These can be a real curve ball if you don’t expect them - suddenly being sent a ‘maintenance charge’ or ‘service charge’ from, say, a management company for so-called communal services on your estate. If you own a flat on a long leasehold then these make more sense for the communal running costs and service charge, but when you buy your own house freehold on an estate, to suddenly have these land on your door step can be frustrating.
They don’t tend to be huge amounts, often from £50 to £200 each year, but that’s still a lot when you don’t know what it’s for. You also tend to find them on newer housebuilder developments.
The 3 Popular Areas
The best way to describe how they often come about is to understand the three types of land ownership you tend to see on such schemes.
Firstly, the actual plots of land with the house and front or rear garden, which are owned by each resident.
Secondly, the main access roads and pavements, which will eventually be transferred to the local authority to become adopted Highways. And then thirdly, the pieces of ‘spare’ land that no one wants to be responsible for, which often include strips or patches of grass and boundaries, but also separate play or communal areas.
These are the culprits with the sneaky charges. As the house builder wants to exit the scheme, they will often transfer to or even form new management companies that take ownership of these pieces of land and ensure there are covenants within each individual plot owner on the estate to pay a contribution towards the running costs of these.
9 Top Tips to Get on Top Of
Sounds a nice idea, although in practice it causes an administration challenge and a lot of confusion when people don’t realise what they have signed up to in the frenzy of completing on their new property purchase. So to try and make things a little clearer, here are some of the details you need to watch out for both before you sign up to anything and when trying to unravel any issues and charges afterwards:
1. There Are Probably Limited Service Charge Legislation to Provide Rights
Usual residential service charges for, say, a flat through a long lease have various rights and obligations which mean the landlord has to provide services and charges in a certain way and timescale, with tenants having rights to challenge this. Unfortunately, not necessarily so with these charges for freehold plots, as although they are still residential properties they are through freehold title restrictions rather than leasehold clauses.
2. The Main Services Being Technical, Non-Technical and Professional
By this we mean what services and maintenance you get for your money, which tend to fall into three categories. So in the first technical category, you may see electrical lighting and related equipment such as lighting and powered gates that go with it. Be careful though, because often these are not included in the first place in order to save costs, with any adjacent lamp posts actually being paid for by the local authority under their Highways obligation.
These are also SUDS, known as Sustainable Urban Drainage Systems, which basically deal with controlling normal and flood water. A complicated area in itself, and involving things like balancing ponds, attenuation tanks and pipework, and definitely needing a specialist to unravel what’s there and what the management company is responsible for instead of the local water authority.
In a second non-technical category, one area is general landscaping and gardening, which in addition to basic grass-cutting and planted areas can include litter picking, gritting, and any ancillary repairs to, say, wonky slabs and boundary fences and walls. You will also need insurance cover for the land and public liability.
The third area is professional services, including the main managing agent dealing with services and charges, and a separate accountant’s audit of the service charge accounts or any statutory management-company matters.
3. Know What You Sign Up to on Paper
This is a big problem; people simply not realising what they sign up to. Even if they do have a recollection of the original solicitor or developer mentioning this extra ‘management charge’ for communal areas, people often don’t realise what areas they are for and they in actual fact expect more from it.
Later on, when it comes to light that it covers, say, a smaller area well away from your particular plot, then although it may seem unfair to pay £100 a year to maintain a piece of grass you never use, if that’s what you’ve signed up to then you have problems.
4. Chase Your Solicitor if You Mistakenly Signed Something
So after you have checked your title and you did in fact sign something that you genuinely thought was different to what was agreed, you should then check with your solicitor. Worst case scenario you may have been misrepresented and received plans and costs for something completely different, and even though you signed something else it was under false pretences.
5. See if Any Extras Can be Done
So you may have an annoying little extra patch of grass that technically is not under the management company area, and may be the council’s or another owner’s control, but it’s a two minute job for the same maintenance crew to include this as well.
It makes sense, and worth asking. One word of caution though, make sure this is clarified in writing, particularly over a longer period of time to make sure any rights are not inherited and any liabilities clarified.
6. Remember That Non-Payment Can Bite Back
As a frustrated occupier, refusing to pay your maintenance charge may seem the only option you have, although two words of warning here.
Firstly, remember that if everyone does this and there is literally no money received, then services can reduce or even stop.
Secondly, when you come to sell your property these issues often need resolving before the management company formally agreeing to the sale and issuing a Certificate of Compliance regarding the land restriction.
7. Watch Out for Higher Costs in the Future
Initial budgets can often be with rose-tinted glasses, deliberately kept low to keep costs down. To some degree this may be correct with minimal works to do with on new estates, but watch out for sudden emergencies, initial mistakes and snagging issues being paid for, and longer term project works and reserve funds creeping in overtime with large budget increases.
Even if you do see an increase though, place it in context of how much hassle it will take to resolve. So a 20% increase may sound a lot, but on a £100 pa cost only means £20 each year increase which could be outweighed by any legal costs incurred to challenge things.
8. Check if There Are Any Genuine Benefits
So at the end of the day, you will probably have rights to use and benefit from the land, after all you’re paying for it. So although it is tucked away somewhere, you might be able to relax or have the kids play on it, or even club-together with other residents and arrange community events.
9. See Where You Can Formally Become More Involved
There may be annual meetings, regular feedback opportunities, and even possibilities of becoming a shareholder, member, or even Director in the management company. These can provide an opportunity to be part of the answer and not just the problem.
A Proactive Response
Hindsight is a wonderful thing in property management, particularly in scenarios like this with management charges for communal land. The best time to not only carefully understand but actually try and re-negotiate anything is right at the negotiation stage for the whole purchase, and making sure it’s all agreed before you sign anything.
Even afterwards though, it can be easy to become frustrated by these sudden charges, but being able to work with others to at least get the true facts, and then begin unravelling what options are available, will pay dividends in the future.
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