Think twice before buying a new build

Homes under construction © iStock
Do your homework before handing over the cash

Living in a house on a private estate has a certain snob appeal, but thousands of these homeowners face escalating management charges for unadopted roads and patches of ground. These are areas of land that remain in private ownership and which provide lucrative income streams for landowners who can pass on the maintenance costs to homeowners – both the freeholders and any leaseholders. This type of arrangement is normally set up using a deed of transfer, which obliges the homeowner, under the Law of Property Act 1925, to pay to maintain estate land.

The problem is that these charges (known as an “estate charge” or “service charge”) are unregulated, uncapped and, some say, open to abuse. On top of this, homeowners on private estates also have to pay full council tax, even although the council doesn’t maintain the roads and public areas outside their homes.

Campaign group the Homeowners Rights Networks (HorNet) has submitted a briefing paper to the All-Party Parliamentary Group (APPG) on leasehold and commonhold reform, setting out its main concerns with the way in which private estates are owned and run. One of the key issues at stake is that homeowners do not have a choice of service provider, nor the right to manage the estate themselves.

Unadopted estate land on new-build estates is usually either retained by the developers or sold on to management companies. Moreover, the proportion of estate charges spent on delivering actual maintenance work is often less than half the total cost to the homeowner, and there is no quality control on the maintenance of estates, claims the briefing paper.

Unsurprisingly, “the main benefactors [of this situation] are the plc developers, who get to keep the estate land, don’t have to prepare it to adoption standards and don’t have to pay for its maintenance or the commuted sums for adoption,” says HorNet. “Councils get financial incentives for new builds, as well as more council tax payers, without the encumbrance of long-term maintenance. Currently, land, roads and sewers have to be put up for adoption by the landowner, and councils cannot require it unless there is already an agreement to do so.”

Concerns about private estates come after a year of constant criticism of housebuilders who sell new-build houses on a leasehold, rather than freehold, basis thus generating extra income through ground rents and permission fees for alterations. As with the leasehold scandal, poor legal advice has contributed to problems with private estates.

However, unlike leaseholders who can ultimately take cases to a property tribunal, freeholders on private estates have no set route of redress. Should they challenge the management company in court, the company can often charge back its legal costs to residents whether it wins the case or not, putting homeowners in a “lose-lose” situation.

In the paper it has submitted to the APPG, HorNet is calling for the compulsory adoption of all new estates and retrospective adoption for established ones. It says this will put public access land back into public ownership and create fairness for all estate homeowners. But in the meantime, anyone thinking of buying a new build should ask at the outset whether the roads will be adopted by the local authority under section 38 of the Highways Act 1980 on completion of the development. If the answer’s no, it may be time to reconsider the purchase.


Britain’s first branded flats

You can now buy flats in Britain’s first “branded” apartment building, reports The Daily Telegraph. The 50-storey Aykon block, currently in development in the Nine Elms district of southwest London, has been created in collaboration with Italian fashion house Versace Home. The flats’ interiors were designed by the company, and you can expect to pay £747,000 for a one-bed flat, going up to £13.5m for a top-floor maisonette.

At the entrance to each apartment, a “V” for Versace has been inlaid into the marble floor, while images of the head of Greek mythological figure Medusa, the fashion house’s logo, are “scattered around the building”. Even the children’s playroom has a patchwork Versace carpet.