While house building soars to a 33-year high in England, estate management charges are not always revealed until buyers are ready to sign on the dotted line.

People who buy freehold houses on private housing estates are often liable for estate management fees which cover the costs to maintain, renew and repair the shared community amenities and spaces which the local council has not adopted.

This has all come about due to negotiations between developers and planning authorities under what is known as “Section 106 agreements”, allowing Councils to claw back funding from developments, and forcing homeowners or investor buyers to pay for the management and maintenance of open spaces within or surrounding the development.

The devil is in the detail

So, when a buyer finds out there is a small service charge to look after the lovely green open spaces, which sounds reasonable at the outset – they may later discover that these charges increase, there is no cap, and no right to dispute the charges – they are bound to the property through the title deeds!

What’s more, the open space you pay for can be used and abused by the general public, and yet you are still expected to pay full council tax.

Uncapped fees could make a property unmortgageable and unsaleable

We have learned that Santander already refuses to lend on new-build homes where the developer has included uncapped management charges in the freehold contract, and Nationwide has declined the number of similar cases.

Landlords remain liable for service charges

Under the Tenant Fees Act, 2019 tenants cannot be liable for service charges relating to maintenance of freehold or leasehold properties/developments.

This blog is by no means to warn people off buying properties on new developments, but to advise you to check what you are liable for when you buy, as well as future increases.

If you are buying an investment property where estate/service charges are payable, you should build these costs into your expenditure when calculating your net yield.

Dawn Clarke

[email protected]