A recent article from the BBC claims that new house freeholds aren’t “worth the paper they’re written on”, with one person saying “I don’t trust landlords and leaseholds. I promised myself I would never get involved with a leasehold property. Now finding out my freehold isn’t worth the paper it’s written on makes me so angry.”
Andrew Burrows – Director and Head of our Residential Property team says “it’s very important when buying a property that you get the correct advice, and this can be particularly important when buying a new build property.”
The article also states “once the estate is finished and handed over to a management company, Denise (resident) will be charged each year for services such as the upkeep of the green spaces and the maintenance of the roads. However, she doesn’t have any control over what that rent charge might increase to in the future.”
Following on from this, Andrew suggests the way that planning permission is currently granted for developments means that developers will be forced to create a green or open space in the development. Whilst this will provide a significant amenity for the residents, once the development is completed the builder will want to hand over responsibility for its maintenance to the residents. This is usually achieved by the residents being forced, upon purchase of the property, to become involved in a management company ran by the residents themselves. In some cases, residents can even be forced to become officers of the company.
The maintenance of these open spaces, and the fees associated with the running of the company such as accountants fees, are levied on residents as an annual payment, usually called a rent charge. The exact amount for this isn’t fixed in the deeds, and so can rise unexpectedly. This can lead to complex legal arguments regarding sanctions for the non-payment of these charges, which can delay or even prevent a property being sold.
Proposals are being made to regulate these charges more closely, but given the present political climate, it is difficult to guess when these may become law.
The BBC also proposes “Covenants are intended to preserve the amenity and outlook of the wider estate and to promote good neighbourly relations and when planning the estate, the developer will need to form a view as to how restrictive the covenants should be.”
Andrew backs this up by suggesting, sometimes to reflect planning conditions but sometimes for the developers benefit, the deeds will contain restrictions called Restrictive Covenants. These can prevent alterations to the property, parking certain types of vehicles, or preventing running a business. It’s important that these are considered before committing to the purchase, as they may hinder your plans for the property and not be acceptable to future buyers.
Whilst it’s not always easy, the best approach is to look past the glossy sales brochures and the pristine show homes to truly consider, with an independent and suitably qualified and experienced lawyer, exactly what you are signing up to.
Whitworth, D. (2019). Homes freehold ‘not worth paper it’s written on’. BBC News. https://www.bbc.co.uk/news/business-49935283