How bad could new build service charges/fluctuating rentcharges get?

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We were so close to exchanging on a new build

But our solicitor let us know (after lots of money spent later) that the service charge that we expected of around £115/year is actually a rentcharge. The rentcharge is variable, can go up to anything with no limit and the builder has put in the contract that basically the people on the development have no control over the amount the fees go to, nor control over how the money is spent. If the freeholder/owner of the house does not pay the service charge, then they lose the property to the management company. The money is supposed to go to maintenance, but legally the management company can default, be sold, or misspend funds and the people living at the development have to make up for the funds lost. I feel like, surely this can't be possible? Could a whole development of people be potentially screwed over time with no recourse? Could the service charge/rentcharge become something absurd like £500/month in the future? I have no idea. What are your thoughts on this? Most new builds from what I have been told are turning service charges in to rentcharges to give them more enforcement power.

Sorry O/P. I would walk away in those circumstances. They could hike the charge up as much as they like by the sounds of it.

Yes, and I've known someone where it was sold on and increased massively and there was nothing they could do about it. Developers add that in as it is another revenue stream

The money goes to the owner of the rents charge and this is not necessarily the builder. It could be an investment company. Years ago, they went to the former land owner as an ongoing income from the land. They are legal but not palatable. They are not leasehold ground rents and they are not service charges for upkeep of green spaces.

Was your solicitor recommended by the house builder? Apparently rentscharges are common in Bristol and around. A solicitor certainly should know about them and it’s very easy to check out what they are. I cannot see why it cost a lot to find out. I’ve done it in a few minutes!

You have to pay it annually on time. They don’t necessarily get increased. However, you can apply to the Department of Communities and Local Government (or its successor) and have it removed. It will cost, but not that much, and then you are free from it and it makes the property easier to sell . Your solicitor (or a better one) needs to advise you about doing this. If you have to pay the rentscharge, never, ever, miss a payment as it can lead to huge problems. The best advice is to get it removed. It’s a “scam” in this day and age really and the collection of the rents is a business commodity.

If you do not want to be bothered with all of this, and I don’t blame you if you don’t , walk away from the property.

Hang on - something doesn't add up here: no new rentcharges have been able to be created since the Rentcharges Act 1977 came into force so what exactly is the background with this charge? You need to know the exact terminology and be very clear what it is.

A rentcharge is just a payment to someone who has only this interest in the land - they don't provide anything in return for the money.

It sounds to me as though the terminology has been confused - this has all the hallmarks of a ground rent.