‘Fleecehold’ seems to be a catch-all phrase that is associated with almost any circumstance in which charges are paid by owners of freehold properties in addition to their mortgage and council tax.
The phrase took hold when some developers sold houses on a leasehold basis with escalating ground rents. This rightly attracted a lot of negative media coverage as the impacts were highlighted. This money wasn’t used to maintain an estate and the homeowner derived no tangible benefit from paying it.
The Leasehold Reform (Ground Rent) Act 2022 has now effectively banned ground rents on new houses, which will mean this fleecehold practice cannot continue.
But the waters have been muddied. There is confusion as buyers of freehold houses link perfectly legitimate estate maintenance fees associated with their new freehold house (to maintain the common estate grounds), with the fleecehold concept, which relates to ground rent, despite no ground rent being payable.
Clarity is needed. Estate maintenance fees and ground rents are different. While there has understandably been negativity surrounding ground rents and leasehold houses, estate maintenance fees shouldn’t be part of the same discussion.
Transparency is key in helping freehold homebuyers better understand their estate maintenance fees and the tangible benefits they offer.
Previously, on a new development, local authorities would typically adopt open spaces, roadways and footpaths, carrying out all maintenance funded by homeowners’ council tax. However, due to local authority budget cuts, developers are tasked with establishing long-term ownership and a management framework for these assets. The answer is often to set up resident management companies (RMCs) to own and maintain these communal assets.
When a purchaser of a freehold house buys a property on a new development, they sign an agreement to pay estate maintenance fees to contribute to the upkeep of the communal assets. This obligation is not affected by whether a property is a leasehold or a freehold property.
Property owners, by virtue of their property purchase, become a stakeholder in their RMC. This means that once a development is completed, they and their fellow property owners can decide what works are undertaken and where, when and how these maintenance charges are spent to help shape their community, from the ground up.
Far from being fleeced by unfair fees to maintain communal assets or rent for the ground on which their properties stand, the RMC model gives homeowners control over their wider communal assets and the spaces in which they live. If they are unhappy with something on their estate, they can change it. If they wish to improve an aspect of their estate, they can. This is a more interactive and flexible model than the traditional council adoption one.
RMCs can greatly enhance a property owners’ experience by fostering collaboration, transparency and effective communication as to how estate maintenance fees are spent and communities shaped.
By valuing the input of residents and ensuring transparency in decision-making processes, RMCs can create a positive and thriving residential community for all residents.
A new development where a developer is still selling new homes includes a sales suite and beautifully tended garden areas that look just like the brochure.
If there’s no RMC in place, when the developer has moved on and the areas are handed over to the local authority to maintain, communal grass and gardens often aren’t tended to with the same frequency and care. Council budgets are stretched.
However, with an RMC in place, the presentation standard that new homebuyers buy into when they purchase their new home can be consistently maintained as gardening contractors will continue to look after the grounds with the same care and attention.
There is a sustained demand and expectation from homebuyers on new developments for well-maintained communal assets. Homebuyers now expect more than just a quality home on their own plot. They are looking for the same level of quality outside their own boundaries, within the wider development that they call home.
Regular maintenance and upkeep funded by estate maintenance fees help preserve a well-maintained development that is more appealing to potential buyers, which can lead to higher ongoing property values.
Estate maintenance fees often enable an estate to be maintained to a higher standard than a council-adopted estate, with maintenance contractors attending at greater frequencies to undertake tasks such as grass cutting, and also undertaking reactive repair work more promptly.
Effective estate management, funded by said estate maintenance fees, can also ensure a more secure living environment with measures such as CCTV cameras, access control systems and security patrols, contributing to residents’ peace of mind.
Ultimately, the estate maintenance fee represents an investment in the maintenance, security and enhancement of an aesthetically pleasing and vibrant living environment.
Fleecehold is a catchy term, but one that also carries a lot of negativity and bias. Its use can also hinder productive dialogue and co-operation between residents, developers and managing agents when open and transparent channels of communication are vital.
Care must also be taken not to generalise. Not all residential communities with estate maintenance fees operate in the same way. There are many variables. Some will have well-managed and transparent service fee systems that benefit residents, while others may not. Using a blanket term like fleecehold is shortsighted and fails to distinguish between the good and the problematic.
The negative fleecehold stigma is both unhelpful and unconstructive. Improved transparency into what role estate maintenance fees play in maintaining developments and building new communities, as well as shouting more about their many tangible long-term benefits, will go a long way to shedding the fleecehold moniker.
Oliver Taylor is head of client delivery at estate management agent Preim