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Toxic leaseholds are banned but now firms are cashing in on freeholds

Up to 1.3 million homeowners could be trapped in freehold contracts that tie them to rising and unregulated fees, Money Mail has discovered.

Many new-build estate residents who already pay council tax are being charged uncapped ‘management fees’ if their local authority does not take on the upkeep of the area.

Campaigners are calling it ‘the new leasehold scandal’ and say homeowners are now struggling to sell or remortgage.

Retired teacher Joelle Jones and husband Ian are battling demands for cash from an estate management company — despite paying £2,310 a year in council tax (see box below) 

Developers say the charges — which can be as high as £1,800 a year, according to a campaign group — are necessary to cover the cost of maintaining roads and green spaces on the estates because local councils can no longer afford to do so. 

But councils say many developers are simply trying to make more money. MPs, campaigners and residents are now all calling for the charges to be capped and regulated.

Buying a freehold property ordin-arily means the homeowner does not pay ground rent and service charges that leaseholders face.

Earlier this year the Government banned the sale of new-build leasehold houses to protect families, who were being forced to pay toxic ground rents that doubled every decade.

But now, an increasing number of newbuild buyers are being hit with escalating fees and charges — despite buying their property outright and owning the freehold.

Others have to pay up to £2,000 in ‘permission fees’ if they want to make improvements to their home.

And some developers are adding ‘covenants’ to property deeds that ban the owners from parking vehicles such as vans or motor homes on their own driveways.

Forced to pay £199 a year on top of £2,310 council tax bill 

Retired teacher Joelle Jones and husband Ian, a former nuclear engineer, moved into their £413,000 freehold home six years ago. 

The grandparents say the four-bedroom detached property in Buckingham was ‘ideal’ for their needs after moving from the North to be closer to family.

But now they are battling demands for cash from an estate management company set up by developers — despite paying £2,310 a year in council tax.

Their estate was built by a consortium including Barratt, David Wilson Homes, Bellway and Bovis. 

Residents are made to fork out for upkeep costs that have risen from £181 to £199 over the past three years.

Joelle, 63, says they have no idea how their money is being spent. She says: ‘We are paying full council tax like everyone else in Buckingham — so why shouldn’t we get the same services as everyone else?

‘I would be happy paying more if we were getting better services but there is no transparency and we cannot see what we are paying for. There should be laws stopping developers from doing this.

‘We were so excited when we were buying the property, so when the cheery saleswoman said ‘Oh, there will be a company to look after the green spaces’ we didn’t really give it very much thought.

Campaign group Hornet says it knows of at least 110,000 households which now have to pay these fees — typically around £250 a year.

Cathy Priestley, of Hornet, says: ‘This is the new leasehold scandal, we’ve been told some homeowners are struggling to sell, and in some cases building societies are refusing to accept re-mortgage applications.’

It is understood that many developers are selling the contracts to maintain the estates to property management firms.

Beth Rudolf, director of the Conveyancing Association, says more freehold homes are being sold with estate management charges.

She says: ‘The Government is banning leasehold houses because of all the abuse, but it’s a bit like whack a mole — every time you think you’ve sorted out one area, another one pops up. 

We are expecting it to become more common now that the Government has banned leasehold houses, builders will be looking to replace lost revenue.’

The fees can come under a variety of names including ‘upkeep fees’, and ‘service charges’. In most cases part of the income is used to pay for contracted jobs the council would usually do such as maintaining green spaces and roads.

But Local Government Association housing spokesman David Renard says: ‘Even in cases where councils are in a position to adopt new open spaces, some developers prefer to make their own arrangements for repair and maintenance in order to maintain control of those spaces and generate income.’

Firm tried to charge £10k for gardening 

Oxford University finance manager Stuart McCarroll's management company tried to charge £10,000 for gardening

Oxford University finance manager Stuart McCarroll’s management company tried to charge £10,000 for gardening

Stuart McCarroll’s management company tried to charge £10,000 for gardening on the development — quoting a firm based 80 miles away.

The Oxford University finance manager and his partner Vicky MacGregor, a nurse, bought their three-bed semi in Witney, Oxfordshire, in June 2016.

The couple, who have eight-week-old twins, bought the new-build property for £350,000.

It’s one of 36 homes on Cala Homes’ Spring Meadow site.

The couple, both 37, currently pay £385 in service charges.

In 2017, management firm Remus told residents it had been quoted £10,000 for gardening by a firm in Birmingham. 

Stuart says: ‘We refused to pay and eventually the company used a local firm that charged £3,900.We wanted to buy freehold because we wanted security for our family home but now we worry about charges rising.’ 

Remus said the quote, from the development’s original gardener, was only listed for reference.

Cala Homes says: ‘We do not sell management contracts or receive income from them.’

Labour MP Helen Goodman, who estimates 1.3 million households are affected, is seeking a change in the law for new estates where management of streets, verges and public open spaces has not been taken over by the local council.

She told the House of Commons in November last year that management companies appointed on estates had the ‘opportunity to mismanage and overcharge with impunity’

She told MPs: ‘The fees are high, rising, uncapped and unregulated. One constituent told me their fee had risen from £60 to £134 in four years. Another constituent faced a 50 per cent rise in one year.

‘All of this looks like just another way for property developers to screw more money out of hard- pressed households. It really is a private new-build tax.’

She added: ‘When challenged over the fees or upkeep by residents, the management companies adopt an ultra-aggressive stance.

‘My constituents have been bullied with threats of court action or even the bailiffs. This is going on across the country.’

Miss Goodman said problems have arisen because public areas on new-build estates are sometimes ‘not made up to proper standard’, so local councils will not take them on. Instead, housebuilders are selling the management rights on to third-party companies which charge ‘unfair fees’, she said.

The fees must be paid by residents on top of the normal council tax, owed to the local authority.

‘A couple of years ago, I had a trickle of complaints about the poor upkeep and unfair fees being charged to homeowners on new estates. This has now turned into a torrent and then a flood.’

Miss Goodman, whose bill was backed by a cross-party group of 30 MPs, wants to force developers to build estates where public areas are built to a standard where they can be adopted by local councils, and for estate management bills to be capped and regulated.

But the bill did not get passed in time and it was dropped when Parliament was prorogued recently.

I’ve no clue where my £100 a year charge goes 

Administrator Alison Dutton, 56, pays £100 a year for a piece of dog-mess-covered scrub

Administrator Alison Dutton, 56, pays £100 a year for a piece of dog-mess-covered scrub

When Alison Dutton bought a four-bedroom detached home four years ago she was thrilled it came with communal parkland.

The 56-year-old paid £169,995 for the freehold house in Shildon, Co. Durham to live in with her grown-up son Christopher.

Alison was expecting a nature reserve, but instead got a piece of dog-mess-covered scrub that she must pay £100 a year for. 

The 270 households at Middridge Vale, Shildon — built by Persimmon Homes and Dunelm Homes — pay £27,000 annually.

Wiltshire-based firm, London and Economic Properties Limited takes the fee and can increase the charge every ten years in line with inflation.

Alison says: ‘I don’t think it’s fair. They promised woodland, walkways; it would be like a nature reserve. 

But there are still no pathways, no bins to put rubbish in, nothing for dog walkers to get rid of their waste.’

Persimmon say: ‘We do not benefit from this levy, it is solely for the benefit of the owner/manager of the community woodland.’ 

London and Economic Property Management did not respond to our requests for a comment.

Labour’s Clive Betts, chairman of the Commons housing, communities and local government committee, says he believed some estate charges were acceptable if they were explained properly to property buyers.

He adds: ‘I’m very concerned about the growing number of freeholders being made to pay charges, because it seems to me that since leasehold homes have become more difficult for developers to sell they are now simply looking for other ways to keep up their income streams.

‘That is completely wrong and the Government needs to intervene to take action to stop it.

‘Any fees should be clearly explained and freeholders should have a right to challenge them.’

Developers are also forcing freeholders to follow strict rules.

These can include a ban on satellite dishes on the front of their homes or even having mobile homes or commercial vans parked outside.

Failure to comply could lead to legal action from the developer or management company.

Builders often say this is to ensure all houses on an estate look similar, but campaigners say that these rules go against the spirit of freehold ownership.

Affected homeowners have told Money Mail they are frustrated by the lack of laws to protect them. 

Sebastian O’Kelly, a spokesman for the Leasehold Knowledge Partnership, warns that residents on new estates were at risk of becoming ‘second class citizens’.

He adds: ‘You’re going to have a situation where some people who pay council tax will get all the services they are entitled to, while others living in newer homes will be paying their council tax but will only get some services — and on top of this will have to pay estate fees.

‘Councils should not be allowing these management companies to be set up just to shirk their responsibilities. This is not how you create communities.’ 

A spokesman for the Home Builders Federation, which represents developers, says: ‘Traditionally local authorities ‘adopt’ and then maintain this new infrastructure, with residents funding upkeep and maintenance through council tax.

‘However, increasingly we are faced with the situation whereby councils specify requirements for new roads, green spaces, drainage systems or play areas but subsequently refuse to take responsibility for these new assets. 

This leaves residents reliant on management companies to fill the role that council taxes should pay for.’  

f.parker@dailymail.co.uk

 

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