Home buyers purchasing new-build houses in the UK are being warned about "hidden" charges that could cost them thousands of pounds extra each year. New estimates suggest that millions of freehold new-build homes carry ambiguous "estate charges" or other fees for maintaining communal areas. Data gathered from 677 new-build housing estates shows that the average estate charge is £273 a year, but some homes have to pay far more than this. These charges are in addition to regular council tax payments and can leave homeowners with unaffordable bills and homes that are difficult to sell.
Hidden Charges and Growing Concerns
Concerns are growing over the lack of regulation surrounding these hidden charges for new-build homes. Freehold homeowners currently have fewer rights to contest management fees than those who own leasehold properties. The government has debated bringing freehold homeowners' rights in line with leaseholders, but little progress has been made towards legislating any changes. Campaigners are calling for the law to be changed to give freeholders the right to challenge unfair estate charges.
Freehold vs Leasehold
Buying a "freehold" home means you own the house and the land it occupies, while "leasehold" means you own the home but not the land it's on. Historically, people buying freehold homes wouldn't have expected to pay any additional fees. However, new-build estates now tend to carry charges for the upkeep of communal areas, similar to leasehold maintenance fees. These charges are usually set out in a legally binding document called a "deed of covenant" that buyers must sign before completing on their home.
Homeowners' Stories
The Sun has heard from several households who say they were not clearly informed about the charges for communal area maintenance when they purchased their homes. One homeowner in West Suffolk owes their management company over £3,000 after being fined for disputing the charges. Another homeowner was billed hundreds of pounds for the maintenance of a play area and a car park that do not exist on their estate. These stories highlight the need for clearer disclosure of these charges to potential home buyers.
Potential Mortgage Problems
Experts are concerned that freehold homes with high estate charges could face similar problems to leasehold properties with large ground rents, which have become difficult to sell. Mortgage lenders want to ensure that they will be able to sell a home in the future if they have to repossess it. Estate charges are similar to ground rent in principle, so prospective homeowners need to fully understand any charges before agreeing to a sale. The Competition and Markets Authority is set to publish a final report into the fairness of estate management charges in February next year.
