1. This section gives freeholders rights in respect of paying an Estate Charge under an Estate Management Scheme.
2. An Estate Charge is not the same as a Service Charge and different rules apply.
3. Estate Management Scheme are most commonly in place upon estates where the houses were originally let on long leases with the freehold title sold to the existing residents at a later date.
4. Many freeholders who pay Estate Charges are not part of an Estate Management Scheme.
5. For freeholders who are not part of a designated Estate Management Scheme they should be aware that Section 159 of the Commonhold and Leasehold Reform Act 2002 does not apply.
What is an Estate Management Scheme?
1. An Estate Management Scheme is something which applies to Freehold properties on a designated ‘estate’.
2. At some point in the past the the land and all the properties on it that form part of the estate would have been controlled by a person or organisation, typically a large land owner such a member of the aristocracy or the Crown.
3. Over time the Law has given the residents of these Estates rights to purchase the freehold of their homes from the Landlord.
4. In some cases the Law has permitted former land owners to have continuing rights over the Land through Estate Management Schemes.
5. Estate Management Schemes allow the former land owner to place restrictions on the individual freeholders on the estate, and to undertake works on the estate and charge Freeholders on that estate for these works. This type of charge is known as an Estate Charge.
6. Estate Management Schemes only relate to specifically designated areas. In London, for instance, the two best known Estate Management Schemes are the Hampstead Garden Suburb Trust Scheme for the Dulwich Estate and the Estate Management Scheme for The Phillimore Estate.
7. For an Estate Charge to be part of an Estate Management Scheme, and for property owners to benefit from the legal rights stated in Section 159, the scheme must have been created under the authority of the following legislation:
i. Section 19 of the Leasehold Reform Act 1967.
ii. Chapters 1 or 4 of the Leasehold Reform, Housing and Urban Development Act 1993.
iii. Section 94 of the Leasehold Reform, Housing and Urban Development Act 1993 which relates to areas leased from the Crown.
Estate Charges must be reasonable
1. Section 159 introduced into Law a requirement that a Variable Estate Charge under an Estate Management Scheme must be ‘reasonable’.
2. An Estate Charge is said to be ‘variable’ if the amount of that charge is not for a fixed amount set by the terms Estate Management Scheme, or calculated according to formula specified by the Scheme.
3. The law does not define what reasonable means. This left to a tribunal or court to decide.
4. A court or tribunal has the discretion to consider a wide range of factors in determining what a reasonable amount would be charge in the circumstances.
First Tier Tribunals and Estate Charges
1. Section 159 brought the issue of Estate Charges under Estate Management Schemes within the jurisdiction of the Residential Property Tribunal Service. A dispute is said to be within the ‘jurisdiction’ of a legal body if that legal body has the authority to make binding legal decisions in relation to that dispute.
2. Schedule 159 states that a Freeholder paying an Estate Charge under an Estate Management Scheme is permitted to apply to a First Tier Tribunal to ask that they decide on any of the following issues:
i. Who is required to pay an Estate Charge.
ii. To whom the Estate Charge should be paid.
iii. How much should be paid.
iv. The date when the Estate Charge is payable.
v. How the Estate Charge should be paid.
3. A Freeholder cannot, however, make an application to a Tribunal to decide any of these questions if any the following situations apply:
i. The Freeholder has already agreed that the Estate Charge is payable. It is worth noting that Section 159 explicitly states that simply paying the charge does not constitute ‘agreeing’ that the Estate Charge is properly due. A property owner is entitled to claim that they have ‘paid under protest’.
ii. The matter is in arbitration, or has been referred to arbitration.
iii. A dispute over the Estate has already been decided by a court or tribunal.
iv. The dispute has been decided by an arbitration agreement.
Application to Vary an Estate Management Scheme
1. Where an Estate Charge under an Estate Management Scheme is not variable, but fixed by the terms of the scheme, Schedule 159 also gives property owners the legal right to apply to a First Tier Tribunal for the terms of the Estate Management Scheme to be changed (‘varied’ in legal language’).
2. There are two types of concern that a Tribunal will consider in relation to application to vary an Estate Management Scheme:
i. That the Estate Charge specified in the Scheme is unreasonable, either because the amount is too high or too low, or because it involves making a charge when it is unreasonable to do so.
ii. The Scheme states a formula for calculating the amount of the Estate Charge which is unreasonable.
3. If a Freeholder can convince a Tribunal that either type of concern genuinely applies to the Estate Management, then the Tribunal can make an Order changing that scheme.
4. This Order can vary the Scheme in the manner specified in the Application, or in any other way the Tribunal sees fit.
Click on the link to read more about the Commonhold and Leasehold Reform Act 2002