It is becoming increasingly common on new-build private estates for freeholders to be required to contribute to the maintenance of the estate’s communal areas and facilities. This practice has been referred to as 'fleecehold'. This short paper provides background on the issue and sets out the Government's proposed reforms. The paper covers England only.Jump to full report >>
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. These 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 to leaseholders in terms of information about the charges and a right to challenge the level of the charges. This practice has been referred to as 'fleecehold'.
The Government has committed to giving freeholders equivalent rights to challenge service service charges, and is considering whether they should have a right to change the provider of maintenance services by applying to a tribunal for the appointment of a new manager. There is an "aspiration" to introduce legislation within 12 months (as at 29 January 2019).
There is also an intention to regulate managing agents to "protect leaseholders and freeholders alike."
There is some suggestion in the sector that these reforms will not go far enough. 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 is 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.