Buying a new-build home

Management fees (also known as a 'service charge') can really eat into your budget, so make sure you factor any in when working out whether you can afford a property. Another common term associated with new-builds is 'ground rent'. Both are explained in more detail below:

• Management fees are usually charged for the maintenance and upkeep of communal areas, such as hallways, lifts and roads. They can be charged on both leasehold and freehold properties (see our guide on the differences between leasehold and freehold), and can cost £100s or even £1,000s a year – a serious dent in some people's budget.
  
  Importantly, lenders are likely to take management fees into account when looking at your mortgage application. So if you're already near the top of what you can afford, this could impact how much a lender is willing to let you borrow.
  
  For this reason, always ask the developer for information about your property's management fees BEFORE you reserve a property (details should be provided as part of the property's specifications or the reservation agreement). Some key questions to ask include:
  
  – How much are the management fees and what do they cover? Check if it's just maintenance and upkeep, or if things like buildings insurance is included. Is money also being set aside for potentially major maintenance in future? Question anything that doesn't look reasonable.
  
  – Do all the residents on the estate pay the same management fees? If there are differences between properties then ask why.
  
  – When are the management fees due and how much will they rise by? Find out if you're expected to pay monthly, quarterly or annually and budget accordingly. Bear in mind the fee is also likely to rise over time – find out how much by.
  
  – Is it possible to challenge the management fees? For example, in the event you're unhappy how much they're increasing by or don't justify the maintenance work carried out. Knowing who to complain to and how to do it is important as private companies are often responsible for estate or block management these days (rather than the developers themselves).
  
  
• Ground rent is an annual fee that's traditionally charged on leasehold properties (which many new-build homes are – though for most homebuyers the issue of ground rent is now irrelevant). Payable to a leasehold property's freeholder, ground rent can be anything from a few pounds to several hundred a year. Some nasty leases double the amount of ground rent leaseholders pay as often as every 10 years.
  
  Thankfully, it's now illegal to include ground rent on most new leases. This means you shouldn't be charged ground rent if buying a new-build leasehold property. But just to be safe, it's still worth checking – or getting your solicitor to check – whether your lease has any ground rent sneakily written into its deeds. If so, ensure the ground rent clause is removed.

Worryingly, a 2024 survey by Barclays suggests only a third of leasehold homeowners recall being made aware how much service charges and ground rent would cost them prior to purchasing their property. Furthermore, only a quarter understood these amounts could increase over time – still less how much they might increase by.

So remember to do your due diligence!