It is becoming common for developers to charge home owners for maintenance of communal areas on new build estates, including leasehold and freehold properties.
Historically, developers funded the development, with the local authority managing roads and public areas. The private estate model is now more common whereby developers retain these communal areas, which are managed by property companies who pass the charges on to the home owners.
The maintenance costs are often passed to home owners via a deed of transfer, obliging the homeowner to pay an annual charge for maintenance of these areas. The obligation to pay these charges may also arise through an ‘estate rent charge’.
There are many variations in the way the deeds are drafted between builders and estates. The charges are usually referred to as an ‘estate charge’ or ‘service charge’ and are payable in addition to council tax.
Leaseholders have some statutory protection in respect of these charges. Freeholders do not currently have equivalent rights in terms of information about the charges or a right to challenge the level of the charges.
Whilst freeholders can take cases to court, this can be time consuming and costly. Freeholders should exercise caution where maintenance charges are set as a ‘rent charge’ given one of the remedies available for non-payment, is the ability on the rent charge owner to take possession of the property. It is hoped that the government will put in some form of regulation in the future.
You should carefully check the annual charges at an early stage, which may vary from year to year and read the sales literature given by the developer. Please contact a member of our residential property team for further legal advice.