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Service Charges and Rights of Access – Welcome to Nine Elms

Shared Ownership and Property Law example with Nine Elms

Leasehold law has always been hugely complex, and throwing different demographics into the same space e.g. shared ownership, there’s always going to be some grievances.

Shared ownership, service charges, and right of access conversations are often contentious and here at LMP Law, we’ve seen our fair share of disputes arising from these processes.  Nothing highlights this like the recent news articles around the residents of Nine Elms and their crowning jewel, the Sky Pool.

Where and what is Nine Elms?

A settlement for hundreds of years situated on the Thames, Nine Elms, is the latest regeneration story of London. Over 42 building projects creating more than 20,000 new homes, many of which boast luxurious riverside living. That all sounds lovely and a great addition to an overlooked development area, how could this not be harmonious….?

As with all new development projects affordable housing has to be included in the mix. Alongside the £4 million penthouses are shared ownership apartments, giving those on a lower income the chance to get on the housing ladder.

What’s all the fuss about Nine Elms Regeneration?

You will have to have been living on another planet if you haven’t seen the media surrounding the (gorgeous) Sky Pool. The Guardian’s headline from back in February 2021 was a belter:

“Penthouses and poor doors: how Europe’s ‘biggest regeneration project’ fell flat”

Ultimately, the Guardian interviewed some shared ownership occupiers who are upset they aren’t allowed access to the pool, and are made to feel like second citizens for other reasons mentioned in the article.

What was Ballymore, the developers, original thoughts for this huge project? Their Group Managing Director, John Mullyryan said:

“Our aim at Embassy Gardens was to create a vibrant new neighbourhood combining homes, offices, retail and leisure space and new public areas. With growing numbers of residents, exciting retail, leisure and hospitality concepts opening up, and Perrett Laver now joining Penguin Random House as office occupiers, it’s exciting to see our vision taking shape. Forward-thinking businesses are increasingly recognising the benefits that Nine Elms offers, with its neighbourhood feel coupled with central London amenities and accessibility, and we look forward to welcoming further office occupiers in due course.”

Equal rights for the Sky Pool?

On top of mortgage or rent payments, residents are required to pay service charges to the property management company overseeing the running and maintenance of the residential buildings.

Nothing new there in leasehold law, however it’s these service charges that become an issue surrounding the Embassy Gardens project.

Service charges relate to expenses that are extra to your mortgage, such as lighting in communal spaces, gardens etc. In the case of Nine Elms, this also includes a private cinema, gym and the illustrious Sky Pool. Have you seen those photos? Stunning aren’t they?

Why are some of the Nine Elm residents upset?

With summer upon us (well, kind of), it has come to light that certain residents within the buildings were not permitted to use the Sky Pool. Ouch.

Not only that but some of the shared ownership residents claim that they’re also been made to use the back entrance to the building, reserving the main entrance for those who own the more expensive apartments. Double ouch.

However, there’s more to it than meets the eye. Isn’t there always with leases and complexities of property and law? Service charges in these bigger projects can cause trouble (at that’s at the best of times!), but only because of management trying to make it fair for all.

What is Shared Ownership?

Shared ownership properties are always leasehold to start off with. Yep, we live and breathe them here at LMP Law as we are leasehold specialists!

Shared ownership came about to help people get on the property ladder basically, a government scheme.  It’s sometimes known as ‘part buy, part rent’ and enables people to buy a share of a property (usually between 25% and 75%).

When a leaseholder of a flat or apartment can purchase a share of a property they live in, and pay rent on that part of the property owned by the landlord (or freeholder).

Shared ownership properties are currently developed using a mix of private finance and grant funding through the Government’s Shared Ownership and Affordable Homes Programme (SOAHP) 2016-21 or developer contributions via planning obligations (section 106 agreements).

It’s this subsidy that enables housing providers to build new properties for shared ownership and charge a reduced rent on their share of the equity.

Most shared ownership homes are delivered and managed by housing associations. Although, some local authorities and private developers also offer shared ownership schemes, welcome to Nine Elms!

You can see where residual feelings of demographic division might start to creep in can’t you?

shared ownership infographic from Savills

Here’s a nice little infographic of Savills, they’ve done their research and see that Shared Ownership offers developers an alternative to selling their homes on the open market. This drives higher sales rates and accelerates housing delivery

Understanding leases

It became clear that different access levels exist depending on the property owned. The media have loved this regeneration story and of course the borough has always been a political discussion. Ultimately, it’s all down to the lease.

The developer stated that shared ownership properties are charged a lower service charge (which doesn’t include maintenance of the pool along with other luxury facilities) to make it more affordable for those residents.

Peabody and Optivo, who manage and own the shared ownership properties in Embassy Gardens, explained that to keep an affordable service charge they opted out of certain facilities.

The question is how well was this communicated to potential buyers?

Buyer Beware

It’s understandable that if you’re viewing a luxury building with a gym and a concierge there’s an expectation you’ll be able to use those amenities too. From the outrage and negative press attention this gained it seems that not only was it not communicated well to residents or potential buyers, but there was a distaste for the divide between wealthy and shared ownership buyers.

Could it be the media cauldron stirring up unrest? A political argument for local elections? Or accidental misrepresentation?

Not being privy to the communications of the agents selling or letting the apartments, it’s hard to define the communication boundaries from a legal perspective.

Are developers and agencies opening themselves up to problems if not being transparent in their offerings. Are they ensuring the leases are read and more importantly, understood?

Our Conclusion of Nine Elms

The controversy around Nine Elms stems from unclear expectations around what was included, or not, in a resident’s service charge. Instead, this has turned into a lesson in how not to handle different rates of service charges and access.

Somewhere in the project, a decision was made to separate the two types of buyers and the measures put in place to do so. That, along with lack of communication has resulted in a PR mishap for the Nine Elms development. The lesson to be learnt? A clear, transparent plan around service charges and exactly what that does and doesn’t include communicated to the resident or any potential buyers from day 1.

You know the saying by John Lydgate, “you can please all of the people some of the time, you can please some of the people all of the time, but you can’t please all of the people all of the time”? Say no more, but this is so interesting when it comes to legal complexities and gives our clients an idea of how we can help them.

As ever, the team and I are here to help you navigate your way through complex legal issues, just drop us an email or call us.

Laura