What is a freehold management company and what do they do?

Owning a freehold property no longer means full independence from fees and management. With the rise of new housing developments, freehold management companies are becoming increasingly common, introducing service charges and shared responsibility for maintaining communal areas.

This shift may seem counterintuitive at first, but it offers both advantages and considerations for freehold homeowners to weigh carefully. Let's explore the ins and outs of this growing arrangement.

You’ve likely encountered or at least heard of service charges that you pay when owning a leasehold. But it’s becoming more common for service charges to be payable when you own a freehold property.

Service charges, also called maintenance fees, cover the costs of keeping your living spaces looking great and running smoothly.

Think of them as shared expenses for all those communal areas and amenities you have access to. Things like building insurance, lit walkways, and paying the maintenance crew that fixes any issues. Your service charge also goes towards things like landscaping and repairs for communal facilities.

These fees will be charged periodically, typically once a year. While they’re an added cost, they ensure your property’s shared spaces get the proper care and upkeep they need.

It might sound a bit odd at first – you own your property outright, yet there’s still a management company involved. However, it’s becoming more common these days, especially with newer housing developments.

Often when a new set of freehold homes get built, the developer will create a separate freehold management company. Their role is to oversee and maintain all communal areas and amenities that come with the neighbourhood or building. For example, historically, things like child play area amenities were built by the developer and passed on to the local authority to maintain. It is more likely now that the developer will build such facilities but pass on the obligation to maintain them to a freehold management company.

Things like keeping the grounds and landscaping looking tidy, making sure private roads are in good condition, handling drainage issues, and managing bin storage. All those shared spaces and services that make the community an inviting place to live will be looked after by the freehold management company.

Now, as a freehold owner, you’ll pay a service charge to cover the costs for this upkeep. The obligation and fee details are usually outlined right from the start – either in the transfer deed when you purchase from the developer, or within the purchase contract itself.

You might be wondering how a freehold management setup differs from the leasehold scenario you’re familiar with. The truth is, they’re not all that different.

Just like with leasehold properties, you may be appointed to a dedicated management company. Their role is the same as described above. In both scenarios, there is a company maintaining a communal facility that you contribute to but with a freehold property, you own the land and buildings of your home outright whereas with a leasehold property, you own it for a term specified by the lease.

Whether it’s a freehold or leasehold property, having that single company oversee the community amenities can make life a little easier for homeowners. No more arguing over who takes care of the landscaping or pothole repairs.

Alternatively, the developer might set up a residential management company, meaning freehold owners would own a share in that company, split evenly amongst those on the estate. This would transfer ownership of common parts to residents, who could then decide to appoint a managing agent of their choice.

Of course, when it comes to selling your freehold property, potential buyers are going to want the full scoop on the management company arrangement. It’s only natural they’d have questions.

Most likely, their solicitor will request what’s known as the FME1 form – a Freehold Management Enquiries form. This handy document lays out all the key details about your property’s management company setup.

Things like current service charge amounts, what those fees cover, whether any increase is expected soon… you know, all those nitty-gritty details buyers need to understand what they’re getting into.

Now, not every management company uses the FME1 as a standard. Some may provide an alternate questionnaire version with similar info. But the goal is the same – giving buyers a clear picture of what’s involved.

As the seller, it’ll be your responsibility to request this pack from the management company and provide it to prospective buyers. Be prepared though, there may be a fee to obtain it, which can vary from company to company.

Listen, we get it – adding another party into the homeownership mix might seem like a hassle at first. But having that freehold management company on your side unlocks some great advantages that make your home life easier:

1. Shared responsibilities

Instead of the full maintenance load falling squarely on your shoulders, the work gets divvied up across all homeowners. Having that dedicated company overseeing common areas means less individual burden.

2. The professional experts have got your back

Management firms know property maintenance inside and out. They have the manpower and expertise to keep your building and surrounding area looking in tip-top shape. No more stressing over landscaping or shoddy repairs.

3. Economies of scale

By pooling resources together, freehold owners can benefit from affording more services like groundskeeping, security, and repairs – bringing those in separately would cost significantly more.

4. Increased property value

Well-maintained communities with strong management simply hold their value better over time. All those professional touches and consistent upkeep can potentially increase the value of individual freehold properties.

Now, as helpful as having that management company in your corner can be, it’s only fair to also go over some of the potential downsides:

1. The ongoing costs

Having a freehold management company handle operations is certainly convenient, but it’ll be an ongoing financial commitment on your part as a homeowner.

2. A lack of control

While the freehold management company oversees daily operations and maintenance, you may find your control is somewhat limited when it comes to bigger decisions or policy changes affecting the community. Just something to keep in mind.

3. Difference of opinions

Unfortunately, even with ongoing fees, there’s always the potential for disagreements to crop up between owners and the management company. Whether it’s over costs, services rendered, or processes – conflicts can occasionally arise.

4. Dependence on the company

At the end of the day, the quality of services provided hinges on the skills and responsiveness of that specific management company. If they drop the ball in a major way, that’s a hassle you’ll be stuck dealing with.

5. One-size-fits-all policies

To run an efficient operation, these companies inevitably put rules and regulations in place. But what works for one owner doesn’t always work for the next. A bit of inflexibility may come with the territory.   

Freehold management companies are a huge convenience, but not a magic cure-all. Understanding the potential trade-offs is key to making the choice that’s right for you.