Could the new Freehold Properties Bill be the answer to ‘Fleeceholding’?
Labour MP Helen Goodman introduced the Freehold Properties (Management Charges and Shared Facilities) Bill to Parliament in November 2018. The main issue the Bill aims to address is ‘fleeceholding’, where freeholders on communal estates are charged excessive estate management fees by managing agents.
Estate maintenance fees would be capped by the Bill, as well as ensuring shared facilities are adequately maintained and providing the means for self-management of communal areas. Although positive news for freeholders, there could be implications felt more widely throughout this currently unregulated area.
Rachel Gwynne, our head of social housing, explains how the Freehold Properties Bill can help freeholders:
Private housing developments often charge homeowners for the upkeep of communal spaces, such as roads, grass verges, electric gates, and playgrounds. In fact, approximately 1.3 million households pay these estate fees.
Land, of course, needs to be maintained to keep communal areas usable. However, the fees charged for these services are considered disproportionate by many. They vary between location, developer and management company, but on average they are between £100-£450 per household, per annum. Residents also have no voice when it comes to the work undertaken or the service provider selected, as there is no obligation for companies to lower costs or prove they have completed their services.
Councils used to manage the roads and public areas of housing developments, but funding-cuts in recent years have limited local authorities’ abilities to do so. This has made developers wary of asking councils to fund these services, in case planning permission is not granted. Therefore, a growing number of new-build estates are adopting the private estate model.
Transparency is needed in the sector and that is what the Freehold Properties Bill aims to provide. Giving homeowners access to information such as how fees are calculated, why they are increased, and who to contact if they have concerns. Lack of regulation in this area leaves homeowners without the right to raise any issues they have.
As well as this, purchasers should receive greater transparency to ensure fees do not come as a surprise. Although they are contained within the transfer deeds as covenants, many homeowners are not fully aware of them. This can lead to financial issues for those who did not factor these additional fees into the cost of their home.
Now that leaseholders have an amount of statutory protection from the Government’s proposals to ban sales of new leasehold houses and impose a £10 statutory cap on ground rents for residential long leases, it is time for freeholders to gain protection too. The Bill has been introduced to help do this by regulating fees, ensuring standards of communal facilities are upheld, and allowing freeholders to self-manage communal areas.
Brexit has caused uncertainty in the market and this is only increased by the unresolved challenges of UK housing sector. The change involved must be understood by buyers, developers and investors before plans can be agreed upon successfully and fairly.
The Bill is due to have its second reading on Friday 22 March 2019.