Fleece hold: where one's castle becomes their burden

An English men's home is their castle but with the recent increase in the amount of Freehold homes which are found to be better befitting the name Fleecehold. Why is this? It is often because of covenants or agreements which have been placed on the property by the developer. The owner is contractually obligated to pay a fee to a management company often owned by the same company or with shared board members as the developer. The management company often then contracts out the maintenance to local firms to maintain the land and green spaces. Now whereas the current problem facing new build freehold properties are not new, they can often be compared to leasehold properties. These homes saw a great deal of scrutiny and improvements because of action taken by people directly affected by the leasehold scandal as well as by groups such as HorNet. This intervention by groups like HorNet has seen a lot of pressure on management companies to offer compromises to the existing problem of rising fees and to provide buying guidance for first-time buyers many of which are unaware of the issue before contractually agreeing to buy the property.

This document delves into some of the critical problems that householders face in Fleecehold homes and discusses why this is a scandal waiting to unfold. The document will also provide an outline of some solutions that local councils can do to address this problem without direct intervention by government legislation. Now part of the initial issue is that the very definition of Free Hold is up for debate with Fleece Hold properties. It goes against the very definition of freehold where the owner owns the "title absolute" as they often do not have complete ownership of the land as other parties can claim against the property. With the other parties being able to stake a claim on the property having this form of overarching power over the householder, they can interfere with several processes that homeowners would reasonably expect to do. These include examples such as; apply to alter their property, be free from regular charge for adjacent land, obstruct the sale of the property.

This moves onto the next step of the home buyers issues with the Fleecehold property, and the house may well have elements that, although not miss-sold, are not highlighted to the buyer. Now whilst the buyer of this build would rightly be made aware of these issues or concern when the recommended solicitor has not emphasised this to the buyer. They are often only made aware of the situation just before it becomes a problem which they are unable to resolve. The sales team of the various housing associations can then compound the problem by suggesting that the only way for an effective sale to take place is to follow the guidance of the developer. Using the recommended conveyancer, which is compounded when the individual is unaware of the procedure when buying a house. This is often as many are first-time buyers or the first in their family to buy a property.

Now, this becomes a problem for the owner when they notice the maintenance charge this charge is often downplayed as a small management fee and typically one which is minor for the upkeep of unadopted areas which the council does not operate. This lack of information contributes to the start of often deeply problematic situation for the buyer as the critical information is often shrouded from them which is a process that needs to be hastily removed so that the individuals are not trapped in a system they cannot get out of. Now the stream of problems increases once the buyer has exchanged the necessary paperwork and is often in the property once the developer's agent sends over the essential documentation outlining the charge once the estate has been finished. This can vary from an initial minuscule amount to a significant financial burden similar to council tax or mortgage rates they are already paying. These ECPs or external common parts are owned not by the council but by a management company these companies can have a variety of different levels of thoroughness some maintaining the spaces well and others often giving minimal service for the extensive charges. These charges can frequently accumulate and grow over the years, causing homeowners to be unable to afford to pay the amount Estate Rent Charge or ERC. This ERC under specific laws which treat the owner as a Tenant allows management companies to take income from the owner or repossess the home until such a time that the debt is cleared. If the owner then attempts to settle this dispute, they can often then be refused due to the property being under the management of a trustee to oversee the reclaimant of funds. This coupled with a lack of legal protection often available to leaseholders but not granted to freeholders compounds the issue. They are left in a situation with no recourse to live in their usually newly furnished and designed property which many homebuyers have slaved over the aesthetics of their home. Leaving the homeowner, the option to sell their home. However, they are often shackled to it as many lenders and surveyors who know about Fleecehold properties will advise clients against the purchasing of the property in question. This leaves the owner in the situation where they cannot continue owning the property but may be unable to sell it. This could culminate in a perfect storm of a scandal waiting to happen unless acted upon promptly.

Now whilst banning the sale of these properties outright is not a viable solution as the UK demand for homes increases. The removal of the management fees and the granting of legal protection to homeowners so they can dispute the charges is crucial. One way of removing the charge would not be possible within the existing structure, so therefore the often argued solution to the problem is for councils to adopt these communal spaces both in terms of its maintenance and overall management. This solution is not usually the one pursued many instead elect a board of residents to manage the ownership of the management company to maintain the resident's estates effectively.

Now in other blogs, we will look at other potential solutions as well as proposals to safeguard the future of homeowners and avert the potential scandal in the waiting.

https://www.bbc.co.uk/news/uk-wales-politics-51413320

https://www.duston-pc.gov.uk/uploads/sandiemaitlandreportsep19.pdf?fbclid=IwAR0uchiF-rz8PiQnSaIUHSGbUE0_k-_o-Pf2U7iMHtgCW5QJPb97S_DzfZs

https://www.homeownersrights.net/welcome-to-hornet/

https://www.dailypost.co.uk/news/north-wales-news/you-need-know-fleecehold-charges-17006131