Freehold houses: estate charges

It is standard practice for long leaseholders in blocks of flats to pay a service charge to cover the cost of maintaining the building and its common areas. Long leaseholders have statutory rights in terms of information about service charges and an ability to challenge the reasonableness of the charges, and/or whether the service provided is of a reasonable standard, at a First-Tier Tribunal (Property Chamber) or the Leasehold Valuation Tribunal in Wales.

Freeholders of houses who are required to contribute to the maintenance of the estate’s communal areas and facilities, do not have equivalent rights. This practice has been referred to as ‘fleecehold‘.

The Government has committed to giving freeholders equivalent rights to challenge service charges, and a right to apply to the First-tier Tribunal to appoint a new manager for the provision of services covered by estate rentcharges.

There is also an intention to regulate managing agents to “protect leaseholders and freeholders alike.”

The Government intends to introduce legislation “when Parliamentary time allows“. 

There is some suggestion in the sector that the proposed reforms will not go far enough. For example, Helen Goodman introduced the Freehold Properties (Management Charges and Shared Facilities) Bill 2017-19 on 14 November 2018 under the Ten Minute Rule procedure. The Bill’s purpose was the:

…regulation of fees charged by management companies to freeholders of residential properties; to make provision for self-management of shared facilities by such freeholders; to require management companies to ensure shared facilities are of an adequate standard; and for connected purposes.

The paper focuses on England but section 8 covers proposals in Wales. Scotland has a factoring system while the issue does not appear to have arisen in Northern Ireland.