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Daily Mail
a day ago
- Business
- Daily Mail
We're tempted to buy a flat above a Post Office but will it be a mortgage headache or hard to sell in the future?
My husband and I have found a flat we really like. It seems like reasonable value compared to other homes in the area. However, we have one major concern... the flat is located above a Post Office, which is possibly why it is a little more reasonable than other properties in the area. The flat itself is leasehold with 188 years on the lease and the service charge is £1,000 per year. But should we stay clear given that the property is above commercial space? We are worried that a Post Office could change to something else in the future, like a restaurant or takeaway which could be even more disruptive and present a fire risk? Will it also be possible to get a mortgage on it and could it be difficult to sell in the future? Ed Magnus of This is Money replies: When it comes to buying a home, often the biggest challenge is compromise - there is likely to always be something that holds buyers back. The human brain is hardwired to look out for threats and even those who find their perfect home, will likely spend a lot of time pondering over potential pitfalls. But it's great you have found a property that both you and your husband really like and feel is reasonable value for the area - that's the hard bit to get right. A 188 year lease is long enough not to worry and the service charge is relatively low, so that's also a positive, albeit you need to find out what the service charge is going towards, and whether it can be increased - and if that increase is capped. The average annual service charge for a flat in England and Wales was £2,300 in 2024, according to analysis by the estate agent Hamptons - so it's fair to say this is well below the norm. You are right to question about the flat being located above commercial space, given this has some potential to impact getting a mortgage and the ability to sell in the future. Given it is a Post Office, it would be worth checking it's opening hours and perhaps spending some time looking at how busy it is during the day - if that concerns you. In its present form, a Post Office below the flat should not cause an issue on the mortgage front, but as you say, there is the potential for it to change into something else in the future. For expert advice we spoke to Luke Thorne, associate director at mortgage broker SPF Private Clients, Amy Reynolds, head of sales at Richmond estate agency Antony Roberts. Will they be able to get a mortgage? Luke Thorne replies: While most lenders would generally consider lending to someone buying a flat above commercial premises, such as a Post Office, this is always subject to specific review from the bank surveyor. Some lenders will restrict the loan to value available where a flat is located above commercial premises, so this may mean that a higher deposit is required by any potential buyer. The type of commercial is particularly important and anything that could be detrimental to the saleability, such as noise, smells and extended opening hours, which for example could be associated with a café, restaurant or fast food outlet, which are likely to be treated more cautiously by the lender. Having 188 years left on the lease is fine. Lease length becomes a greater concern once the lender can only see say 85 years left at the time of stating the mortgage. Once that figure is hit, that's when lenders' appetite falls away and fewer options are available. While we are unaware of the property value and the conditions within the lease, £1,000 would not seem to be too onerous a service charge. However, this will be commented upon again by the valuer and the lender will incorporate any comments made that could affect the future marketability of the property, into its lending decision. What the borrower should also ask is if there is any ground rent applicable to this property. If there is, detail about value and review period should be ascertained as again this may impact the lending options open to the purchaser. Will they be able to sell in the future? Amy Reynolds replies: You're absolutely right to ask the question – flats above commercial premises do tend to be priced more competitively, and buyers often wonder why. The answer is that they can be harder to get a mortgage on and that affects the audience we can sell to. However, Post Offices are generally viewed more favourably by mortgage lenders compared to, say, a takeaway or pub - they're considered low-impact in terms of noise, smells, and foot traffic. The concerns about what the unit below might become in future are valid. There are rules around change of use, but these rules do change over time. We sell plenty of properties over commercial and would sell plenty more if lenders would take a different view of the risk. Provided it's a well-run building, priced sensibly, and in a good area, there will always be a market for it. It's just about going in with your eyes open, which you clearly are. Could a Post Office branch be changed to a restaurant or takeaway? Ed Magnus of This is Money replies: You'd hope that the Post Office branch below this flat will continue for a long time to come. The Post Office has sayid it is committed to maintaining its current level of Post office branches. That said, nothing is ever certain - and in November last year, The Post Office confirmed it will be axing 115 branches from its 11,500-strong network. Any future change of use will likely require planning permission from the local authority for someone to change the use from Post Office to a restaurant or takeaway. A Post Office is categorised as a Class A1 type of commercial property. Restaurants and cafes are an A3, while hot food takeaways are an A5 category. However, thanks to a recent government rule change to the commercial categories, switching from an A1 class to an A3 class could in some cases now be deemed a permitted development right, which might make it easier for that particular change to happen. How to find a new mortgage Borrowers who need a mortgage because their current fixed rate deal is ending, or they are buying a home, should explore their options as soon as possible. Buy-to-let landlords should also act as soon as they can. Quick mortgage finder links with This is Money's partner L&C > Mortgage rates calculator > Find the right mortgage for you What if I need to remortgage? Borrowers should compare rates, speak to a mortgage broker and be prepared to act. Homeowners can lock in to a new deal six to nine months in advance, often with no obligation to take it. Most mortgage deals allow fees to be added to the loan and only be charged when it is taken out. This means borrowers can secure a rate without paying expensive arrangement fees. Keep in mind that by doing this and not clearing the fee on completion, interest will be paid on the fee amount over the entire term of the loan, so this may not be the best option for everyone. What if I am buying a home? Those with home purchases agreed should also aim to secure rates as soon as possible, so they know exactly what their monthly payments will be. Buyers should avoid overstretching and be aware that house prices may fall, as higher mortgage rates limit people's borrowing ability and buying power. What about buy-to-let landlords Buy-to-let landlords with interest-only mortgages will see a greater jump in monthly costs than homeowners on residential mortgages. This makes remortgaging in plenty of time essential and our partner L&C can help with buy-to-let mortgages too. How to compare mortgage costs The best way to compare mortgage costs and find the right deal for you is to speak to a broker. This is Money has a long-standing partnership with fee-free broker L&C, to provide you with fee-free expert mortgage advice. Interested in seeing today's best mortgage rates? Use This is Money and L&Cs best mortgage rates calculator to show deals matching your home value, mortgage size, term and fixed rate needs. If you're ready to find your next mortgage, why not use L&C's online Mortgage Finder. It will search 1,000's of deals from more than 90 different lenders to discover the best deal for you. > Find your best mortgage deal with This is Money and L&C Be aware that rates can change quickly, however, and so if you need a mortgage or want to compare rates, speak to L&C as soon as possible, so they can help you find the right mortgage for you.
Daily Mail
5 days ago
- Business
- Daily Mail
Can I offer my estate agent a £1,000 bonus if they sell our home for the best price?
We're about to list our home for sale and have agreed a flat fee with the estate agent firm upon completion. I'm aware our selling agent will get commission, but can we incentivise him to sell our home quicker and prioritise us by giving him a cash bonus? I thought I would offer £1,000 cash off the books to make our home his number one focus and get the price we want. But is this unethical, or even illegal? Ed Magnus of This is Money replies: This is an interesting idea, However, it needs to be kept above board, on the books and handled in the right way to be ethical. It's worth remembering that a good estate agent shouldn't necessarily need to be given additional financial incentives to sell. You would hope they would want to get you the best possible price regardless, as this often dictates their commission. If a quick sale is what you are after, it might be a better strategy to simply price your property competitively. Homes that receive an enquiry on the first day of marketing are 22 per cent more likely to successfully find a buyer than homes which take more than two weeks to receive their first enquiry, according to Rightmove. Listing your property at a realistic asking price is also likely to attract more buyers. That means more interest, more viewings, potentially more offers and even a bidding war. Buyers tend to become more engaged once they know other people are interested in a property and that 'fear of missing out' kicks in. Will the bonus strategy work? This will divide opinion and many will argue it won't. After all, a property is worth what a buyer is prepared to pay for it and ultimately, what price you accept is up to you. But there could also be an argument for offering an incentive to the estate agency on the basis it is paid to whichever negotiator ends up selling the property. You need to be clear about the terms. For example, you'll pay £1,000 if they sell for a certain price, or within a fixed time period. If the estate agent is just a one or two man band, then I would question whether an extra £1,000 will make much difference to them personally as the managers of the business. That said, most estate agent offices have a team of sales negotiators who get paid commission when they sell a property. Typically only the negotiator who sells a property earns the commission - the others get nothing. Negotiators' commission is often 10 per cent of the fee agreed, albeit it can be higher than this. This means for example if you agreed a flat fee of £6,000 with the estate agency, only £600 of that might go to the negotiator who sells your home. Do the maths: Most negotiators will receive a percentage of your estate agent fee if they sell the property, but this will only be a fraction of the sale price Most estate agents charge a percentage fee, rather than a flat fee, the average being about 1.5 per cent of the final selling price. This in theory incentivises each agent to get the best possible price. However, the negotiator who sells the property may not be that fussed to negotiate hard on your behalf given they only receive a fraction of that. For example, while the difference between you selling for £400,000 and £410,000 might be a big deal for you, for the negotiator it could make all but £15 difference to their commission, based on them taking 10 per cent of a 1.5 per cent fee. Setting a target price for all the negotiators to target with the offer of an extra £1,000 incentive for anyone who manages to secure that price (or more) could in theory pay off. After all, the worst kind of estate agent is the one that just waits for the incoming phone call via Rightmove or Zoopla. A much better sales negotiator will pick up the phone, know their list of buyers and be able to create a buzz around your property from day one. Some agents may even be able to find potential buyers looking in surrounding areas - if they have other offices nearby with a buyer database they can access. For expert advice, we spoke to Mike Hansom, consultant for property litigation at BLB Solicitors, Jeremy Leaf, north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors, and Matt Thompson, head of sales at Chestertons. Is £1,000 cash off the books legal? Mike Hansom replies: I am not sure what an arrangement 'off the books' would entail, but the extra fee you pay would be income that the agent needs to declare to His Majesty's Revenue and Customs. I recommend you are vigilant in avoiding any transaction where you suspect the agent might not declare the income. It could mean you are implicated and even prosecuted for an offence relating to tax evasion or avoidance. Assuming the transaction is entirely legitimate for tax purposes, there could be a view that you are simply looking for a premium service, for which you are willing to pay a premium rate, and in principle that is not unlawful. I also anticipate it is common for some agents to offer different marketing packages for different prices. Jeremy Leaf replies: I am not sure it is a great idea for various reasons – first and foremost, there is the tax and transparency question. Should the payment, if made, be disclosed to the tax authorities by the giver or receiver? And what would the reaction be of other client vendors of that agency if they were to discover that sellers have been offering extra payments to promote their properties at the expense of others? My advice is not to make the proposal as almost certainly trouble will follow one way or another. The majority of negotiators are on individual commission anyway so will benefit if they arrange a sale. You must be careful of offering one negotiator an incentive and not another because if word gets out, you may find the other negotiators disengage from trying to sell your home. Is it unethical? Jeremy Leaf replies: Any conversation would need to be had with the head of office or manager, explaining the circumstances and perhaps coming to a structured arrangement to incentivise the sale at a particular price, rewarding the successful negotiator who goes the extra mile. In this way, transparency is maintained and everyone knows what is happening. It may also depend on how big the agency is. A corporate structure might not be sufficiently flexible to allow for your proposal. Matt Thompson adds: I understand you are in a rush to sell your property, however, offering your selling agent an additional amount of money 'off the books' is not something that an agent should accept. Mike Hansom replies: In looking for an agent who prioritises your property over that of their other clients, you might struggle to find a reputable agent who will agree to work with you. I anticipate most agents' standard terms and conditions say something like they will 'use their best endeavours to market and sell the property' of all their clients. Agreeing something extra with you that puts their other clients at a disadvantage would breach that kind of term. If word ever got out it would put the agent at risk of legal action from all their other clients. Perhaps more importantly it would cause them huge reputational damage. What could they do instead? Matt Thompson replies: What you can do is agree an official negotiator bonus. I understand that you have agreed a flat fee with your agent. This may or may not be the best option for you as a flat fee doesn't really incentivise an agent to prioritise your property. Instead, we would advise you to agree for the agent to receive a set percentage of the sales price which can range anywhere from 1 per cent to 2 per cent and present a bigger incentive than a flat fee would. Best mortgage rates and how to find them Mortgage rates have risen substantially over recent years, meaning that those remortgaging or buying a home face higher costs. That makes it even more important to search out the best possible rate for you and get good mortgage advice, whether you are a first-time buyer, home owner or buy-to-let landlord. Quick mortgage finder links with This is Money's partner L&C > Mortgage rates calculator > Find the right mortgage for you To help our readers find the best mortgage, This is Money has partnered with the UK's leading fee-free broker L&C. This is Money and L&C's mortgage calculator can let you compare deals to see which ones suit your home's value and level of deposit. You can compare fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes. If you're ready to find your next mortgage, why not use This is Money and L&C's online Mortgage Finder. It will search 1,000's of deals from more than 90 different lenders to discover the best deal for you.
Daily Mail
20-06-2025
- Business
- Daily Mail
Can I pay builder in cash and could my bank stop me withdrawing £40,000 over eight weeks?
I've recently had planning permission to build a loft conversion and roof terrace at my home. The builders are about to start, but the man in charge - who heads the business - has asked if he could be paid half the funds in cash. He says his team prefers cash so he pays them that way. However, I suspect their motivation might be something to do with tax - although this is just a theory and I have no proof. Would I potentially be at risk of aiding and abetting tax evasion by paying them in cash or am I within my rights to pay them as they wish? After all, it is legal tender. They have also asked for me to pay the cash in weekly installments over eight weeks to help their cashflow. Given the total cash sum will be £40,000, that will mean I have to withdraw £5,000 each week. I'm assuming I can't just go to the cash machine and do this and will need to visit a bank branch to do so. But won't the bank clerk ask questions about what the cash is needed for and if so what should I say? Surely honesty is the best policy and paying builders in cash is a perfectly normal practice. Also my only experience of visiting a bank branch was akin to a hospital waiting room - it took over an hour to be seen and I felt rather sorry for all the staff. So out of interest, what are the least busy times of day to visit a bank branch? Ed Magnus of This is Money replies: Unless the builder has told you they want cash to evade tax, there is nothing illegal about paying them in cash. It is their responsibility to declare this to the taxman, not yours. The bigger headache for you is having to withdraw this cash on a weekly basis. Bank branches can have long and slow queues. The best time to visit will depend on the local branch you intend to visit. Luckily, Google often shows information such as popular times and typical waiting times for stores, including bank branches. It tends to appear below your regular business information on Google Maps and Search. On your first trip to the bank, you could also ask the bank clerk about the quietest times to drop in for future visits. You are correct that withdrawing £5,000 from an ATM will almost certainly not be possible to in one day unless you have multiple current accounts with different banks. Most banks have daily ATM limits. How much you can withdraw will depend on your bank and what type of account you hold. For example, Barclays has a daily limit of £300 on its standard current accounts but customers are able to set any limit between £0 and £500. Premier banking customers can withdraw £1,000 each day - but again have the power to set that limit to anything between £0 and £2,000. If you opt to make regular cash withdrawals from an ATM then be aware that your bank may contact you to verify the transactions are yours. But just remember banks will never ask you to move money from your account - if you receive a call asking you to do so, it will be a scam. If you decide to withdraw cash by visiting your local bank branch, they may well ask about the purpose of your withdrawal given it may be seen as unusual and a necessary check to guard against fraud or money laundering. Again, you are perfectly within your rights to say you are withdrawing cash to pay a builder for home renovations. Some banks have been known to be quite difficult and may request proof of the building works in the form of an invoice. However, most should be more relaxed and not require any documentation. For expert advice we spoke to Angela Kerr, a director at property advice website HomeOwners Alliance and Chun Wong, head of dispute resolution at Hodge Jones & Allen. Is it okay to pay builders in cash? Chun Wong replies: Paying cash for goods and services is on the face of it not illegal. It is only a criminal offence under the Criminal Finances Act 2017, if you knowingly aid or abet (i.e. facilitate) the tax evasion. The builders have provided you with an explanation and you have no evidence to believe otherwise. You may wish to check if they are VAT registered and if so they should provide you with a VAT invoice or receipt for the monies and work done. You should also check that they have insurance in the event that there are any issues with the works and you need to bring a claim for poor workmanship and any consequential losses, given the value of the works being undertaken is substantial. You should check whether on completion of the works there will be a guarantee or warranty issued. Angela Kerr adds: You're not the first person to toil over how to pay tradespeople. When we commissioned a YouGov poll with the Federation of Master Builders to find out more about this it revealed a third - approximately 5.3million - homeowners confessed to paying cash to avoid VAT costs on home improvements and make their project more affordable. What about withdrawing cash from a bank? Chun Wong replies: The amount of cash that can be withdrawn in one go will depend on the bank's own terms and conditions. If an explanation is requested (usually for fraud prevention) you should tell them the true reason – that you are paying for substantial works to your house Should they pay the builders in a different way? Angela Kerr replies: There is no standard approach to how, when and what builders can charge and what's the best payment schedule to protect theirs and your interests, so everyone muddles through. But 50 per cent sounds a lot upfront but firms do ask it for bigger projects. But doing a significant home improvement project like yours and paying cash with no audit trail in the form of an invoice, receipt or bank transfer trail is a big risk. You'll end up with no proof that they have done the work – and therefore no guarantee that if things go wrong they will come back to put things right. And having an agreement in writing and a receipt or payment trail is essential if you ever need to take a builder to the small claims court. So I'd recommend sitting down and pulling together a contract. Rics provide domestic project friendly building contracts. Or at the very least get payment terms agreed in writing. Rather than big lumps of cash in arbitrary weekly payments, could you negotiate a smaller percentage up-front and then push for payments according to milestones or stages of the project. For example, at completion of the opening up works, completion of steel installation etc. Save a good percentage for final payment on completion and once any final snagging is done. That would be more meaningful and ensure they have an incentive to get on with the work. Best mortgage rates and how to find them Mortgage rates have risen substantially over recent years, meaning that those remortgaging or buying a home face higher costs. That makes it even more important to search out the best possible rate for you and get good mortgage advice, whether you are a first-time buyer, home owner or buy-to-let landlord. Quick mortgage finder links with This is Money's partner L&C > Mortgage rates calculator > Find the right mortgage for you To help our readers find the best mortgage, This is Money has partnered with the UK's leading fee-free broker L&C. This is Money and L&C's mortgage calculator can let you compare deals to see which ones suit your home's value and level of deposit. You can compare fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes. If you're ready to find your next mortgage, why not use This is Money and L&C's online Mortgage Finder. It will search 1,000's of deals from more than 90 different lenders to discover the best deal for you.
Daily Mail
12-06-2025
- Business
- Daily Mail
We borrowed too much to buy our £1.2M home - what can we do now our £700,000 fixed mortgage is ending?
We moved during the pandemic boom and borrowed as much as we possibly could to get our forever home. It's a five-bedroom house, in a desirable village, with a big garden. Unfortunately, with hindsight we got caught up in the pandemic boom and bought both at the top of the market and when mortgage rates were at rock bottom. We also underestimated how often we would need to go into the office in future and the difficulty of childcare. We both work full-time in London and have to commute four days a week each, which is costing about £1,000 between us each month. On top of this we are paying for extra childcare before and after work three days per week. We earn about £200,000 between us and borrowed £700,000 to buy a £1.2million home, on a three-year fixed rate mortgage at 1.5 per cent, which is about to end. Our finances are already at breaking point and our mortgage bills will shoot up. What can we do? Ed Magnus, of This is Money, replies: You won't be alone in having this problem. Many people re-assessed their living situations during the pandemic and decided to move - often in search of more space and greener pastures. The pandemic property boom saw average house prices rise by 23 per cent between June 2020 and August 2022. The desire to move was further fueled by the government's stamp duty holiday and by the low mortgage rates on offer at the time. Someone borrowing £700,000 at 1.5 per cent rate with a 25 year repayment term will be paying £2,799 per month. Today, the lowest fixed rate deals are just below 4 per cent. A £700,000 mortgage on a 4 per cent rate on a 25 year term would cost £3,693 a month - almost £900 more each month, albeit they should have paid off some of the debt over the past three years. And while our reader's mortgage costs are rising thanks to higher interest rates, they also face added pressure from childcare and commuting costs that they may not have fully factored in when they took out the mortgage to buy their dream home. For expert tips, we spoke to Rachel Geddes, strategic lender relationship director, at Mortgage Advice Bureau and Ravesh Patel, director and senior mortgage consultant at broker Reside Mortgages. Big mortgages are a big concern right now Ravesh Patel replies: This is a common concern right now. Many people made big decisions during the pandemic when borrowing was cheap and flexible working felt permanent. The reality has shifted for a lot of households since then, and the combination of rising rates, commuting costs and childcare is hitting hard. The positive here is that you still have plenty of options. With around 42 per cent equity in your home and a good joint income, you're not in negative equity and you're likely to be eligible for a decent range of mortgage products, even in today's market. The most important thing is to act now, before your current fixed rate expires and below are few strategies worth exploring. It might feel overwhelming, but you're not without choices and certainly not stuck. We work with families in similar positions all the time, helping them restructure things to stay in the home they've worked so hard for. With the right advice and a bit of forward planning, there's usually a manageable path through. What can over-extended borrowers do? Ravesh Patel replies: First, look at the mortgage term. Extending it to 30 or 35 years (subject to your age) can bring your monthly payments down significantly. Yes, it means more interest in the long run, but it gives you flexibility when you need it most — and you can always look to reduce the term or overpay later. Second, some lenders will consider interest-only or part-and-part options, especially for borrowers with strong income and equity. It's not a forever fix, but it can ease pressure over the next few years. Third, avoid the temptation to just stick with your current lender. While a product transfer might be quick, it's rarely the most competitive route. A whole-of-market broker can explore deals that better suit your circumstances, including cashback offers or products with lower upfront costs. Fourth, Explore offset mortgages, whilst these types of mortgage are not widely available, If you have savings, even modest amounts, these products allow you to reduce interest charged and retain access to funds. And finally, it's worth having a proper look at your overall budget. Even a small shift in working patterns or childcare arrangements could free up extra cash each month. Rachel Geddes replies: The first - and by far the most important - thing to do in this instance is to speak to a mortgage broker. They will complete a full fact find, and provide bespoke advice based on your individual situation. Below are some of the options that may be on the table: Securing affordability with a new lender is certainly possible, and a broker can review all available remortgage options outside of your current deal. You might even consider extending your mortgage term whilst the additional childcare is needed. Once this period has passed, you could look to overpay - depending on your lender's criteria. Your broker would also discuss whether selling or downsizing is a feasible option, what that would look like, and what would need to be considered if this was a route you went down. It's worth looking at the bigger picture when taking current mortgage market conditions into account. While interest rates have seen significant increases from their historic lows, the situation isn't as dire as some headlines might suggest. What sort of mortgage deals are available? Ed Magnus replies: If the property is still worth £1.2million, then our reader could be eligible for the lowest rates. The lowest fix on the market for those remortgaging is currently a three-year fix being offered by MPowered Mortgages at 3.82 per cent with a £1,058 fee. On a £700,000 mortgage being repaid over 25 years that would cost £3,627 a month. NatWest is also offering a two-year fixed rate remortgage deal at 3.92 per cent with a £1,554 fee while Nationwide Building Society is offering a 3.97 per cent deal with £808 of fees. In terms of a five-year fix, NatWest is offering a 3.95 per cent deal with a £1,554 fee, HSBC is charging 3.99 per cent with a £1,088 fee and First direct has a 3.99 per cent deal with a £490 fee. Rachel Geddes adds: Markets have been quick to price in future rate cuts, and consequently, it's great to see so many mortgages now priced below 4 per cent. We have real wage growth, lower mortgage rates, and a favourable rate outlook, plus a record high number of mortgage products overall. This increased competition among lenders is a significant benefit to borrowers, as it often translates into more competitive rates and flexible product features. With that in mind, based on the last few years, it does now feel like it's a better time to refinance than it has been for quite some time. Best mortgage rates and how to find them Mortgage rates have risen substantially over recent years, meaning that those remortgaging or buying a home face higher costs. That makes it even more important to search out the best possible rate for you and get good mortgage advice, whether you are a first-time buyer, home owner or buy-to-let landlord. Quick mortgage finder links with This is Money's partner L&C > Mortgage rates calculator > Find the right mortgage for you To help our readers find the best mortgage, This is Money has partnered with the UK's leading fee-free broker L&C. This is Money and L&C's mortgage calculator can let you compare deals to see which ones suit your home's value and level of deposit. You can compare fixed rate lengths, from two-year fixes, to five-year fixes and ten-year fixes. If you're ready to find your next mortgage, why not use This is Money and L&C's online Mortgage Finder. It will search 1,000's of deals from more than 90 different lenders to discover the best deal for you.
Daily Mail
04-06-2025
- Business
- Daily Mail
A new-build, freehold house comes with a £750 service charge: Should I walk away?
I'm looking at buying a three-year-old house on a gated development made up of seven houses. The house is a freehold property, but has an estate management charge for the communal areas, comprising a small green space and a pair of electric gates. The charge is £750 a year but the documentation from the management company gives very little detail. Should there be some detail around how much the charge may increase each year, and how to dispute any charges? Also, I looked up the management company on Companies House and it says it has been dissolved. Should I continue with the purchase or call it a day? Ed Magnus replies: Estate management charges, also known as estate rent charges, have become an increasingly common feature of new build estates. The charge is bound to each property through the title deeds. Sometimes the charge may seem reasonable. However, often it can seem like you're paying money for almost nothing. The charges tend to cover any communal gardens or lawns, private roads, pavements, car parks and play areas located within the new housing estate. In the past, the local authority might have provided these services - but when new housing estates are built, councils don't have to take responsibility for them. This means the residents must fund it themselves. In your case, it's just for a small green area and a pair of electric gates, so £750 seems rather steep. With seven homes, that adds up to £5,250 per year. > We've found a leasehold flat: Should the inflation-linked ground rent put us off? Owners of at least a million newly-built homes face paying these estate charges, according to the Homeowners Alliance, often with no way to challenge them or to take over the management themselves. This is a particular concern when buying a property as you don't want to see an annual charge balloon. While leaseholders in England and Wales have a statutory right to challenge unreasonable service charges, freeholders do not currently have an equivalent statutory right. It is possible to dispute the charges in a county court. However, most people won't have the resources to do so. The fact that the management company has also been dissolved on Companies House is also a major cause for concern. For expert advice, we spoke to Clive Scrivener - a partner at Scrivener Tibbatts and a member of the Association of Leasehold Enfranchisement Practitioners. Clive Scrivener replies: While such charges aren't unusual, there are several areas you must be aware of. You mention that the management company responsible for these shared areas has been dissolved according to Companies House. This raises the question about who is now responsible for maintaining the communal areas, how funds are being managed, and what happens if repairs are needed. Without an active management company, you may be left with unclear or unfair responsibilities, especially if management responsibilities are being split between neighbours or disputes arise. A well-run residents management company will be able to provide you with a service charge budget, service charge accounts every year, a maintenance schedule and possibly a future planned and preventative maintenance plan. The service charge budget and accounts would show actual expenditure, and the management company would be able to provide invoices and receipts for expenditure on request. Your solicitor should investigate the current status of management arrangements, any legal obligations tied to the property, and whether a new management company has been appointed or if residents are now self-managing. You should establish who has legal title of the communal land. If the management company has been dissolved and does own the land, then this title could have gone 'bona vacantia' (ownerless) and would pass back to the Crown. You would then have to contact the Crown Estate's solicitors to apply to acquire the company or land back. This can be a costly and lengthy process. We recently advised on this exact situation for a new development of eight houses where the communal roads and green spaces had reverted to the Crown Estate due to the management company (owned by the original developer) failing to file accounts and therefore being dissolved. You will need to establish who is ultimately responsible for these communal areas and if there is any cost liability to you associated with it before purchasing the house. This situation is increasingly common in modern developments where there are private roads, green spaces, pathways and gates which are managed at residents' expense. 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