Exorbitant costs and inefficient administration: The potential perils of residing in a freehold community
Get a Home of Your Own, But Beware the Expenses: A Look into Freehold Estates
Savor the idea of owning a house, only to discover unexpected costs, strict rules, and more fees when it's time to sell? Welcome to the realm of freehold estates - a type of housing development that real estate experts have alerted us about as on the rise.
Dotted across the country, families moving into these developments often grapple with confusing terms and hefty bills, with the government already stepping in to intervene.
What are these properties?
Unlike other freehold homes, shared areas and facilities on a freehold estate are not overseen by the local council. Instead, a private management company or residents, via a management firm, shoulder the responsibility.
The councils opt for this approach to sidestep the expense of maintaining new housing developments, according to Andrew Bulmer, CEO of The Property Institute.
Residents must pay the management company to maintain communal spaces, in addition to their council tax.
Costs skyrocketing year after year
The Competition and Markets Authority report published this year discovered that estate management company fees per household vary greatly, from around £60 to nearly £1,000 in 2022.
The report revealed that these charges have been escalating significantly year-on-year. In some cases, they doubled or even tripled when a new management company took over.
"Projecting these costs over a 25-year period, without accounting for future hikes or increasing scarcity, affected households would pay the equivalent of more than £4.4bn," it found.
Bulmer explained that residents on smaller estates might have to shell out "astronomical" fees due to the fact that management companies have to split costs among fewer people.
Moreover, these expenses go beyond just covering maintenance costs; they encompass the overheads associated with the property, such as an out-of-hours call line, accountants, insurance, and risk assessments.
Feeling inadequately protected - Thame resident's story
"These companies don't care about anything else as long as they're getting their money," grumbled Thame resident Jane Morton Driscoll about her management company, RMG.
Morton Driscoll, a 40-year-old homeowner for six years, has felt "unsafe" and "infuriated" due to a host of problems on her housing development. Although she knew about the required fees when she purchased her home, she expected to receive better service for her money.
Though the broken equipment in the children's play area has never been replaced, 25% of the street lamps don't work, melted tarmac, withering trees, and neglected gardens are common sights.
"The estate is not being managed well at all," she lamented. "It doesn't feel safe to walk home at night."
Despite her safety concerns, her annual management fee has still risen.
"It's exasperating. It's a feeling of hopelessness that this is our fate. We are stuck with incompetence."
'Detestable' customer service
Morton Driscoll shared with us a copy of the financial report sent by her management firm, which revealed £20,773.24 spent on grounds maintenance, £3,373.20 assigned to playground costs, and £3,106.80 on tree surgery.
She questioned how any of that money was put toward improving the estate.
"My assumption is that it doesn't cost £3,000 to replace a children's roundabout and a swing," she remarked.
She was particularly frustrated by the amount spent on "professional fees" for what she perceived as poor customer service.
"Things just keep disappearing off their records. Why should we have to keep chasing them?" she wondered.
RMG's response
RMG, Morton Driscoll's management firm, informed us that the children's roundabout was removed following a safety inspection, and they are working to reinstate all equipment "as soon as possible."
They are also addressing outstanding faulty streetlights and collaborating with residents to solve the tarmac issue.
"We acknowledge that some issues have taken longer than expected to address and are making efforts to improve communication and responsiveness," RMG added.
"While we have no record of any complaints being lost or disregarded, we encourage residents to get in touch if they believe an issue remains unresolved."
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'It was pretty dangerous if my little boy stepped out'
Nigel Betterton was shocked to discover that apart from his £600 annual management fee, he faced more costs when he tried to sell.
Having moved from Germany to his estate in Burgess Hill, West Sussex with his partner and three-year-old son in 2018, Betterton felt he was a victim of an "elaborate scam."
Betterton's home was on a bridal pathway, which appeared on satellite navigation systems as a road, causing cars to buzz by.
"It was dangerous if my little boy stepped out. I insisted on doing something about it, and wanted boulders placed at the end of the bridal way, but other residents thought it was a waste of money."
Disappointingly, Betterton reached out to the council, who were unfamiliar with the estate and couldn't help.
"It was terrible. We didn't know what was happening," Betterton complained.
Residents were obliged to adhere to strict rules, so Betterton was prevented from building a gate at the front of his own home.
In other instances, an elderly neighbor was compelled to tear down her car port, and residents were prohibited from parking caravans in the driveways, according to Betterton.
Sale fees amounting to £700
After six years of disputes with his management company HML, Betterton made the decision to sell and move to Cardiff. That's when he learned about even more fees.
During the process, management firm Harper Stone took over management of the estates from HML in October 2024.
"We had to pay £350 for a sale package, which were simply documents about the house," Betterton stated. "Then the management company changed, and I had to pay another £350 for the same information."
A sale package, also known as a management pack, typically contains essential information about the property for potential buyers. This includes accounting documents, fire risk assessments, and details of future maintenance works.
Sellers also receive a break-up of any payment requirements or fees payable to the management company for the transaction to proceed.
"It was ridiculous," Betterton expressed his exasperation. "I've never, ever, ever consider living in a freehold estate again."
Harper Stone and HML's responses
Harper Stone asserted that it was not responsible for any issues raised prior to its management of the estates.
"Any concerns or requests regarding installations or alterations falling under restrictive covenants would have been addressed appropriately during our period of management," they stated.
Regarding the information provided to Betterton at the time of his property purchase, they could not comment, but restated that all covenants are stated in the legal documentation for each property, which Betterton would have signed.
HML explained that the bridleway referenced was not part of the estate managed by HML. Instead, it belongs to the local authority and is a designated route for right of access and emergency right of way.
What needs to be done?
Freehold estates are not a fresh concept, and the government has already passed the Leasehold and Freehold Act 2024 to bring greater transparency to charges and more power to residents to contest unfair costs.
Bulmer suggested that a better intervention would be to avoid the creation of these private areas in the first place and require local authorities to adopt them instead.
"It's easy to comprehend why councils don't want them, but that's a poor solution that imposes long-term costs on homeowners," Bulmer concluded.
He explained that management firms are not dedicating sufficient funds to reserves for future major bills.
"It saves money for homeowners in the short term, but future buyers will be displeased," he warned.
What should you look out for?
Bulmer advises prospective buyers to ensure they are well-informed about the costs and to seek expert legal advice before making a purchase.
"Ask your lawyer to provide you with advice on what you are buying and explain the implications beyond merely supplying information for you to figure it out on your own," he advises.
- The freehold estates, unlike traditional freehold homes, have residents managing shared areas and facilities through a private company, a strategy adopted by councils to avoid maintenance expenses for new housing developments.
- Unforeseen costs and escalating fees charged by estate management companies have become a concern for many residents, with the Competition and Markets Authority reporting significant year-on-year increases.
- As a result of inadequate management, residents have voiced their concerns over safety issues and poor customer service, with one resident, Jane Morton Driscoll, stating her management company, RMG, was more interested in collecting fees than providing proper service.
- Furthermore, unanticipated sales fees can also burden homeowners, as seen in Nigel Betterton's case, who was required to pay £700 for a sale package when he decided to sell his property.
