You may have seen on Fairfield Parish Council (FPC)’s Facebook page last month that our MP, Richard Fuller, asked the following question in parliament: “In my constituency, Councillor Weir of Great Denham, Councillor Gallagher of Shortstown and Councillor Dixon of Stotfold are leading efforts on behalf of local residents who own a freehold property to challenge excessive fees, lack of transparency and poor service by estate management companies. Will the Minister review the terms of reference of the Property Ombudsman to make it easier for homeowners, freeholders, to challenge these unfair practices?” To understand the background to his question, we explain how new housing developments such as those in Fairfield are set up, and detail some of the problems that residents in our parish are facing as a result.
Most homeowners in Fairfield are obliged to contribute to the upkeep of our shared areas – playgrounds, paths, green spaces, and so on – through private management agreements. This is a relatively new way of doing things. Fifty years ago, new estates were almost always ‘adopted’ wholesale by the local council on completion: the upkeep of any common areas was covered by council tax, and homeowners were not expected to take responsibility for anything beyond their own boundaries. Times have changed. Squeezed councils are now resistant to incurring additional costs, and keen for the upkeep of common areas in new estates to be paid for by local residents.
As a consequence, housebuilders have had to find new ways to ensure that public amenity spaces and other shared areas will be properly funded and maintained after a development has been handed over to its residents.
One option is to sell properties as ‘leasehold’, retaining ownership of the land on which houses are built and charging a ground rent and/or service charge that can be used to fund upkeep. This system is often used in apartments, where one building or freehold contains more than one dwelling. However, leasehold arrangements are not popular with house buyers, who like to feel that they own the land the house is built on as well as the house itself.
Keen to keep the ‘freehold’ status, many developers have turned instead to an almostobsolete Victorian construct that can be applied to freehold properties – the ‘rentcharge’: a legal commitment to pay a regular fee to the ‘rentholder’. Management companies chosen (or sometimes set up) by the builder act as the rentholder, collecting fees and arranging upkeep.
In practice, this system is not dissimilar to a leasehold agreement. The advantage for developers seems to be mainly that it is less well known and therefore less unpopular with buyers. One of the disadvantages for freeholders is that they are not (yet) afforded the same rights as leaseholders to challenge the reasonableness of charges or the way their money is being spent.
Mortgage lenders, who are better informed than most home buyers, don’t like rentcharges (as some residents have discovered when trying to buy and sell houses in Fairfield), because they are open to abuse by unscrupulous rentholders. But, usually, there is no evil intent and the management company is (eventually) handed over to residents. This largely removes the risk of excessive fees and poor service from third parties (as long as there are residents who are prepared to give their time to the cause). Until that handover happens, however, householders do have to pay whatever fees are asked to a company of the builder’s choice, and there is not much room for challenge if they don’t like the way things are run.
In Fairfield, as elsewhere, niggles have been voiced among neighbours from time to time about fee increases or unpopular decisions made by management companies. But, unfortunately, in one part of the parish things have gone beyond mere niggles. There are claims that one particular recent development has not been delivered to the agreed standards, that the builder is difficult to contact, and that the builder-appointed managing agent, far from helping to resolve these issues, is piling on the pressure for residents to accept handover of the site as is. If they were to do so they would become responsible not only for their amenity spaces (as is standard) but also for all of their roads, and potentially also for a sewage system in need of remedial works.
There are several claims of ‘lack of transparency’ and ‘poor service’ here. The builder apparently always intended to keep the roads ‘private’, and did not enter into any discussions with CBC about their adoption. This is not unheard of – some of the smaller cul-de-sacs in Fairfield Park are privately owned and maintained – but it is unusual for residents to be responsible for a road that takes significant traffic, and unacceptable for buyers not to have been informed of this arrangement when purchasing their properties, as residents claim was the case here. As for the suggestion that householders might be left liable for rectifying a substandard sewage system – that clearly stinks!
It is on these residents’ behalf that FPC entered into discussions with Stotfold and Langford Ward Councillor Steve Dixon, and then with MP Richard Fuller, who seems to be aware of similar problems arising in other parts of his constituency too. We will keep our readers informed about any developments.
Header picture, from left to right: Fairfield Parish Councillor Anthony Hopkins, Richard Fuller MP, Fairfield Parish Councillor Barrie Dack and Stotfold and Langford Ward Councillor Steve Dixon