Missed Estate Charges Penalty

[Zebblox]

Me and my girlfriend are in the process of moving house but have hit a bit of a snag and wondered if anyone else had had the same.

The property we’re trying to buy is freehold ,however, there is a covenant in the deed which allows the original developer (Taylor Wimpey) to put a leasehold on the property if any estate management fees aren’t paid.

Our solicitor advised that we’ll need a deed of variation to amend this, as per our mortgage lenders conditions, but it’s been over a month since we raised the issue and we’re yet to see any movement from the sellers side. Our sale is ready to go and the buyer is chasing so we’re both getting a bit anxious

I’m assuming this may be fairly common with newer estates, so just wondered if anyone had to deal with the same issue and how it ended. Is it likely to be a deal breaker?

Surely the pertinent questions are: have any estate management fees gone unpaid to date, and what are the limits and contractual terms for any future estate management fees for which you may become liable - some developers have sneaky terms which allow them to increase fees exponentially making them gradually more unaffordable.

Your solicitor is doing a good job of looking out for your interests - trust them. Developer covenants like this can have a serious impact on the value of a property and you could end up in negative equity and unable to sell when your life circumstances mean you are ready for the next step, so it is a good idea to be cautious.

@KihoBebiluPute As far as I know they’ve never been demanded, so I’m not sure if they’d be classsed as unpaid or not. The seller advised that nobody on the estate has ever paid them or had them requested despite the provisions existing in the deed.

We trust our solicitor 100% but it’s more worry that this is going to be something which stop the purchase from going ahead. We asked for a deed of variation over a month ago and haven’t really heard anything back or made any progress since unfortunately

Our first house was a freehold Taylor Wimpey new build which had a management company (Chamonix, now called Firstport) to which we had to pay a small amount of management fees to per month (around £14 iirc) this was to maintain the communal areas etc. I hate to say it but I would avoid like the plague - it was a nightmare to sell, loads of faffing about with the council regarding whether roads had been adopted/paid for etc and it took months. I would never ever buy a house with any sort of caveat of that type again.

I recently pulled out from buying a house with an estate rent charge. The estate rent charge is exactly as you describe with regard to the lease, but the charge is also unregulated and uncapped so will rise a lot in coming years and you will have no right to query the charges. Don’t pay what they demand and your house will served with a lease and worst case you can be evicted and tenants put in your home. Have a look at “fleecehold”’on the internet. If you are ok with the land owner having open access to your wallets go ahead and buy, otherwise buy an older property where you properly own the land it’s built on and doesn’t have these onerous covenants.

Thanks for your feedback. The house was built 6 years ago so we’re hoping that it doesn’t have the fleecehold covenants that the newest houses do, but we’ve advise our solicitor to stop any enquiries on it until the leasehold clause has been resolved.

The problem we have is our buyers are extremely keen to get moved and there’s very little to no other suitable properties for us to view, let along buy. We can’t even rent because we’re porting our mortgage so we need to buy on the day we sell.

What a nightmare

Yes, the house we were buying was a new build resale too - my solicitor asked for a "deed of variation" but the answer was a straight "no". I could have gone through with the purchase as my lender was ok with the fleecehold (some banks will not lend with an estate rent charge as they know about the difficulties of reselling if the rent charges escalate, many people trying to sell are trapped in their properties or have to sell heavily discounted) but didn't as I wanted a true freehold. The people who were buying the house before us also pulled out too.

Just to say, worth double checking the porting your mortgage thing. We are also hoping to port our mortgage, but have 6 months to do so between buying and selling (we are renting to break the chain so hopefully 6 months will be enough). You've probably already checked but just wanted to make sure, as sometimes there is some wriggle room!

@Zebblox just be so careful with ground rents. We have just sold our lovely house after a year on the market, it was really hard to sell and the only thing putting people off it was the ground rent. Good luck x

Some charges have to be paid whether demanded or not. Speak to your solicitor. The vendors may need to pay the monies asap or get a letter from TW confirming nothing is owed. It may not matter that the builder hasn't asked or chased anyone.

It sounds as though the management charge is a type of rent charge. This is different from a ground rent.

We can't even rent because we're porting out mortgage so we need to buy on the day we sell.

I am porting my previous mortgage to the property I'm currently buying, however sold my house in June. My lender allows porting up to 6 months after the sale, and I should complete in that time, which means I'll get my early repayment charge back!

I meant to add (which was the point of my post!):

So it's definitely worth calling your mortgage provider to double check what their porting rules are.

Thanks for all the advice. We ended up walking away from this house because there were just too many unknowns.

We’re breaking our chain and moving in with Family next month to make sure we don’t lost our buyer. Turns out we have 180 days to find a new property in order for the ERC (8k!) to be refunded

Really appreciate all of the input

Sensible, because if you were nervous of buying in such a hot market imagine trying to sell it later in a cooler market.

I pulled out of a house with similar covenants, OP. I think you've done the right thing!

Very sensible. We pulled out of one with similar covenants. Turned out one of the walls on the edge of the estate had collapsed a few years ago and blocked the main road. Years of wrangling and eventually the insurer laid out but the estate resident all got hit with huge insurance charges. Negotiating it was also a nightmare as it was the residents committee involved as well with some that were looking at moving (and needing a cheap bodge it job before the insurer accepted liability) and others that were intending to be long term residents.

These estates are a nightmare with many roads not adopted and meaning there are huge future charges stacked up once it reaches a certain age and the residents all have to cough up. Councils have been complicit as it are avoiding the normal maintenance despite residents paying significant council tax fees....the ones on the estate we were contemplating were £3000 per annum!

Of course the sellers didn't say anything. Was a friend that lived locally that warned us. These estates are the next big scandal waiting to happen...they just haven't aged enough yet for the costs to become apparent.

@Sunflowergirl1It seems crazy that it’s allowed for such restrictions on ‘freehold’ properties. Especially given the current demand for housing and lack of it, just another hurdle for potential homebuyers to have to manoeuvre.

We certainly won’t be viewing any newer build properties on the back of this!

Solicitors advise you don't proceed with a variation, because even if you can get a mortgage on it (and lots won't give it) it might be difficult to get a mortgage on in future, so you might find it difficult to sell.

This is the key thing peoole forget.....its not just about how the term impacts you or doesn't, it's about how it will affect the saleability or particularly the lendability of it.

Mortgage lenders are increasingly wary of lending on anything with shorter leases, anything beyond tiny ground rent which is fixed and don't like any terms in leases or estate charges which can be adjusted or the rights sold on on and adjusted. The government is in the process of changing leasehold law for new builds and making it a bit easier for existing leaseholders to extend their leases. This will mean anyone with an onerous clause will find their property becomes even harder to sell.

Often the only people who can buy are cash buyers who do t need mortgages and solicitors will a d use them not to buy without amendments b cause when they sell, the buyers might need a mortgage.