The future for many home owners on privately owned estates will find them under the hidden burden of what the government call “un-remedied liabilities”.
Developers are not offering estate land and amenities up for adoption, so are free to construct sub standard roads, paths, sewers and landscaping. This saves them a great deal of money. Although there may be agreements about standards via local authority planning departments, the developers know cash strapped councils will not enforce them. We end up with estates constructed to a much lower standard than if they were going to be adopted.
After the builders move off, the land is handed over to their choice of managing agent. Are these agents taking steps to ensure the estate is constructed to a good standard, asking for guarantees or indemnity insurance? We do not believe they are. Why should they, they want more future custom from the developers and they will not be footing the bill for remedial work, the home owners will.
We are already hearing of examples of estates where there have been additional large expenses for remedial work due to poor quality construction.
We believe that more questions should be asked about the handover process. There is a huge conflict of interest and lack of independent scrutiny. It is often the case that the managing agent is chosen by the developer before the first home is built – a rather cosy relationship set up before a Residents Management Company (if there is one) could have any say in the matter.
In the long run, this issue could well turn out to be the most important defect in the private estate model.
Last month we wrote to the Housing Minister on behalf of over 3,500 members pointing out the problems and defects in the private estate model, both for home owners and for the quality of the estates themselves. You can re-read what we wrote here.
Over a month later we received a response from his department which outrageously ignores the main points: a) The fundamental unfairness of a small group of home owners subsidising newly created public open space. b) It suggests Local Authorities are virtually autonomous and not constrained by government policy or funding. Of course they would say that when they have had to respond to the recent petition calling for compulsory adoption. c) There is a total unwillingness even to consider alternative ways of funding estate maintenance. The response is written as if replying to a disgruntled individual, not a large and active campaign group – a bit of wishful thinking on their part? We do not intend to go away, or shut up!
Read to the end and let us know if YOU are reassured that the government intends to look after your interests!
HorNets have not had their feet up in the sun over the summer holidays. We have been busy arguing our case.
Perhaps the most important piece of work has been our letter to James Brokenshire, Housing Minister, in response to his speech on housing at the Policy Exchange in July. You can read the full speech here.
We have taken him to task over his statements concerning quality vs quantity in new house building and the social injustice of our position. The letter is quite long, but we believe that it is the essence of our position on new build managed estates. Click on the image below to read the letter:
We plan to share the contents of this letter to key decision makers, and HorNets may wish to use some or all of it when lobbying their MPs.
The “elephant in the closet” is the poor preparation of estate infrastructure – it is absolutely vital that estate home owners do not have to pick up the tab for this in the future.
Thanks to the efforts of HorNets and members of our sister group, the National Leasehold Campaign, the government petition for compulsory adoption of estates has reached and passed the trigger point for a government response. It is open until September 1st – every signature adds weight to the campaign, so please sign and share if you haven’t already done so.
The petition author, who is an individual home owner like all HorNets was unaware of our existence until the petition really took off.
You can read the story behind it in this article in his local press.
On Wednesday 18th July, HorNet reps joined the National Leasehold Campaign demo outside parliament and later walked with them to 10 Downing Street where they handed in their petition to abolish leasehold. It was great to join such a spirited and well organised demo and to meet with people face to face.
A number of MPs came out to see us all in support including Sir Peter Bottomley and Jim Fitzpatrick co chairs of the All party Parliamentary Group on Leasehold and Common Hold reform. That great champion of exploited home owners, Justin Madders, John Healey, Shadow Housing Minister, and Catherine McKinnell who is very supportive of her HorNet member constituent.
Since our campaign is about estate management, you might wonder what we were doing there when it was a leasehold issue. We believe that all these ways of monetising land and property are interlinked, and that ordinary home owners are being exploited in a number of ways. Many leaseholders also live on managed estates, so even when successful in purchasing their freehold in most cases it will be “fake freehold” with charges attached. They will still not be free of a landlord and own a true freehold.
Stealing a phrase from the NLC campaign “don’t polish – abolish!” we who live on privately owned estates with public open spaces should be demanding compulsory adoption of these areas. Apart from resolving all the injustice and extra hidden costs for the home owners, this would also drive up standards of estate construction, which are currently abysmal and will eventually lead to blight.
Adoption for estates with public open spaces
Common hold for exclusively private estates
Abolish leasehold across the board in favour of common hold
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”