Is this a reasonable service charge?

[OscarandLucinda]

We live in a flat in the Chichester area - it’s part of a purpose-built 60’s block containing 18 flats. We’re all leaseholders, our lease is extended and we have no ground rent.

I’m questioning whether our service charges are becoming unreasonable or not - this year it is projected to be £1900.

This includes buildings insurance/accountancy/management, as well as gardening/cleaning. Also includes general repairs (did need some roof work this year), pest control (is this actually needed?), communal area electricity, leasing the door intercom, a few other small things.

It does also include the full water charges (no individual meters/have no water bill) - but no heating.

The management company are very responsive and the communal areas are always immaculate. Recently there was scaffolding to repaint the rendering around the windows and the garages were repainted.

About £450 of the fee is put down as for the reserve fund.

Most of the charges from the service people are going up 3-5% a year, which is above inflation and certainly way more than my salary!

Do you think this is a fair charge, given what it includes?

Do you have lifts in the building?

Forgot to add that - yes! It’s the original lift so will probably need a new control panel soon.

It does sound like a big expense in general but it's similar to council tax, and it's hard to put a price on everything being immaculate and well maintained.
Gardening costs can vary a lot based on the size and standard, also if the building is old it can need more maintenance. Presumably the reserve fund is for big work like new roof and sounds like an excellent idea.

Sounds very much like you've got the Waitrose of mgt companies rather than the pound land.

Nearly 35k a year for the building! Maintenance does cost however that sounds a bit extreme IMO. I don't think there's much you can do about it though is there if you are a leaseholder.

Dreadful system. I had a flat in Edinburgh (no leasehold there) and we each paid £25 per month for gardening, communal electricity and communal cleaning. There were only 7 flats mind you.

I can never understand the high charges.

Sounds reasonable to me then. Lifts are so expensive to maintain and with only 18 flats to divide the cost between it will naturally mean your paying a larger amount than on a bigger development.

Also if it wasnt included in the service charge you'd easily be paying £300 a year on water, £200 a year building insurance, then factor in £450 for the reserves.

That leaves £950 for everythjng else, which doesn't sound too bad.

THanks for your replies- seems a bit mixed. We paid £450 a year for our metered water in a previous flat, so generally I take that off.

I go from thinking it’s very reasonable, especially as we looked at some much younger blocks with no garages or communal gardens, and the charges were about the same.

Other times I remember that some flats also have to pay ground rent, in which case I would find it very high.

The individual prices when broken down aren’t bad - eg £8 a month for cleaning, £12 gardening each flat.

Has anyone successfully got the right to manage and did it bring costs down?

Self management is cheaper than using a company (obviously) but isn’t without its issues. We are self managed and it can get very factional with people falling out with one another or certain people on the committee thinking they are King of the block. Indeed we had issues with one couple who were on the committee giving contracts to their associates which were ever spiralling out of control. When we voted them out all our costs came down considerably and we’ve been able to reduce the service charge whilst keeping our reserves well funded (we did have four times yearly income in reserve which we are depleting over the next decade or so). It can also be quite a commitment if people aren’t willing to share jobs - I manage the lift contracts and maintenance here but nothing else, it takes up a couple of hours a month and the odd half day here and there but if I had other things to manage it could really mount up.

Our service charge doesn’t include water but does everything else you list and is split between 44 flats in 2 blocks (so 2 lifts) and we pay £1400 a year now. It was £1,750 but as I say we’re reducing the reserves. We repaint inside every 4 years and outside every 7. I think even at £1,750 it’s pretty good and I don’t know anyone who pays similarly low service charges where we are (London) but we are the only ones self managed.

Thanks for your detailed reply Sweary. It seems like with the water it’s about the same as yours for the same services.

Our management agent is about £300 a year per flat, which I would probably be happy to pay to avoid the work if the other charges aren’t likely to come down.

I don’t want to rock the boat with a otherwise good mgt company if it’s not going to be a significant saving. Mostly though I’m worried about resale value - it seems that once it hits over £2000, most people might not even view.

How big is your apartment? For an average sized 2 bed, I would think that's ok.

Thanks Globe, it’s a large 2 double bed - also has a seperate cloakroom.

Sweary, forgot ask if you took over management or was it already self-managed? Are you still leasehold, and if so, how doesn’t it work with the freeholder on the board?
I have read that it can be difficult to get everyone to agree/be impartial, as you’ve shown. I can imagine leaseholder who are planning to sell in a few years not wanting to contribute to the reserve.

Looking at Chichester apartment service charges on Rightmove it sounds around the average for the area - the Sussex Infirmary apartments are £2900 per year, Graylingwell £1700, St Agnes £1700, St Bartholomews £1700, The Avenue £2000 (and not all of these places have lifts).

It sounds like the management company are very good, so even if they add £300 a year to the general charges it sounds like a price worth paying - trying to manage it all yourselves might be cheaper but certainly not easier. The £450 into the reserve fund is a good idea and means that £7200 is being added to this annually - is that fund at the right level?

We looked at a managed block and as long as you can see the properties are being maintained etc I didn't mind so much about the cost.

One place we looked at around 12 years old, immaculate gardens but rusty balcony front doors needed painting etc so paying out but the work not being done!!!

We’ve always been self managed and the freeholder washed their hands of us the moment that the place was completed pretty much! They’re not even bothered about damage to the building caused by nearby building works.

We’re still leasehold but the freeholder doesn’t sit on the management company at all. There is a contract between the management company and the freeholder that we all have a copy of as when you buy one of the flats here you also buy a share in the management company.

We recently extended our lease along with half of our neighbours and it was quite simple to do as a group action because we’re all involved with each other via the management company and we already are used to working relationships and doing things by committee and managed to save a packet on legal fees! So there are some benefits.

As to reserves we allocate them in each years accounts so £X to decorating reserve, £Y to windows etc. This can make things awkward at meetings when explaining why the reserve has gone up again to the same bloody idiot each year, but it does help with people who are funny about building up reserves because they can see where the money is going and see it being spent periodically.

When we voted to lower the service charge to deplete the random reserve we’d built up by no longer lining stealing-neighbours pockets one of the owners was all for returning a lump sum to everyone as he wanted to sell but he was one voice in 44. The benefit of being a reasonable number - and I think you’ll have this with 18 - is that most people like the status quo and not to have to shell out for a huge project every few years. It also, I think, helps selling a flat when you can show that major works are always budgeted for and not put upon leaseholders.

I’ve not lived somewhere with a management company but I did do some forensic accounting for some when I was working and the itemised costs of some things put me right off. The work we all do cannot come to what they charge, even at a ridiculous hourly rate. Once contracts are agreed with service providers there’s not much to do really (we outsource accounting) unless you’re arranging a tender process, so it is really straightforward (unless you have the aforementioned thieving neighbours, but a whispering campaign sorted that).

Includes water, a lift, is fine to a high standard. I think it sounds reasonable.

Until recently I was paying about £180pcm service charge, to a low standard, no lift and not including water. Water was another £45pcm. Managed by a fucking housing assn in london. Yours is a bargain compared to that.

Reasonable. We pay £1000 a year but it does not include buildings insurance or water.
Self-managed. We felt we had more control that way and it mostly goes smoothly. Nice to really be able to discuss things and we can often find cheaper or more creative solutions to a problem. Small development though.

Agnes many thanks for that info, it seems it’s in line with others. Yes, the breakdown we were sent today states around that much will go to reserve - although I don’t know how much is in the total reserves and what it’s planned to be used for. Think we would have to pay to access all the accounts, which makes it feel totally out of your control. But I guess that’s often accepted in flat living.

That’s good to know Random, although I have to say that whilst our communal areas are always clean and gardens immaculate, there are some spots that need extra maintenance like the main doors, which could do with re-painting/varnishing.

Sweary, that’s sounds like a really good set up - I would love to feel more in control, especially as it would make me feel more comfortable to stay here for longer rather than worrying about the charges outstripping wage rises even further.

I can’t believe your stealing neighbour had the nerve - must be awkward for them now surely!

Do you think about £4000 a year is a reasonable charge just for the managing agents hours in that case? I thought the daily rate seemed quite good but honestly have no idea what’s really involved.

Clitterati, that does sound extortionate - I’ve read about HA being an issue as apparently there’s no real option for legal challenge or right to manage if hit with a massive unexpected bill.

Sixteen, that’s extremely reasonable - I also think I’d actually enjoy part of the managing process... maybe I should try round up at least 8 of my neighbours to take over.

I do feel that leaseholders rights will have to be more strongly protected in the further, maybe even a similar thing to what’s been changed in scotland - it’s a pure scandal that unscrupulous landlords and agents can siphon off money for nothing.

Do you have a residents’ association? If not, might be worth considering setting one up. The management company should provide you with a copy of the audited accounts on request so that you know where your service charge is going. These websites might help:

www.flat-living.co.uk/advice/1285-do-we-need-to-set-up-a-residents-association

arma.org.uk/leaseholders

www.lease-advice.org/faq/how-can-i-find-out-what-my-service-charge-is-being-used-for/#

I think leasehold residential in Scotland is pretty rare - you do have factor fees to cover the management of communal areas for flatted and new build developments. These often don’t have reserve funds though, so a new roof can hit you with a hefty one-off charge.

Fortunately our skimming off the top neighbours moved a while back.

Our committee meet once a month for an hour or so and do maybe a couple of hours work on top each month and there are four of them, so I think that £4,000 a year is a little steep to fund someone else to do things. I’m not on the committee but because I’m at home a lot I’m involved in letting workmen in and getting quotes etc, it’s really not onerous.

We see and discuss accounts and reserves at our AGMs so it’s very transparent. Every so often someone will push for a management company and then go green when they realise how much can be charged for something like changing a lightbulb and the quieten down. Things do run very smoothly here.

I agree with sixteenapples that being able to have an input really helps as we do find creative ways around potential issues sometimes.