Retired engineer Walter Wright and his wife Peggy thought they had found the perfect place to downsize.
The three-bedroom detached home was only a couple of years old and would need less upkeep than their bungalow, which had a very large garden.
When they purchased the £269,000 property in Chudleigh, Devon, in August 2015, the Wrights were told they would have to pay a small ‘estate management’ fee twice a year.
Price hike: Walter and Peggy have paid more than £200 this year for the upkeep of the estate they live on in Chudleigh, Devon
This was to cover the cost of maintaining the grass verges, trees and two small play parks on the estate.
But, since then, the fee has risen by almost 70 per cent. They paid £90.68 for the first five months.
For the six months to July, they were charged £152.98. Even worse, the Wrights have now discovered that there is no limit to how high the management company, Meadfleet, can hike the fees.
Walter, 87, says: ‘We knew the charges were a condition of sale, but assumed that they would be affordable. There was no indication increases were in the pipeline.
‘Meadfleet does not even look after the roads and footpaths, there isn’t much grass to mow and one of the play areas has just a single set of swings.’
Experts say management companies are increasingly using service charges as a ‘money-making venture’.
Flat owners have paid these charges for years, but it’s much less common for house owners to have to pay them.
Experts warn that these high fees could be the next leasehold scandal, which has seen homeowners held hostage by eye-watering ground rent charges. They say firms are taking advantage of the fact that cash-strapped local authorities often cannot afford to ‘adopt’ the new public areas and take on the responsibility for maintenance funded through council tax.
Usually, in the past, when an estate was built, the developer would agree for the local council to manage its roads and public areas, explains Sebastian O’Kelly, of campaign group the Leasehold Knowledge Partnership. In return, the housebuilder would typically fund a project in the local area, such as paying for road improvements.
But developers now fear that asking local councils to take on the cost of managing streets and public spaces might put them off granting planning permission, says Mr O’Kelly.
They have also spied a money-making opportunity, as they can sell on the right to manage the estate to a third party, he adds.
What’s more, while leaseholders have the right to challenge ground rent charges at a tribunal, freeholders have no way of challenging escalating management fees and cannot choose who manages their estate.
Labour MP Clive Betts, chairman of the Housing, Communities and Local Government select committee, says he has received numerous complaints about management fees on new-build estates from constituents in Sheffield, South Yorkshire.
The three-bedroom detached home was only a couple of years old and was worth £269,000
He says: ‘Some companies appear to have been using management fees as a money-making venture. And there is little people can do about the situation at present.’
Back in Chudleigh, Walter is not the only resident who is annoyed by the rise in Meadfleet’s charges. In a spreadsheet sent to the estate’s 45 freehold homeowners with their most recent management invoice, Meadfleet said that it had spent more than £4,500 between February and July.
This included a tree inspection costing £324, ten play area safety inspections totalling £359, two operational inspections at £66 a time, public liability insurance of £97, and six visits by a contractor for grounds maintenance costing £604.50 a month.
But, when Money Mail visited the estate, we found uncut grass, unkempt hedges and paths on which the gravel had been washed away, leaving mud and stones.
One resident says her management charges rose from £75 for the initial five-month period after she moved in 2013 to more than £150 for the six months to July.
Another resident says: ‘There is no quality control on the work carried out. We asked Meadfleet if we could sit down and put our point across that we were unhappy at the constant rises.
However, the company effectively told us that it wasn’t interested. Some people protested by withholding their fees and Meadfleet passed this on to a debt recovery agency.’
Paula Higgins, of the campaign group HomeOwners Alliance, says: ‘The difficulty is that new-build estates are not being adopted by local authorities, so work to look after them has to be subcontracted out.’ Paul Miller, managing director of Meadfleet, says the company visits the estate in Chudleigh 26 times a year to ‘maintain the standard of the estate’.
He adds: ‘Because of its location, it can be difficult to get contractors in and their prices can be variable.
‘The real problem is that local councils will not accept [verges, trees and play areas] into their management. Local authorities are ducking responsibility.
‘We recognise that sometimes bills go up. We sometimes give people the opportunity to make payments at a lesser value or defer payments.’
Mr Miller says Walter’s first bill appeared unusually low because it only covered five months, whereas the subsequent ones have been for six months.
Mr Miller says that after counting RPI inflation over the past three years, the rise in the charge is equivalent to 28.5 per cent.
The Government says it is looking at reform of estate charges. Ministers plan to bring in legislation so households can challenge estate fees they think are too high, but no timetable has been set.