Buying a property on a new estate? Be wary of the estate management charges and administration fees.
If you are considering purchasing a property on a newly built estate, you should carefully consider the estate management fees being charged by managing agents for maintaining communal facilities and areas on the estate as well as administration fees for providing information to buyer’s when you sell the property. This area of housing is currently unregulated and in many cases disproportionate or unreasonable fees are being charged to property owners.
More frequently, developments are being built where roads, footpaths and communal areas and facilities remain private. This arrangement is agreed between the developer and the local authority and, as all responsibility and costs for maintenance of these areas sit with the developer and not the local authority, this benefits the developer in obtaining the grant of planning permission for their developments. The developer employs a managing agent to carry out the repairs and maintenance to communal areas and facilities on the estate and the costs of this are recouped from all of the property owners.
Whilst the importance of the communal areas and facilities being maintained is acknowledged, the issue appears to be that property owners have little involvement in deciding which contractors undertake the work, the extent of the work undertaken or is required and that there is little incentive for the managing agents to keep the costs of the work to a minimum. Currently, property owners have little or no recourse if they are unhappy with the level of the estate management charge being demanded from them.
Similarly, when a property on an estate which has privately maintained areas is sold, typically the buyer’s solicitor will ask for information about the estate management charges, what areas or functions they cover and for any registration requirements of the managing agents for acknowledging the transfer of property ownership. More often than not, managing agents are charging excessively high administration fees for providing this, often, standard information. As the buyer’s solicitor needs to know this information, sellers are finding themselves feeling forced to pay it.
Below is a list of questions you may wish to ask when looking at properties on a newly built estate so that you can make a better informed decision whether you want to buy there:
- What communal areas and facilities are on the estate and whether or not these are or will be adopted?
- Whether a managing agent has been appointed or is intended to be appointed?
- What will the managing agent be responsible for?
- What are the likely costs for each property owner?
- Is it anticipated these costs will rise significantly?
- What costs do the managing agents charge for providing a ‘sales pack’ when a property on the estate is sold?
The Freehold Properties (Management Charges and Shared Facilities) Bill was proposed to introduce a cap on estate management fees and allow property owners the opportunity to self-manage communal areas as resident groups; however, the bill did not successfully pass through Parliament and so this issue remains unregulated.