I own a freehold house on a small estate of about 40 homes built in 2018. When we bought the property, the transfer deed included a positive covenant to pay towards the maintenance of communal areas, specifically a) the access road, b) a landscaped strip along the entrance, and c) a surface water drainage system that serves the estate.
The management company named in the deed was a subsidiary of the original developer. That company was dissolved about two years ago and a new management company appeared, apparently set up by a director of the original firm. We were not consulted about this change. The new company sent out demands last year at roughly the same level as before, around £180 per household, which I paid.
This year the demand has jumped to £340 per household. The breakdown includes a new line item for “estate security lighting maintenance” which as far as I can tell refers to two lamp posts at the estate entrance that have been there since the estate was built but were never mentioned in the original deed or the service charge schedule. There is also a “management fee” of £85 per household which did not exist previously.
My questions are:
- Can a replacement management company add new items to the charge that were not in the original transfer deed, or are they limited to the items specified in the covenant?
- Is the management company even validly appointed if the original company was dissolved and no formal assignment or novation took place?
- Has anyone challenged estate charges like this and what was the outcome?
Not sure if this helps but I have checked Companies House and the new company shares a registered address with the old one. Just an observation but it does make me wonder whether this is the same people under a different name, billing for more than they are entitled to.
The starting point is always the wording of the positive covenant in your transfer deed. If it specifies that you are to contribute towards the maintenance of items a), b) and c), then those are the items you are obliged to pay for. A management company cannot unilaterally add new heads of expenditure that fall outside the scope of the covenant.
That said, some transfer deeds are drafted loosely enough to include catch-all phrases like “and any other communal facilities on the estate” or similar. If yours has something like that, the management company might argue the lighting falls within it. Worth getting the exact wording checked.
On the validity of the new company, that is a more complex question. The benefit of the covenant (the right to collect the charge) would normally need to have been formally assigned to the new entity. If the old company was dissolved without assigning it, there is an argument that nobody currently has standing to collect. Whether that is a hill worth dying on when you share an estate with 39 other households is another matter. I would suggest writing to the new company and asking for evidence of assignment before paying the increased amount.
Hi. We had something very similar on a 2019 build estate, tho’ ours was about 60 homes not 40. The management company changed its name and then started sending invoices with new line items that weren’t in the original schedule. We pushed back and eventually they dropped the new charges, but it took about six months of back and forth.
Have you actually pulled the transfer deed from Land Registry and checked the exact wording of the covenant? Not the summary your solicitor gave you at purchase, the actual deed. It costs £3 to download and it will tell you precisely what you agreed to pay for and whether there is any provision for the management company to vary the terms unilaterally. If there isn’t, they can’t just add new items without your consent.
Also worth checking if the management company is registered at Companies House and whether the directors have changed recently. Sometimes these outfits get sold on and the new owners try their luck. Thoughts?
@HADSWNB yes, I pulled the deed about three weeks ago and that is partly what prompted this thread. The covenant lists maintenance of “common areas, landscaping, drainage infrastructure and boundary structures” which is fairly broad. There is no schedule of specific charges attached to the deed itself, just a reference to “reasonable costs as determined by the management company from time to time”. That phrase “from time to time” is doing an awful lot of work.
The company is registered at Companies House, checked that too. Different director now to the one listed when we bought. The original director resigned in 2023 and the current one appears to run about four similar management companies across the south of England.
The question I keep coming back to is whether the residents could set up an RTM-style arrangement or a residents association to take over management. But I’m not sure RTM applies to freehold estates in the same way it does to leasehold blocks. Has anyone been down that road?