This is looking like Fleecehold, isn't it? :(

[Uncooperativefingers]

We put a reservation fee down on an off plan new build, after being assured that the estate management fees would only increase by RPI (but only verbally, I know I know...)

Now the solicitors have looked at the contracts, it turns out that there actually is no cap on the estate management fees. The estate manager will be Trinity, who Google shows to have an awful reputation. The council is adopting the roads, lighting etc, so Trinity are just maintaining the park, green space and attenuation basin.

My concern is that this is a "fleecehold estate" and we will be subjected to spiralling costs that we can't control. Or indeed that if the fleecehold scandal breaks in the media we will be unable to sell on as others won't want to take on the liability...

I'm not being ridiculous am I? I'm going to have to pull out?

I’d pull out. Slightly outing, but I used to work in property management. Once encountered a house that was completely unsellable as it was leasehold, the ground rent or service charge (can’t remember which) was over £140k per year.

Gosh yes, these fees have turned out to be a bit of a scandal, loads on tv and the radio about it, and because of the fees the houses are unsellable too.

Around here the newbuilds are going up at lightning speed, I can’t believe they are built properly!

Sorry :(

Thanks @owdbovril. The house itself is freehold, as is the garage and garden. It's just the communal green space we have to pay estate management fees for. Would you consider that still a problem?

I’ve not heard of this particular issue before, I must admit (no longer in property management). However if owning the house renders you liable for the fees then I’d assume it would be a problem. Has your solicitor not given you any indication?

I don’t understand how cases like this aren’t the cause of professional negligence claims against the solicitors.

We got a very wooley statement from the solicitors, saying that because the fees (and increases) would be shared across a number of households "ought to mitigate" the actual monetary increase to ourselves. But she admitted a large increase "wasn't impossible".

The maintenance charges will be calculated based on predicted expenditure by the management company. I have seen a report for the first year and it's vague: such as x amount for "landscape maintenance" and so on. Nearly 40% is "management fees". The solicitor says the contract allows us to send a dispute to the charted institute of surveyors if we disagree with the costings, but given how vague the descriptions are i'm not sure how easy that would be.

For example, £15000 on landscaping is ridiculous if it just means cutting the grass, but not so if it involves significant earthworks. No further detail on the descriptions has been forthcoming.

I think I'm talking myself out of this!

What do you expect solicitors to do about it AwdBovril?

Fixing the estate charge increase can cause problems if the management company needs to pay out more than that OP.

Fleecehold estates are increasingly common unfortunately. I do title checking for a conveyancing firm and the majority of the new builds that I deal with have a freehold management company.

One of the problems with freehold management charges is that they aren't covered by the service charge protection legislation (reasonableness etc).

40% management fees is high - the "normal" is about 10%

I would pull out due to the lack of cap.

I`ve seen these freehold newbuilds. Looked at one.

Wouldnt touch with a barge pole. Funny how on rightmove these properties arn`t selling anymore now the public is cottoning onto the whole fleecehold thing! My first question as a viewer on any newish looking build is "whats the management/ service fee?".

any answer except none means I`m not buying!!

I think a service charge is quite different to a fleece hold, I'd want to find out the price but and details of what it covers, but it wouldn't put me off. In general these new areas tend to be far better maintained than those that rely on the council (who refuse to adopt the whole sites as they cant afford it!), which could well end up.protecting your property value in the long run.

Management fee's are very different to leasehold.
They have to be accountable in my experience and although they are not capped there is a degree of transparency. There would have to be a very good reason for them to increase by a substantial amount.
I agree with above, I would rather pay a management fee and know that the area I live in is looked after than rely on the council.

Driving round any kind of new build development generally shows that they look "loved" and well kept.

I'd pull out.

The problem is that even you get comfortable with the estate management fees you may really struggle to find a buyer down the line who will do likewise. It may therefore really effect the value of your home.

Freehold property with an estate fee is different to buying a leasehold house new build

Our last house was a freehold with estate management company fees. The management company only did the grounds, although there was hardly any actual work done ever - no actual maintenance ever got done. Endless mistakes: for a while we were all paying for maintenance of a nearby block of flats because they bundled it all up together by mistake. It was an absolute nightmare and the management company caused us so much stress. Never again. When we were looking for a new house we wouldn't consider anything with a service charge.

Unfortunately this situation is becoming more common in that although the house isn't leasehold, the communal areas are. It is yet another scam that means that the council avoids the cost of maintaining the green areas which are generally very low. Just wait to see the next step when they stop adopting the roads and the residents have to pay directly through leasehold charges.

Estate management fees are very different from the whole fleecehold ground rent issue.

Decent property management companies will try and keep the increase in estate charges to RPI. But... that's assuming the developer has set it at a reasonable level in the first place (not kept it artificially low in order to sell on the development). And there are good reserves for unforeseen circumstances (tends to be something like plant equipment breakdowns). Without those two things you'll either see a hike in y2 (when the development is fully handed over to the managing agent) or you'll get a bill or an unexpected increase years down the line when you find have to spend big money. Or you spend big money because it's an emergency, and then have no gardening for the rest of the year as there isn't any cash left for it.

I agree that all this unadopted roadway is a scheme for councils to avoid maintenance and upkeep of vast new areas, but it's also a scheme for developers to keep their amenity development costs down. They don't have to build it to council standard which is much cheaper. The only loser is the people who buy there.

FWIW, Trinity really isn't a bad agent. I can't think of a single managing agent which doesn't have lots of bad reviews - it's a bit like hospitals; people only really deal with them when things go wrong and they're much quicker to leave a negative review than they are a positive one ;)

Oh, and the management fees thing - managing agents will have a base rate for their services, and should be charging on a per-unit basis (percentage fees are against RICS guidelines). The problem is that if you have a very small budget, it's going to be a larger proportion of the cost! On big, complex developments running a £5m budget, the management fees are a tiny, tiny proportion.

Weve got together with all the residents on my estate and we now run the management company - so all our money goes into our own pot for potential repairs etc and a village in bloom initiative. So that's an option :)

We were managed by a company and fees were expensive. Ridiculous costs for painting for example (which we felt didn’t need doing) but lights in hallways took ages to fix. There is no need for a management company in every estate however.

The residents in ours got together and took over the management themselves cutting out the company. A bit of admin and organisation but much fairer for everyone as we could negotiate everything ourselves. This was only possible once everyone had moved in and we had a few years of their fees so we could group everyone together and show how it could be cheaper doing it ourselves. We used their models for reserves and managed to get most things cheaper as well as cutting out their 40% fees. Always an alternative as all your neighbours would want to keep costs down as well as bringing the community together once a quarter for a pizza night and update on the estate and finances. We had an actual say in our estate then

I would expect the purchasers solicitor to push to pin the exact details of the fees down. If they can’t do this, & consequently expose the purchaser to ongoing, unknown & escalating costs that cannot be avoided or insured against, & that potentially renders the property virtually unsalable, I’d question the competence of the solicitor TBH.

Once these kind of properties become a burden on the books of the property developers, they’ll surely realise it makes no commercial sense to build them. And if solicitors are wary of touching them because of potential comeback, the pool of buyers will continue to shrink as sales fail to proceed. Rough on the purchasers who lose money in the meanwhile though.

Thanks all for your input. Lots to think about.

@LBOCS2 fleecehold issue is not the leasehold ground rents issue. It is the term for people paying large estate management charges despite them owning the freehold for their house. BBC link for more info:
www.bbc.co.uk/news/amp/uk-england-46279048

Unfortunately, we aren't going to be given the opportunity to form a resident's management committee. If we were, I wouldn't be too worried. Taylor Wimpey are keeping the freehold and have decided the appoint Trinity to manage. Trinity decide what we pay them, but we cannot decide what work needs doing, nor how it is done. Not can we remove Trinity or do anything to influence the quality of work

Not possible AwdBovril. We get told that it's an estimate as these things can't be certain until the houses are built and the work that will be charged for has actually been done.

In that case (IMO) they either need not to try to tie people into purchasing them until that point, or have a maximum limit that the fees could reach & it should be set in stone. Or there should be some other protection that protects purchasers from unreasonable costs. Just because something is legal doesn’t make it morally right.

My service fees on a new build estate are not supposed to rise by more than RPI but they have; from £65 a year in 2014 to £105 this year.