HOME BUYERS purchasing new-build houses are being warned about “hidden” charges costing them up to thousands of pounds extra a year.
New estimates suggest millions of freehold new-build homes carry ambiguous “estate charges” or other fees for maintaining communal areas, such as car parks or green spaces.
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Data gathered from 677 new-build housing estates, provided to The Sun by campaign group Homeowners Rights, shows the average estate charge is £273 a year.
But some homes have to pay far more than this – and that’s on top of paying regular council tax, despite estates often taking years to be adopted by the council.
One freehold homeowner in West Suffolk told The Sun they owe their management company more than £3,000 after being fined for disputing their charges.
Homeowners Rights estimates there are up to three million homes which may have to pay estate management fees – dubbed “fleecehold” – based on available data.
Concerns are growing that the lack of regulation around these charges could leave homeowners lumbered with unaffordable bills and homes that are difficult to sell.
Freehold vs leasehold
Buying a “freehold” home means you own the house and the land it occupies.
The other main tenure is “leasehold”, which means you own the home but not the land it’s on. This tends to be more common for flats.
Leaseholders usually have to pay ground rent to the landlord, often on top of other maintenance fees.
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After years of lobbying by campaigners, the government finally banned ground rent for new leasehold properties in February.
However, a scandal has been brewing in the freehold property market in the meantime.
Historically, people buying freehold homes wouldn’t have expected to pay any additional fees.
But new-build estates now tend to carry charges for the upkeep of communal areas in a very similar way to leasehold maintenance fees.
The charges are usually set out in a “deed of covenant”, a legally binding document the buyer must sign before completing on their home.
However, the Sun has heard from more than a dozen households who say the charges weren’t clearly explained to them at the time or were downplayed as small fees for mowing grass, for example.
Freeholders currently have even fewer rights to contest management fees than those who own a leasehold property.
In July this year, the government debated bringing freehold homeowners’ rights in line with leaseholders, but little progress has been made towards legislating any changes so far.
Helen Morgan, Liberal Democrat MP for North Shropshire and spokesperson for Housing, said: “Rogue developers are exploiting people who think they have bought their dream home only to be forced to fork out fees they were never warned about – while still having to pay council tax.
“The law must be changed to give freeholders the right to challenge unfair estate charges.”
A spokesperson for the Department for Levelling Up, Housing and Communities told the Sun: “These charges are unacceptable – which is why we will bring forward new laws to protect freeholders in these circumstances.
“This will give them the right to challenge unreasonable costs, go to a tribunal or get a new manager to provide services”.
‘Charged for a playground that doesn’t exist’
Many of the homeowners Sun Money spoke to said they had received huge bills for work done on their estates that they hadn’t agreed to.
Jacqui Stevens, 53, was billed hundreds of pounds for the maintenance of a play area and a car park – neither of which exist on her estate.
The payroll administrator, who lives in Shepshed, Leicestershire with her husband and two children, said they were only advised about a “small charge for cutting grass” when they bought their freehold home in 2020.
But shortly after moving in, the family received a demand for a £280 annual management fee and have had to cough up for extra unexpected bills on top.
This is in addition to their £270 monthly council tax bill.
“The management company seems able to charge whatever it likes with no justification,” Jacqui said.
“When residents dispute these charges, they receive threatening letters and £60 fines for refusing to pay.
“No one warned us that we would have no protection or rights to refute these charges, it’s a nightmare.
“If I’d known my freehold home would be treated like a leasehold, I wouldn’t have bought it.’
‘Billed £3,000 for a small patch of tarmac’
Simon Stafford, from near Bury St Edmunds in Suffolk, is fighting his estate’s management company in a small claims court after disputing a £1,000 charge for the upkeep of a patch of tarmac by his garage.
The 53-year-old has since racked up fines for not paying that have increased his bill to over £3,100.
Simon said: “I’m not even refusing to pay any of it, I just want to know what exactly I’m paying for first. But no one will tell me.
“I’ve discovered I’m basically liable to pay for anything on the estate even if it has nothing to do with me.
“I never would have bought my house if I knew that would be the case.”
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‘£445 a year for living on a building site’
Sharon and Christopher Harvey bought one of the first new-build homes to be completed on a Bellway estate in Faversham, Kent in 2021.
They were initially told there would be a cost for gardening and maintenance once the estate was completed.
But shortly after moving in, the couple were billed £445 and were charged the same again this year, even though the estate remains unfinished.
Sharon said: “We’ve basically lived on a building site for two years with very little gardening upkeep or estate management, so we feel we’re paying for nothing.”
Bellway said it handed over upkeep of the estate to a management company in 2021 and has not received any direct complaints.
Brewing mortgage problems
Leasehold properties with large ground rents have become difficult to sell, and experts are concerned freehold homes with high estate charges could face similar problems.
For example, Nationwide told the Sun it asks for details about what any estate charges over £500 per year are paying for, as it could affect the property’s valuation.
David Hollingworth, associate director at L&C Mortgages, said: “Mortgage lenders want to ensure they will be able to sell a home in future if they have to repossess it.
“Leasehold homes with big ground rents are unattractive to buyers, so banks are reluctant to lend on them.
“Estate charges are similar to ground rent in principle, so people buying new-build houses with hefty fees could feasibly have the same issues in future.
“Prospective homeowners need to ensure they fully understand any charges before agreeing to a sale. Ask your solicitor if you’re not sure.”
The Competition and Markets Authority is set to publish a final report into the fairness of estate management charges in February next year.
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