Two consultations on reforms to leasehold and private estate management have been launched as the government puts the hastily passed Leasehold and Freehold Reform Act 2024 into action.
Earlier this year, the Home Builders Federation (HBF) raised the issue of a ‘double whammy’ for homebuyers on private estates, with many new build developments passing the cost of private management agreements on to home buyers. Research conducted by the body identified just 10% of developments where 10 or more homes have been built in the last three years have had their roads adopted by local authorities, with 97% of new sewers and 98% of sustainable drainage systems (SuDs) also remaining unadopted.
Information received by the HBF following a freedom of information request to the UK’s six largest water companies showed that just 3% of sewer adoption applications were completed over the past three years. Similarly, only 2% of SuDs applications were successful. Typically, local authorities will not adopt roads until sewers are formally adopted, leading to delays.
The Competitions and Markets Authority has been instrumental in instructing home builders to amend leasehold clauses, some of which see ground rent double every five years. Now, Sarah Cardell, chief executive of the CMA, says the organisation is targeting estate management charges.
“Our review of the housebuilding market found that 80% of new homes sold by the UK’s biggest builders came with estate management charges – leaving many owners facing high and unavoidable costs, with no effective way of challenging shoddy work. The changes the government is consulting on today would deliver on our recommendations and make a huge difference for homeowners across the country.”
The first consultation will review enhanced protections for homeowners on freehold estates, with proposed new protections for people already paying estate management charges, including removing the risk of losing their home for falling into arrears and introducing stronger rules on accountability and information. Suggestions include annual reports, a standardised charge demand, stronger rights to request information, rules on admin charges, and a tribunal route to appoint a substitute manager. The government says it also intends to ban the use of enforcement powers for failure to pay an estate rentcharge, contained within Sections 121 and 122 of the Law of Property Act 1925.
The second consultation will look at reducing the prevalence of private estate management arrangements for unadopted amenities such as roads, drainage and green spaces. Increasing adoption by public authorities, introducing common standards for adoptable amenities, considering mandatory adoption for certain infrastructure, removing financial incentives that make non-adoption attractive to developers, and improving transparency and data on estate management arrangements are all being considered.
Housing and planning minister Matthew Pennycook said:
“Far too many homeowners living on newly developed housing estates are subject to unfair private management charges as a result of infrastructure remaining unadopted.
“We are determined to end the injustice of ‘fleecehold’ by reducing the prevalence of private estate management arrangements and providing existing homeowners on freehold estates with greater rights, protections and control over the places they live.”
The consultations will draw on the upcoming work of the Law Commission, which is set to review the management of housing estates and arrangements where leaseholders of flats who meet certain qualifying criteria have the right to take control of the management of their block of flats (the “Right to Manage”), but freeholders of houses on a housing estate have no equivalent right.
Commonhold has been identified as the government’s preferred future tenure, with Pennycook saying the proposed reforms sit alongside the government’s “wider commitment to bring to an end the feudal leasehold system, with draft legislation set to come forward in the near future to fundamentally rewire homeownership.”
Commenting on the consultations, Paula Higgins, CEO of HomeOwners Alliance, said:
“These long-awaited consultations are a step forward, but they still don’t go far enough – and the government needs to act quickly. This is not a niche issue. There may be as many as 1.75 million homes on privately managed estates in England, with many homeowners paying estate management charges but having few real rights or protections.
“We welcome proposals to remove the risk of losing your home over estate charge arrears and to improve transparency and accountability. That matters because these charges can be high and unclear. While the CMA estimated the average estate management charge at £358 a year, costs vary widely and can escalate, leaving homeowners exposed with little ability to challenge poor management – the essence of what many now call fleecehold.
“But the protections consultation stops short of giving freeholders a clear, affordable right to manage their own estates. Instead, it points to further work, leaving homeowners stuck with unaccountable management companies.
“The government is right to look upstream at how this problem is being baked into new developments. With around 80% of new homes sold by the 11 biggest builders subject to estate management charges, the only credible solution is full, mandatory adoption of all new housing estates, alongside a clear mechanism to adopt existing ones. Anything short of that is a fudge and will leave millions more homeowners trapped by fleecehold for decades to come.
“These reforms must be strengthened and delivered at pace if they are to protect today’s homeowners and prevent the next generation being caught in the same system.”
The consultations are open until 12 March.
Reducing the prevalence of private estate management arrangements
5 responses
For once, the Government has rightly drawn attention to two issues that have long been ripe for reform.
Estate rentcharges frequently delay transactions for weeks, with archaic statutory rights of re-entry causing frustration for buyers, sellers, and practitioners alike. Equally concerning is the failure to secure adoption of estate roads. Without adoption, some developers sell common roads to third parties who exploit their position through inflated service charges, undermining consumer confidence and burdening homeowners. Another problem is the lack of a legal mechanism to compel developers to offer roads for adoption once estate roads have been constructed to an adoptable standard.
By consulting on these matters, the Government acknowledges the need for proportionate reform. Addressing them would remove unnecessary friction and restore fairness to homeowners. However, just like with other homebuying and selling ‘reforms’ the devil is in the detail. Government must speak to property lawyers to avoid unintended consequences.
I’m sorry but there is no appetite for commonhold despite government efforts to roll it out. It didn’t work in 2002. So why should it work now? I agree that there should be a review of estate rent-charges to make them fairer and more workable. The government should also include mineral rights. It has always seemed unfair to me that Lord Todsbury should be able to veto (or ransom) your proposed development, just because he owns the land below the surface. Apologies to any real Lord Todsbury. The name is supposed to be fictitious. Thank you.
Years ago the council would fully adopt the road, verges, landscaping etc. yet now on new estates you have to pay by management fees and council tax. The council tax should cover the up keep. That’s what it’s there for. Just another way of ripping off home owners and extracting more money from then.
Totally agree re the adoption of roads, verges, green spaces etc. Ridiculous that homeowners have to pay a management fee for upkeep as well as the same council tax bill that others pay that live on estates where their greenspaces are managed by the local council. Seems very unfair. Adoption of roads need reforming too, there doesn’t seem to be any real pressure on the parties involved to get on with the adoption in a reasonable time period.
I too feel that the annual Estate rentcharge has to be abolished for its chronic unfairness. The Sovereign Harbour Rentcharge, with its unique in the U.K. application that includes flood defences residents have to pay but no one else in the country does, not even businesses, is the perfect example of why it should be struck off for cause. It’s monstrous. There are numerous other wrongs in Sovereign Harbour and nowhere else that need to be righted. Until they are, Sovereign Harbour should be shunned. Estate agents who fail to disclose the facts there should be severely punished.