Labour MP Helen Goodman fights ‘fleecehold’ rip-offs with Private Members’ Bill

Helen Goodman, Labour MP for Bishop Auckland, today launches her Private Members Bill to ban “fleecehold” charges on private estates.

These are a where new estates have roads, lighting and communal spaces unadopted by the local council, which have to be maintained at the residents’ expense.

Inevitably in the property world, this has become another income generating asset which is now widely traded.

Helen Goodman told fellow MPs today:

Today, November 14, I will be presenting my Ten-Minute Rule Bill – the Freehold Properties (Management Charges and Shared Facilities) Bill.

This Bill will look to address the issue of ‘fleecehold’ estate fees – “new build tax”– which primarily affect freeholders on private housing developments.

Communal spaces on an estate, such as grass verges, playgrounds, and areas planted with trees and shrubberies, are retained by developers instead of being handed over to the local authority. Property companies then either charge residents directly for maintenance, or sell on the contract to a property management company who collect these fees.

Although estate fees are often included as covenants in the transfer deeds on many freehold properties, many homeowners don’t know they exist until a bill arrives. This practice is currently unregulated, and is the latest cash cow for property companies. There is no cap on fees and management companies are under no obligation to account to homeowners for work carried out or costs incurred. Often, residents find themselves trapped on poorly maintained estates, paying hundreds of pounds a year, with no way to hold the company to account. Unlike leaseholders, who have access to a dedicated ombudsman service, freeholders facing estate maintenance fees have no legal recourse in the event of a dispute. This issue affects around 1.3 million people in this country.

We are being ripped off by private estate charges by developers and property predators just like leaseholders, says HORnet

This Bill would therefore make provision for the regulation of these fees and the self-management of shared facilities by such freeholders. It would also make provision to require management companies to ensure shared facilities are of a suitable standard, amongst other related things.

If you would like to show your support for this campaign, you can do one or more of the following:

– Come to the group photo opportunity at 11 am on Wednesday the 14th of November, which is being co-organised by the Hornets (Homeowners Rights Network) – one of the largest campaign groups on freehold and leasehold reform. The group photo will take place promptly at 11.05 am in CR20.

– Tweet about this issue on the day of the bill, using the following hashtags: #NewBuildTax, #FleeceholdBill, #FakeFreehold, #NewBuildNightmare, #NightmareNewBuild, #FleeceholdScandal. Example tweets:

Stop #NewBuildTax. Stop #Fleecehold.
Let’s put a stop to #Fleecehold and our #NewBuildNightmare!
In what world does grass-cutting cost £25,000 a year? One with #NewBuildTax.
#NewBuildTax must come to an end. #FakeFreehold

Helen Goodman MPs writes:

New housing developments are springing up across the country, and Bishop Auckland constituency is no exception. Anyone buying a new home has come to expect the process to be stressful and expensive – from paying conveyancing fees to navigating the mortgage application process and organising the move itself. It is thought that once the furniture is assembled and the boxes are unpacked, the stressful time is finally over and you can start to enjoy your new home.

That is, until the bill for estate maintenance lands on the doormat.

What are estate fees?

Estate fees, also known as service charges, management charges, rent charges, or maintenance fees, are now a common feature of many private housing developments. They are included in the small print of transfer deeds on many freehold properties, although many residents don’t know they exist until a bill arrives.

The communal green spaces on the site, including things like grass verges and shrubbery areas, are retained by the developer instead of being adopted by the local authority. Property companies then either charge residents directly, or sell on the contract to a property management company who collect these fees.

Much like the spiralling Grounds Rents scam which affected leaseholders, estate charges on freehold properties are being used as the latest cash cow by unscrupulous property companies.
There are no precise figures on the number of households affected, but it is easy to estimate the scale of the problem. In 2017 alone, there were 133,280 new build dwellings completed by private companies. A significant proportion of these homes will have been constructed by major housebuilders on large private developments where buyers are charged these fees. Over the last five, or even ten years, this practice has spread unchecked amongst developers – leading to problems for homeowners on a massive scale.

While estates do need to be maintained, the fees demanded of homeowners are completely disproportionate to the services provided – if indeed they are provided at all. Fees vary according to the location, developer, and management company, but are usually in the region of £100-£220 per household, per year. When collected from every household in a development – say 150 homes, each paying £170 – this produces a yearly income for the property company of £25,500 from just one estate. This is in exchange for irregular grass cutting, the removal of dead trees (which are often not replaced), postage, and the company’s bank fees.

I have had reports from constituents that if they cannot pay, or refuse payment in response to inadequate service, the management company initiate legal action, including sending bailiffs and threatening repossession of the property.

This micro-industry is completely unregulated: homeowners do not have access to a dispute resolution ombudsman, they cannot choose their service provider, and there is no cap on fees. Consequently, people are finding themselves trapped on a poorly maintained estate with escalating yearly fees – with no way to hold those responsible to account.
This practice has to stop.