Freehold estate management

What are freehold estate charges?

Freehold estates are private or mixed-tenure estates where, unlike other residential areas, shared areas and facilities, such as roads, play areas and open spaces, are not owned or looked after by the local authority. Responsibility for their maintenance will instead rest with a private company (often the original developer) or homeowners themselves through a residents’ management company (RMC).

Responsibility for estate management is normally agreed when the local authority grants planning permission. Authorities can be reluctant to take responsibility for common areas (a process known as ‘adoption’) due to the maintenance costs involved.

The private company or RMC will normally employ an estate management company to organise the necessary maintenance work on the estate, and the estate residents will be required to pay for the maintenance via an estate charge.

The requirement to make a financial contribution will be set out in legal documents that are signed when the property is bought.

The amount of council tax each household pays is not discounted or adjusted to account for the estate charge or to reflect the specific services received. Council tax is collected to deliver a broad range of services across the wider local community.

What rights do freeholders currently have?

Unlike leaseholders, freehold homeowners on these estates currently have very limited rights over the cost and quality of services provided.

Where the developer employs a management company, a freeholder can lodge a complaint with the relevant redress scheme. Property management companies in England must belong to a government-approved redress scheme: The Property Ombudsman or The Property Redress Scheme. These schemes provide for independent resolution of disputes. There is government guidance on the schemes.

What new rights will freeholders have?

The Leasehold and Freehold Reform Act 2024 received royal assent on 24 May 2024. The act will strengthen the rights of freehold homeowners on private and mixed-tenure estates in England and Wales. In particular, it will:

• give freeholders the right to:

• • challenge unreasonable estate charges and the standard of work carried out through an application to a First-tier Tribunal (Property Chamber) (or Leasehold Valuation Tribunal in Wales).

• • apply to the tribunal to appoint a substitute manager where their estate management company is failing.

• improve the transparency of estate charges and ensure freehold homeowners receive key information on a regular basis.
• improve the transparency of administration charges and give freeholders the right to challenge unreasonable charges through an application to the tribunal.
• require freeholders/developers who directly manage the estate (in other words, they do not employ an estate management company) to belong to a redress scheme.

In 2019, the government said it would consider whether to introduce a statutory right for freeholders to take over estate management via a Right to Manage company. However, provisions to enable this were not included in the Leasehold and Freehold Reform Bill.

Although the 2024 act has received royal assent, the majority of the provisions are not yet in force and will need to be commenced through secondary legislation.

The Labour government has committed to “act quickly to provide homeowners with greater rights, powers and protections over their homes by implementing the provisions of the Leasehold and Freehold Reform Act 2024…” There have been no further announcements about the implementation timetable.

Future reforms

In the King’s Speech 2024 the government committed to publish a draft Leasehold and Commonhold Reform Bill in the 2024-25 parliamentary session, so that it may be subject to broad consultation and additional parliamentary scrutiny.

The background briefing notes to the King’s Speech 2024 said the Bill will, amongst other things, “bring[ing] the injustice of ‘fleecehold’ private estates and unfair costs to an end.” The government will consult on the best way to achieve this.

CMA recommendations on estate management

In February 2024, the Competition and Markets Authority’s (CMA) final report on its market study into housebuilding identified significant issues with private estate management. The CMA consequently recommended action to:

• prevent the proliferation of private management arrangements on new housing estates; and
• provide greater consumer protections for homeowners on existing privately managed estates.

The CMA also invited the UK, Scottish and Welsh governments to consider options to support the adoption by local authorities of shared amenities on estates currently under private management arrangements.

The Conservative government did not formally respond to the CMA’s findings and recommendations before the general election in July 2024.

Wales, Scotland and Northern Ireland

The Welsh Government’s Programme for Government 2021-26 commits to “ensure that estate charges for public open spaces and facilities are paid for in a way that is fair.”

The estate management provisions in the Leasehold and Freehold Reform Act 2024 apply to Wales. The Welsh Government will introduce subordinate legislation to implement the act.

Estate charges are also an issue in Scotland. Scottish factoring provisions can provide a remedy (the removal of the management company) in certain circumstances. For more information, see Property factors – mygov.scot.

This specific issue does not appear to have arisen in Northern Ireland.

Further information

Ministry of Housing, Local Government and Communities: Guidance: Freehold estates

Library briefing: Freehold houses: estate charges

Library briefings: Leasehold and Freehold Reform Bill 2023-24 and Leasehold and Freehold Reform Bill 2023-24: Progress of the Bill

About the author: Hannah Cromarty is a researcher at the House of Commons Library specialising in housing and homelessness.

Disclaimer

The Commons Library does not intend the information in this article to address the specific circumstances of any particular individual. We have published it to support the work of MPs. You should not rely upon it as legal or professional advice, or as a substitute for it. We do not accept any liability whatsoever for any errors, omissions or misstatements contained herein. You should consult a suitably qualified professional if you require specific advice or information. Read our briefing for information about sources of legal advice and help.