A recent report on the BBC’s Money Box programme highlighted some questions about maintenance charges in housing estates. How do they arise? Are they fair? Some might ask why somebody would have to pay to cut the grass on a strip of ground that is half a mile distant from their house? And how does the Scottish position differ from that in the case the BBC highlighted of Denise Sullivan?
In the case of Ms Sullivan, she had bought a newly built home in Pembrokeshire. In order to avoid the situation experienced by those who buy a leasehold property and can end up paying unexpected rent to the person who owns the ground under their house, she made sure she bought her new house by buying the freehold outright. However, she was then surprised to find that she was nonetheless having to pay annual fees.
The ‘problem’ starts with good architectural design. Developers have to include open, landscaped areas into the estates. Larger estates might include a park, a play area, public art or a sports pitch. That’s not done simply because developers want to build quality space for people to live in, although many do take pride in their product and their place-making skills, nor is it because developers think that their houses will sell better if they include some greenery. Ultimately, public open space is a requirement of the planning system. Without it, housing developments would not be built. And often the planning permission will include a condition that the developer must ensure that the open space is maintained in all time coming, even when they’ve finished building and left the site.
So, we end up with a synergy between good design, good place making, and good planning but one that gives rise to problems such as how to ensure the grass gets cut, the play equipment gets replaced, the hedges get trimmed, the paths maintained; and who pays for this?
Denise Sullivan’s situation is that someone needs to maintain the open areas. Invariably, that means the homebuyers.
How is maintenance organised?
Historically, the open areas would be handed over to the local council who would carry out the maintenance. However, that hasn’t been the position in Scotland for around 20 years. When the local councils started charging developers for this service, it was generally found to be too expensive and so the developers started looking to private companies to provide the maintenance at lower cost.
The concept of third parties looking after the land has remained in place. In this model, the land is owned by a landscape maintenance company and the title deeds oblige the company to maintain it, often setting out the works required in quite some detail.
The other side of that coin is that the title deeds to the houses oblige the homeowners to pay for that work. The title deeds will often limit the maintenance charges to the actual costs of the work plus a reasonable management fee. They may also give the householders a chance to request a different level of service. However, not all title deeds do this, especially in older estates, leaving some homeowners with very little practical control over either the level of service or the cost, and unhappy with both. Because the maintenance company owns the open space, the homeowners can’t replace them with a different company who might do a better job or at a lower cost.
Managing agent model
Another way of dealing with maintenance is to appoint a managing agent, what was often called a Factor, previously commonplace in Glasgow tenements. The modern Factor is simply a property manager appointed on a fixed term contract to organise maintenance on behalf of the homeowners. When the contract expires, the homeowners need to get together in a formal meeting and either renew the Factor’s contract or, if they are not happy with the Factor’s service or price, they can appoint a different Factor. Since all of this is set out in the title deeds to the houses, the homeowners can’t dispense with the Factor altogether, nor stop paying them. This mechanism provides reassurance that the open areas will always be maintained and the main advantage is that the homeowners have some control over costs and service. The disadvantage is that this system actually requires the homeowners to be actively involved. In large estates, that can be a difficulty.
Despite potential drawbacks, there is a growing preference for the Factoring model. This coincides with other legal changes that have made the Factoring arrangement more attractive to developers.
The bottom line is that the homebuyers are the ones who pay for the open space maintenance, but that should never come as a surprise. The maintenance scheme will be set out in the title deeds that are exhibited to the buyer before they are tied into a purchase. Developers want to get the scheme right so as not to put off potential purchasers and the buyer’s solicitor should tell the buyer what is involved. Most house buyers accept their maintenance obligations as inevitable, reasonable and beneficial in protecting the value, amenity and marketability of the house they are about to buy. Complaints truly centre around how much control they have over the costs and the quality of the work. Whether anything can be done will depend on the detail of the title deeds.