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Newsflash: Freehold Properties (Management Charges and Shared Facilities) Bill

Terrace houses Print publication

17/12/2018

Housebuilders face the difficult task of building more homes whilst also maintaining positive relationships with customers and communities in the face of mistrust engendered by a developer-unfriendly media.  This is against the backdrop of trying to run a successful, profitable business for the benefit of shareholders and employees in a constantly changing political, economic and regulatory environment.

In an attempt to counter what the media are already starting to term “fleecehold” or “fake freehold”, the new Freehold Properties (Management Charges and Shared Facilities) Bill was presented in Parliament on 14 November 2018 and will undergo its second reading early in the New Year.

Walker Morris partners Louise Power, an expert in assisting housebuilders and developers with their regulatory obligations, and Karl Anders, a specialist in housing management and litigation, explain the key aspects of the Bill.

What are the issues?

Addressing Parliament [1], Helen Goodman, MP for Bishop Auckland, explained that she had first had a trickle, then a torrent, and latterly, a flood of complaints, about the poor upkeep of new estates and unfair fees being charged to freehold homeowners.  She described the issues as follows:

  • Public spaces are not made up to a proper standard, with unadopted roads being left unmade and promises of green areas, play facilities and street lighting being broken.
  • Fees charged to freehold homeowners are high, rising, uncapped and unregulated and subject to a lack of transparency as to how they are made up. In addition, in some cases, whilst all charges should be explained to a purchaser before they buy the house, in practice many homeowners are unaware until after they have moved in and bills start to arrive.
  • Open or common spaces which were initially owned by the housing developers have been sold to management companies – usually to one of a very few such companies, whose “monopolistic position” facilitates mismanagement and overcharging with little in the way of legal checks and balances.
  • When challenged by residents about fees or upkeep, some management companies adopt an aggressive stance.

What does the Bill say?

Ms Goodman stated that, unlike leaseholders, who have access to an Ombudsman service and the Property Tribunal, freeholders currently have no direct legal recourse in the event of a dispute in this context. The new Bill therefore aims to:

  • Require developers in relation to new developments to make up public spaces to certain standards within a reasonable timescale.
  • Introduce measures in relation to existing developments to ensure that facilities are maintained to an adequate standard.
  • Cap and regulate estate maintenance fees.
  • Make provision for the self-management of shared facilities by freeholders.

One to watch

On the basis that an estimated 1.3 million households are affected by these issues – a number which is likely to increase in light of current house building targets – it is anticipated that this is a Bill which will attract significant media attention as it progresses through the Parliamentary process.

Walker Morris will report and advise on key developments.

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[1] Hansard, 14 November 2018

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