Home owners are subsidising infrastructure provision in their local authority area. How?
Section 106 of the Town and Country planning act allows developers to contribute to local infrastructure where planning permission would otherwise have to be refused. The original intention was to facilitate development of more new homes and provide road improvements, school places, affordable homes and leisure facilities for the new population. In recent years local planners have been using section 106 to provide more and more local infrastructure, arguably not always of direct benefit to the development under question. It is being used almost as legalised bribery to extract as much cash as possible from the big house builders.
It is acknowledged that the commercial house builders are driven by profit and shareholder value, so they are going to do everything they can to retain their profit margins including:
Cost cutting on home quality.
Cramming as many houses as they can onto the development.
Skimping on estate amenities preparation.
Not offering estate grounds/amenities/roads up for adoption.
Implementing the private estate model with unregulated management companies we all know and love!
Unjustifiable sale of leasehold houses with onerous ground rents and onward sale of their freeholds to offshore investors.
Not providing affordable homes via commercial viability assessments.
Home buyers on these estates are therefore purchasing a sub standard home on a sub standard estate and pay unregulated estate charges – effectively a private tax. There is no doubt that future saleability and value of these homes will be affected.
For leasehold houses with high ground rents and doubling clauses, the homes are unsaleable right now.
A HorNet member has researched the topic, and if you are interested, there are links in this document to articles about section 106 use and its damaging effects: S106 Articles Links
The bottom line is that we, the new home buyers, are getting a raw deal as a direct result of the way local planners are utilising section 106.
We think this diagram broadly represents the relationships between different tenures and charges on new build managed estates.
It is easy to see how central to the whole system estate charges are. Permission fees are common, but not always present.
The diagram graphically illustrates how residents with the least resources (in leasehold flats) end up having to pay more in terms of running costs. A bit like that cheap ink jet printer where the ink costs almost as much as the device. How much has Help to Buy contributed to this exploitative situation?
Leasehold houses on these developments may not be simply about lucrative deals selling on the freeholds and high and doubling ground rent, it is also easier to retain control over the estate, particularly when a property is sold on. The obligation to pay estate and permission charges automatically is transferred to the new owner, this does not happen with positive covenants for freehold houses, so less reliable conveyancing devices are used, like estate rent charges, or a chain of covenants.
“Leasehold to fleecehold” It is also clear to see how, if a leasehold house owner buys their “freehold”, they remain in the fleecehold trap. Many leaseholders are reporting this via our friends at the National Leasehold Campaign.
Great news of a successful case in the Dundee Sheriff’s court (same as small claims in rest of UK) – the Sheriff found an illegal monopoly and was able to strike out the burdens because under Scottish Law you cannot create a monopoly in the title deeds. You might say how does this help everyone else? Well…
The most common feature of the way the private estate model is being implemented is that home owners have no choice of provider. They are also very often being exploited, so there are grounds for a legal challenge under UK wide competition law. The more legal experts who back up what we know to be happening to us, the better.
It may be a very good time to launch a mass reporting campaign to the Competition and Markets Authority, who are a bit like Action Fraud in that they monitor activity but don’t take up individual small cases. We will shortly be developing a template to help members join in this action. Remember challenges over PPI initially and successfully took this route.
This really long post is well worth a read. It has been taken from our FaceBook group with the author’s permission.
It is both a personal journey of discovery and very informative for those new to the estate rent charge:
Some new-build estates (or newly built) will have ‘estate rentcharges’, some won’t. In my area (North East) every single new-build developer is doing them, and have been for the best part of 10+ years now.
It’s a case of something which used to have some small value in society, but now has been exploited and bastardised as a ‘legal loophole’. Traditional ‘rentcharges’, or ‘chief rents’, used to apply to some buildings (e.g. terraced houses), but they were very small, nominal charges, mostly very affordable. You could also ‘redeem’ them (get rid of them once and for all for your property) by paying a larger fee, agreed between you and the ‘rentowner’. Traditional ‘rentcharges’ were essentially banned in 1977 (Rentcharges Act 1977), and all traditional ‘rentcharges’ have to end by approx. 2035.
BUT, in 1977 they didn’t ban a different type of rentcharge called an ‘estate rentcharge’. Most of these new-build or newish houses, whether leasehold or freehold, are essentially classed as houses on a private estate, e.g. with the ‘freehold’ houses (or ‘fleecehold’) you own the house, you own the land the house is built upon, but you are still liable to pay an annual rent to the ‘rentowner’ for your house being built on a private estate, come what may. Continue reading “A Rent Charge Victim’s View”
HorNet have been in discussions with We Own It – a campaign group against privatisation of what they believe should be publicly owned and run. Their campaign is across the board, but does include parks and public green spaces. They have been made aware of the back door privatisation of public open spaces on private new build estates and are supportive of our campaign. Visit their parks page to see how they are promoting our work.
You might care to look around their site – we suspect many HorNets will be sympathetic to their general aims and would like to give them support.
Working together where our aims align will make us both more successful!
HorNet members tirelessly take every opportunity to influence government policy. Here is a submission by a member on our behalf to the consultation on developer contributions: Page one
What this is saying is that there should be a drastic rethink in the way that local infrastructure provision is funded. In no other country are residential house builders expected to provide this, and the result of doing so is to reduce the quality and value for money of the houses and the of estates themselves. The builders are commercial enterprises so in order to maintain their profit margin, they skimp on overpriced homes and do not offer up estate land for adoption. They also are less willing to provide their quota of affordable homes as they are already stumping up millions for roads, schools and community facilities.
What has this got to do with estate charges? Well, the open spaces on new build estates required by the Town and Country planning act are public areas for the benefit of the whole local community. These areas are being “provided” via section 106 agreements in the same way as other infrastructure. However ownership remains in private hands, and long term maintenance is not funded by the whole community, just the home owners on the estate. Government has sat by whilst this model has grown and done nothing to protect home owners interests. Although there is talk of estate service charge disputes being heard by the First Tier Lands Tribunal, this has not been enacted. It is HorNet’s view that it would not be of much practical help due to the cost and stress involved in taking a case to court. The current court fee is £400, roughly equivalent to a years charges, and that’s just to get started! If there is to be a redress scheme, it needs to be affordable and accessible to the lay person. This is something we shall be saying in response to another consultation on improving redress in housing, and the more of us who fill it in the louder our voice will be, so here is the link https://www.gov.uk/government/consultations/strengthening-consumer-redress-in-housing
Please take the time to fill it in. You need only do the parts you feel are relevant, or if it is easier, just write an email to the address on the page.
We have heard from our friends in the Unhappy Homeowners Against Greenbelt Group that there are two recent cases where judges at the small claims courts have been convinced by the evidence of lack of service.
They directed Greenbelt to a higher court mainly because they have understood the full picture including the fact that other home owners would then have to pay more (unless they took action to have their charges reduced).
Congratulation to the Greenbelt victims who have shown dogged persistence in successfully opposing unreasonable charges.
What does it mean for everyone else? It is a huge step away from the small claims courts being used to force payment of unreasonable or disputed charges. To defend yourself you must have good evidence. We understand that covenants with Greenbelt do not include a rent charge, so those home owners who are subject to this beware of the right of re-entry. This disproportionate remedy is still on the statute books and means that you can have your freehold taken from you if you don’t pay up. We are fighting to have this law amended.
If it is not so easy to bully people into paying unreasonable and unjustified estate charges, the management companies will have to start to justify the costs they rack up.
Issues reported and discussed by members over the last month include:
Several prospective new build purchaser have walked away when they found out about unregulated estate maintenance charges.
One member reports difficulties after the builder owned management company went bust. A Carillionesque sign of things to come? Certainly a long term risk for this form of privatisation of public open spaces.
More and more examples are being reported of home owners being unable to find out exactly what they are paying for. Management companies simply ignore or refuse to answer requests for detailed a breakdown of costs incurred.
We have heard of several instances of huge obstacles being put in the way of residents who wish to manage the company themselves, even when their legal documents say they can!
HorNets are still working away on their MPs, highlighting the unfairness of the private estate model, and the complete lack of any effective regulatory mechanism to prevent the large and unjustified increase in charges which many face in addition to rises in council tax.
Every vote counts! Please sign this petition and get all your friends, family and neighbours to help. We know there are probably about 1 million households on private estates – so we could easily reach the target of 100,000 signatures. This important petition is asking the government to tackle the fundamental unfairness of estate dwellers funding the maintenance of public open spaces, which should be publicly owned and maintained.
This thoughtful paper written for HorNet by one of its members gives new insights into the role of councils in choosing the private estate model, and more importantly, suggests other ways in which councils can fund the public open spaces we are so unfairly paying for.
This is a revised paper. The original suggested that councils had flexibility over raising funding for estate maintenance under the Localism Act, but unfortunately this is not the case. They could however use council tax to raise funds.