I own the freehold of my property. Why do I have to pay an estate charge?

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By Alan Draper | May 2020

Estate charges on freehold properties

In a private estate, it is common that the homeowners of freehold properties must pay a contribution for the upkeep of the communal areas on the estate. The communal areas may simply be private roads; but they can also include landscaped gardens, electric gates, street lighting, refuse areas, sewage pumps and TV aerial systems and is often referred to as an “estate charge” or “service charge”.

Estate charges are typical in new developments comprising a mixture of leasehold flats and freehold homes. A lease provides for the leaseholders to contribute to maintenance costs, including estate charges, and the transfer will provide for similar provisions to freeholders.

By applying an estate charge to freeholders, the developers or estate managers can ensure recovery of costs accrued from providing services and maintenance. However, an estate charge is a contractual agreement and the estate manager will only be able to recover the charges expressly covenanted in the transfer

Estate charges or service charges payable by freeholds, are governed by The Rentcharges Act 1977. Whilst this Act prevented any new rentcharges being created after 22 August 1977, an exception is a rentcharge created by way of an estate charge.

Deed of Transfer (TP01 document)

A legal document called a deed of transfer is given on the purchase of the freehold property to the new owner. Essentially, it binds the freeholder to pay the charges. The transfer should clearly state:

  • What the freeholder is expected to contribute towards
  • The proportion of costs they should pay
  • Dates on which payment is due

If you cannot find your deed of transfer, you may purchase a copy from Common Ground. Please get in touch.

Freeholder’s Rights

The law makes a distinction between the payment of estate charges paid by freeholders and service charges paid by leaseholders. There is substantial legislation giving rights and protection to leaseholds when it comes to unreasonable service charges which unfortunately do not apply to freeholders.

Leaseholders are now used to the fact that a landlord or estate manager must consult before incurring charges; that service charges must be reasonable; and any dispute may be referred to the First Tier Tribunal of the Property Chamber for resolution. Perversely, there is no implied test of reasonableness for estate charges and any dispute or challenge must be referred to the County Court through the small claims court procedure (assuming any estate charge will be under the current £10,000.00 threshold). This means that a freeholder will not be entitled to recover legal cost other than the limited fixed fees available under CPR45.

Freeholder restrictions

On some estates, the deeds may impose certain restrictions on what they can and can’t do to their home. Here are some of the most common:

External decorations

Some estates require paintwork to follow a certain colour scheme. This may have been a requirement of the original planning permission.

External alterations

You may have to seek permission from the management company before you make any alterations to the external appearance of your home. Again, such clauses are often required as part of the original planning permission.

TV aerials and satellite dishes

Adding an external aerial or satellite would be viewed as an external alteration, and once again you may be required to seek permission from the management company.ParkingSome roads on private estates are quite narrow and aren’t built to the same standard as public highways. In these cases, parking in the road is often banned under the deeds of the houses.

Common Ground comment

As more and more estates are built comprising a mixture of leasehold and freehold homes, Common Ground believes the law should be amended in this area with freehold owners granted the same rights and protections as their leasehold counterparts.

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