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Service Charge

including wills and probate
brightncheerful
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Re: Service Charge

#400087

Postby brightncheerful » March 29th, 2021, 3:02 pm

Lootman wrote: If I really wanted to feel like I lived on a private estate then I'd do what I have seen in the UK, and have seen a lot more in the US: set it up as a gated community with a guard controlling who enters. But of course then you have to pay for that as well.


Alternatively, as with a house i visited a few years ago, an armed policeman at the entrance gate. I remember thinking it was one-upmanship.

brightncheerful
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Re: Service Charge

#400101

Postby brightncheerful » March 29th, 2021, 3:51 pm

Clitheroekid wrote:This type of arrangement is increasingly common with freehold housing estates. In the old days the norm was for estate roads to be adopted by the local Council, but this new system arose because the buyers didn’t want the local hoi-polloi driving their Vauxhall Astras up and down the nice new roads outside their house. By making the roads private they could keep the plebs at bay..


That's not the only reason. Cash-strapped local authorise don't want to take on any more responsibility than they have to. Also the developers receives cash flow pending completion of the estate, which would be determined by the developer; not simply the sale of the properties but still a few things to finish doing etc


(I am commenting on the op below.)

brightncheerful
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Re: Service Charge

#400125

Postby brightncheerful » March 29th, 2021, 4:39 pm

The op is an interesting insight which i am relieved to say Mrs Bnc and I have avoided, having changed our mind about buying into, (albeit we've not told the developer as there is no need for the time being).

In 2019 when seriously planning on moving to Dorset, we visited a site for a small development of new houses and erroneously (hindsight) paid for an early bird agreement. A reserved first refusal for when construction of the property of our choice would be started and the actual price, rather than a guide price, would be released; probably the guide price inflation-adjusted. I was told about the estate maintenance charge to cover expenses for the unadopted roads, communal areas, and so on. The estate layout included a small piece of land along the boundary for children to play on, picnics, etc and via a connecting footpath available for use by non-residents as well

I was told the charge would be shared equally by all householders, in two instalments a fixed amount in advance, the balance at the end of each year depending upon actual expenditure. ( I am familiar with service charge structures: with leasehold residential property service charges are regulated; for leasehold commercial property unregulated. However, this isn't a service charge in the popular sense (or should that be unpopular) but an estate maintenance charge which is different, not quite the same principle as a rent charge as probably more onerous.)

Pending waiting for full details of the charge to be provided, i contacted Dorset Council to find out whether the developer had indicated intention to or had applied to have the highway layout publicly adopted. I was (verbally) told the main estate road would likely be, subject to discussions with the developer which were underway, but not any of side roads.

(I'd heard rumours too that DC were reconsidering whether to adopt infrastructures as a matter of course, but they didn't comment on that. Reconsidering was a possibility because cash-strapped councils do not want to take on the responsibility. Where we live now, an estate developed since 1993 and which took some 7 years to complete there is no way in my view that had the estate been built more recently the council would have taken on the full responsibility which includes maintenance etc of numerous communal paths, extensive landscaping, lighting, etc.)

Before handing over our money, we were told the advance charge would be £185 a year for each household, payable on exchange of contracts, at least 3 months before completion of the property. When i received the full details, the numerous items reminded me not only how many would be under the charge but also how many i hadn't realised would be chargeable - for example, arboricultural inspection, play area RoSPA inspection, insurance, accountancy, company secretary, sundries, reserve fund for cyclical maintenance. The total charge was just under £16,000 for the year ending 31 December 2019, a third of the charge for management fees (including VAT).

Rip-off! As I told Mrs Bnc, one would reasonably expect the estate common areas to be in tip-top repair and condition on completion of the development as a whole, not for the householders to be responsible for the cost of what the developers should do - and since construction was on-going what repairs and maintenance the developers would have to do - if someone like me, (probably me only) were to get a structural survey of the communal areas as well as the property we would be buying. By now, if not before, the roads would have been used by the construction machinery, lorries, etc and what with the snow and ice are quite possibly in worse condition than when we visited.

I appreciate we have had lockdown(s) but to date most the estate is still available; the developers have had to resort to inducements galore and many of the houses, including 'ours' are yet to be started. I don't know what the estimated maintenance charge was for the year ending 31 December 2020 but I'd bet it won't budge until the developers have completed all the sales and don't themselves have to contribute anything towards the total.

As I understand each householder is to have a share in the management company ( incorporated in 2020 and no accounts available yet and whose significant shareholders are the two directors of the developer) but only after the developers have finished the estate, which at the current rate of sales could be years off.

--

Regarding the op, she was given an estimate of the charge at the onset but wouldn't have bought had she though the charge would escalate by so much. Costs do rise, especially anything involving employment of staff. It is quite possible, i would think most certainly, that the estimated charge prior to purchase was too low, a marketing ploy. Depending upon the style of the development, no buyer would go ahead if the annual charge were unrealistic.

What is to be done about it depends upon the voting power of the householders versus the person(s) having significant control of the management company. A coup is one thing: even if the householders were to take over running of the company, it might not follow that the total cost of the services would necessarily be so much lower, presupposing there are no fiddles currently. Whether the extent of the management company's responsibilities should be curtailed would depend upon the shareholders' vote.

As for disclosing the maintenance charge to prospective buyers should the op decide to sell, that is given.

I think the lesson for anyone contemplating buying a freehold property with an annual maintenance charge is caveat emptor. High risk if there'll come a time when affordability becomes a big issue.

AF62
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Re: Service Charge

#400129

Postby AF62 » March 29th, 2021, 4:55 pm

AsleepInYorkshire wrote:I've simply never heard of this before. I can see no reasonable reason why someone should be paying for the upkeep of land used as an amenity by the public. And that's the source of my confusion. I would add that there is additional confusion as the OP states the road is not adopted?

I wonder if there's a private drive off the main road which hasn't been adopted through a section 38? In addition that has a communal area which has under the planning consent to be maintained by the residents and in order to ensure/police that maintenance the LA have agreed to do the work but re-invoice?

I think the OP may not have completely understood the commitment they were making and now has an issue which impacts negatively on their cash.

I don 't have all the facts and I made a quick suggestion in order to perhaps open the conversation up and be of help. However, there's a point at which a lack of information becomes a large hurdle and guessing isn't perhaps as positive as the gesture.

Take care

AiY


You are absolutely right that facts are key to this. I also agree that there was perhaps a naivety in believing the service charge wouldn’t change significantly, given that such increasing service charges have been reported in the press frequently over the last few years.

Without the facts but from the description, my guess would be that the developers never wanted the roads adopted and never even considered s38 (the absence of pavements being a clue). For the road going forward s37 might be a solution, but who is going to push it and pay the legal fees? I can’t see the management company doing that.

As for the communal land, again my guess would be it was land the developers knew they wouldn’t get permission to build on or couldn’t build on due to some feature, so effectively used it as a sales tactic on the planners. There are several developments going on in the town I live where green ‘community’ spaces are being created as part of the development, but they are not going to be handed over to the local authority for them to maintain.

If the OP wanted the facts then a good place to start would be the local authority online planning portal which will hold all the original planning documents and correspondence between the developers and the local authority.

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Re: Service Charge

#400134

Postby EverybodyKnows » March 29th, 2021, 5:23 pm

brightncheerful wrote:
Lootman wrote: If I really wanted to feel like I lived on a private estate then I'd do what I have seen in the UK, and have seen a lot more in the US: set it up as a gated community with a guard controlling who enters. But of course then you have to pay for that as well.


Alternatively, as with a house i visited a few years ago, an armed policeman at the entrance gate. I remember thinking it was one-upmanship.


Perhaps they knew you were due to visit...? ;)

brightncheerful
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Re: Service Charge

#400139

Postby brightncheerful » March 29th, 2021, 5:45 pm

EverybodyKnows wrote:
brightncheerful wrote:
Lootman wrote: If I really wanted to feel like I lived on a private estate then I'd do what I have seen in the UK, and have seen a lot more in the US: set it up as a gated community with a guard controlling who enters. But of course then you have to pay for that as well.


Alternatively, as with a house i visited a few years ago, an armed policeman at the entrance gate. I remember thinking it was one-upmanship.


Perhaps they knew you were due to visit...? ;)


They did know, they also knew that Mrs Bnc would be accompanying me but her name wasn't on their copy of the guest list which led to some suspicious questions which were eased only after the host intervened. No smiles were exchanged.

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Re: Service Charge

#400149

Postby Arborbridge » March 29th, 2021, 6:41 pm

dealtn wrote:
JillyB wrote:
This seems an excellent ruse if it is so. Of course they are going to show a small figure if it does not matter if they can then treble it without any consequences. Had I seen the true cost of how expensive it would be to look after this piece of land, I would have definitely thought again about a purchase. It is only going to get more and more expensive.



So during the purchase process, when you presumably appointed a solicitor (or equivalent) to do conveyancing and searches etc and general due diligence, did you ask for any such figures to be checked for reasonableness? That was your chance to estimate such "true costs". Questions asked then, and money spent at that stage if necessary, is how "buyer regret" is avoided I'm afraid.

Caveat Emptor is the reality unfortunately.



What we have here is someone in difficulty, shock, pain and probably some embarassment. What she needs is help, and although your answer is correct, I can't help feeling you are being a bit of a smart alec. :) Not helpful, and actually I doubt if researching would have been easy, nor much of a defence against what happened later.

Arb.

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Re: Service Charge

#400155

Postby Mike4 » March 29th, 2021, 6:53 pm

brightncheerful wrote:
EverybodyKnows wrote:
brightncheerful wrote:
Alternatively, as with a house i visited a few years ago, an armed policeman at the entrance gate. I remember thinking it was one-upmanship.


Perhaps they knew you were due to visit...? ;)


They did know, they also knew that Mrs Bnc would be accompanying me but her name wasn't on their copy of the guest list which led to some suspicious questions which were eased only after the host intervened. No smiles were exchanged.


Presumably 10 Downing Street.

I had a chat with the copper on the door there once, shortly before Mrs T had them gates put up each end of the road. I often wonder if I rattled them....

I was working just round the corner and we went for a stroll up Downing street to gawp one lunchtime, and the copper seemed pleased to have someone more interested in talking than photographing themselves with him. We were also had a chat with two burly blokes sitting in a Ford Granada all day nearby. They told us they were part of Willie Whitelaw's protection team. Again, seemed pleased to talk to us and that we weren't Irish...

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Re: Service Charge

#400194

Postby Clitheroekid » March 29th, 2021, 9:40 pm

Arborbridge wrote:I doubt if researching would have been easy, nor much of a defence against what happened later.

You're quite right. Developers are some of the most unscrupulous, devious, outright liars I've ever come across - and I worked for a firm in my distant youth whose main clients were property developers, including some national names, so I've seen it at first hand.

This is why they do their best to get buyers of their houses to use the solicitors `recommended' by the developers. They have effectively bribed the solicitors with the promise of a stream of tame clients provided they don't ask any awkward questions, and concentrate on getting the clients to sign the contracts ASAP.

It's an utterly disgraceful practice, and the solicitors who accept the bribes are just as corrupt as the developers. The Law Society and the SRA should be punishing solicitors who take the 30 pieces of silver, but it's conveniently ignored, probably because they're too busy sending us 34 page questionnaires on whether we're meeting diversity and inclusion targets.

In cases like this the developers deliberately underestimate the charges that will be payable, knowing that because they are only estimates there's no comeback when they turn out to be two or three times larger.

These communal areas cause massive problems, often because nobody - including the developer - really wants them or cares about them, so the management schemes gradually fade away.

I have a client at present who owns a property on this type of development, and had agreed a sale. There was a manco set up to maintain the `communal area' that's nothing more than a grassy knoll - useful for shooting presidents, but not much else.

For some reason the grass has always been mown by the local council, so there was no need to spend any money on it. Each house owner was supposed to be a director of the manco, but as the manco had no real function various houses were sold without anyone bothering to observe this, and after the last director disappeared the manco was struck off the register for failing to file accounts.

Unfortunately, there's a restriction registered at the Land Registry that says:

No disposition of the registered estate ... is to be registered without a certificate signed on behalf of [the manco] ... that the provisions of paragraph 13.6 of the Transfer dated 2 September 2005 ... has been complied with.

What this means is that no buyer of the property can register their title, as they need a certificate from a manco that doesn't exist. Consequently, as things stand the property is unsaleable and unmortgageable.

She has applied to the Land Registry to cancel the restriction, on the basis that it no longer serves any useful purpose, but they've refused. So she's now faced with having to incur substantial legal costs not only to restore the company to the register but to try and get it into operating condition. Needless to say, her fellow residents, who aren't selling, have no interest in co-operating as it means spending money. It's a nightmare for her.

Anyone buying property, whether leasehold or freehold, that has ongoing charges attached to it needs to be really careful about what they're letting themselves in for. On some developments these arrangements do work OK, but the potential for disaster is uncomfortably high.

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Re: Service Charge

#400199

Postby mc2fool » March 29th, 2021, 10:18 pm

Clitheroekid wrote:So she's now faced with having to incur substantial legal costs not only to restore the company to the register but to try and get it into operating condition. Needless to say, her fellow residents, who aren't selling, have no interest in co-operating as it means spending money. It's a nightmare for her.

If she restores the company and is the sole director, then she can (presumably?) charge whatever she likes for providing the certificate needed whenever any of the other residents sell up.

If so, maybe she could convince the other residents to cough up a comparatively smaller amount each now to collectively cover her costs -- and take the company off of her hands -- with the threat that if they don't she'll milk them big time when they do finally sell up and need her to provide the sign off?

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Re: Service Charge

#400203

Postby AsleepInYorkshire » March 29th, 2021, 10:28 pm

mc2fool wrote:
Clitheroekid wrote:So she's now faced with having to incur substantial legal costs not only to restore the company to the register but to try and get it into operating condition. Needless to say, her fellow residents, who aren't selling, have no interest in co-operating as it means spending money. It's a nightmare for her.

If she restores the company and is the sole director, then she can (presumably?) charge whatever she likes for providing the certificate needed whenever any of the other residents sell up.

If so, maybe she could convince the other residents to cough up a comparatively smaller amount each now to collectively cover her costs -- and take the company off of her hands -- with the threat that if they don't she'll milk them big time when they do finally sell up and need her to provide the sign off?

I think that everyone else just needs to quote the company name and number to the Land Registry. They don't have to prove anything past that. I think CTK is saying his client has to stump up the cost now as s/he can't quote the company name and number as it no longer exists.

AiY

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Re: Service Charge

#400206

Postby mc2fool » March 29th, 2021, 10:37 pm

AsleepInYorkshire wrote:
mc2fool wrote:
Clitheroekid wrote:So she's now faced with having to incur substantial legal costs not only to restore the company to the register but to try and get it into operating condition. Needless to say, her fellow residents, who aren't selling, have no interest in co-operating as it means spending money. It's a nightmare for her.

If she restores the company and is the sole director, then she can (presumably?) charge whatever she likes for providing the certificate needed whenever any of the other residents sell up.

If so, maybe she could convince the other residents to cough up a comparatively smaller amount each now to collectively cover her costs -- and take the company off of her hands -- with the threat that if they don't she'll milk them big time when they do finally sell up and need her to provide the sign off?

I think that everyone else just needs to quote the company name and number to the Land Registry. They don't have to prove anything past that. I think CTK is saying his client has to stump up the cost now as s/he can't quote the company name and number as it no longer exists.

AiY

Ummm ... CTK said that there was a restriction that there had to be "a certificate signed on behalf of [the manco]", which doesn't sound like a case of a seller just quoting the company name and number.

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Re: Service Charge

#400207

Postby AsleepInYorkshire » March 29th, 2021, 10:40 pm

mc2fool wrote:
AsleepInYorkshire wrote:
mc2fool wrote:If she restores the company and is the sole director, then she can (presumably?) charge whatever she likes for providing the certificate needed whenever any of the other residents sell up.

If so, maybe she could convince the other residents to cough up a comparatively smaller amount each now to collectively cover her costs -- and take the company off of her hands -- with the threat that if they don't she'll milk them big time when they do finally sell up and need her to provide the sign off?

I think that everyone else just needs to quote the company name and number to the Land Registry. They don't have to prove anything past that. I think CTK is saying his client has to stump up the cost now as s/he can't quote the company name and number as it no longer exists.

AiY

Ummm ... CTK said that there was a restriction that there had to be "a certificate signed on behalf of [the manco]", which doesn't sound like a case of a seller just quoting the company name and number.

Oooh ... a loop hole :lol:

I demand a recount ... and an offer my services as a Manco for £60/hr - cheap ;)

Yup - suitably admonished :oops:

AiY

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Re: Service Charge

#400650

Postby brightncheerful » March 31st, 2021, 6:00 pm

Mike4 wrote:
brightncheerful wrote:
EverybodyKnows wrote:
Perhaps they knew you were due to visit...? ;)


They did know, they also knew that Mrs Bnc would be accompanying me but her name wasn't on their copy of the guest list which led to some suspicious questions which were eased only after the host intervened. No smiles were exchanged.


Presumably 10 Downing Street...


Presume wrongly. It was a UK private residence for an ambassador of a foreign country.


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