to check the details.

The last government said they would change it, I suspect that they got too much money from property companies to do that, I hope that the new one will abandon leashold for a model I can't remember the name of but something like commonhold, where all leaseholders share the freehold and it can't go to a third party as an investment.

Whilst that would sort new builds it isn't much use for existing ones and I think some form of limit needs to be added so that they're not worth much and the leasholders have the right to buy for a fair price and that the annual charges are kept low.

YANBU
i would not touch this with a barge pole.

its a racket and i hate how its being normalised

I mean I don't know about crisis to come, it's already very much in the news as far as I can tell.

That's what I find quite shocking tbh. How people just accept it.

Why should people pay council tax AND ground maintenance charges? why don't the council take on new estates? why are these new areas so special that they need extra fees to maintain? There are some shady dealings happening around this and not enough questions are being asked.

Is a Management fee a new thing they’ve invented for new build houses? I would not be entertaining that. Buy an older freehold house with no extra “fees.” Yes I think they would keep putting it up.

It could include things like maintaining the road in the estate if it is not an adopted road, so costs could be significant in the event of an issue. I really would want to know what the charge can be for, specifically, and the conditions for it being increased.

you won’t. The contract will contain a provision allowing them to change the amount , sell on the freehold to someone who can charge what they like etc. if you’re lucky you’ll have something which says they can’t change by more than x% in the first few years, but even that might only be in condition that they don’t sell the freehold on.

I appreciate this is a flat, so slightly different- someone on the radio was talking about his freeholder charging £12 million (divorces by something like 15 flats) to replace the roof of their block.

I do think the news sometimes focuses on the most extreme cases, though.

there are millions of us who live in leasehold flats, and while the service charges are increasing over the years (especially as energy prices, insurance, materials etc have all gone up for everyone), it's not been anywhere near like some of the reports in the media. What frustrates me is that we are getting less service for the money, and they are fairly useless at doing things or organising or communicating. But nonetheless, it's not extortionate, and there are guidelines around transparency and increases etc, at least when it's a housing authority who are managing it. When you have a shared building, and communal areas, there has to be someone overseeing things, and it will end up costing; it's not always unreasonable like some of what you hear. For flats, at least, leasehold can be potentially better than trying to have residents organise and agree, especially for large blocks. Some blocks have residents' committees that can help hold management companies accountable, so that can be worth checking if there is such a thing before you buy.

Houses are probably different, though. But leasehold flats are not always as big an issue as in many of the reported cases.

I’m juggling a baby so limiting ability to type but yes to ALL of this.

my experience of leaseholds and my friends who have been stupid enough to have bought on unadopted roads is very poor - it’s wildly inflated pricing for unwanted and sub par maintenance.
my leasehold charges went from £400 to £3k in 8 years for worse service as the lease transferred and the HA entered into 25 year service agreements to “provide increased value to tenants” 🙄