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Home Builders Federation to host industry debate on new-build estate fee

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The Home Builders Federation (HBF) is gearing up to host an industry debate on estate fees faced by freehold new-build homeowners

The Home Builders Federation (HBF) is gearing up to host an industry debate on the growing issue of estate fees faced by freehold new-build homeowners.

Estate fees, also known as a rent charge, is charged by a developer to a homeowner for the maintenance of communal areas of their new-build housing estate which the local council has refused to pay for.

The use of rent charges can be justified if the council will not adopt the shared spaces on a new housing development.

However, mortgage lenders, conveyancers and consumer groups have voiced concerns over the effects that costly and in some cases escalating estate management fees can have on a household’s future budget and their ability to sell their home. For example, some estate fees are increased by a fixed amount every five years as well as being subject to inflationary rises.

This has led to some lenders refusing mortgages with escalating estate fees.

Mortgage lenders and conveyancers want developers to be more transparent about the fees associated with the maintenance of housing estates and set the fees at a level which is a true reflection of the cost of the work.

Director of delivery at the Conveyancing Association, Beth Rudolf, said that one issue is that buyers do not get information about the charge before they put an offer in.

Mr Rudolf said that under the Consumer Protection for Unfair Trading Regulations, at the point where a buyer is invited to make a purchase, anyone marketing the property must disclose material facts which would affect the average customer’s decision making process. If this doesn’t happen the buyer can report them to Trading Standards.

He advised buyers to ask the developer or their management company for a five year management plan to find out what the likely maintenance costs would be before buying.

Another issue, said Rudolf, was that while developers might routinely provide an estimate [of charges] for the first couple of years it was no reflection on what the cost would be once the developer had left the estate and was no longer maintaining it.

The company or person who receives the rent charges is known as the rent charge owner which is likely to be the developer when the housing estate is under construction. The developer, however, can sell the rent charge ownership to another company.

Rudolf added that they are hoping to sit down with developers to try and get agreed wording, when creating a rent charge, to prevent the risk that where an estate charge is necessary, it is not open to future abuse if the ownership of that charge is sold to an outside management company.

They also want to ensure that the rent charge terms will be acceptable to the mortgage lending market, he said.

HBF communications director, Steve Turner, said that [A debate] is something they have been discussing and are planning. The intention is to bring everyone together with an interest in the estate fees to discuss the issues that arise when local authorities do not adopt communal areas and ensure best practice is consistently applied on all new developments.

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