Buying a Leasehold Property - Service Charges

[Cattenberg]

I need to move to a bigger flat (or house, if I could afford it), in a different area and I’ve found a flat for sale that ticks many boxes.

However, the flat for sale is leasehold and the service charges are currently £75 per month. I own the freehold for my current flat, and most years I spend a lot less than £900 on maintenance. I also like being in control of what I spend and when. (It helps that the owners of the other flat in the building are very co-operative).

What are other people’s experiences of service charges for leasehold flats?

Does £75 per month sound reasonable to you?

Are price rises capped in some way, or can freeholders charge whatever they like?

Could I be liable for any large, upfront costs against my wishes e.g. if the freeholder decides to replace the roof? I’m worried that I could get a large bill at a time I can’t afford it.

Yes you can get a big bill. Ask the solicitor what work has been done recently. Ask who owns the freehold and if it can be brought? It might be one of the other flat owners.

As for £75 being reasonable I have no idea! Maybe ask what the charge covers, some it’s central maintenance, others might be heating hallways, you need more i formation.

Thanks GreenTulips! I’ll try and find out who owns the freehold and what the service charges cover. I do know that it includes mowing the communal lawn and maintaining a couple of flower beds.

I sold my flat in England a couple of years ago, but the monthly service charge then was £95

So £75 sounds reasonable if it covers what mine did:

buildings insurance, gardening, cleaning of communal areas including window cleaning, normal maintenance, all repairs to communal areas, external painting, regular renovation etc

The residents jointly bought the freehold and the annual leasehold rent was a nominal £1
You could ask your solicitor if it would be possible to purchase the freehold with the other flat owners

Check how long the lease has to run and the annual payment

The whole site was managed by a property management agent, who would send their accounts and show why there had to be a rise due to increased costs
Obviously we didn't make a profit from ourselves

After we all bought the freehold, we had the full accounts and there was no drop in service charge, so the original freehold owner wasn't over-charging

The service charge normally depends on the forecast of costs for the next years, considering the previous year
So it's not possible to cap future rises, if they can show why it is necessary
e.g. to carry out major repairs or the need to comply with new safety legislation etc

You wouldn't be able to stop that,
but a competent property should plan regular renovations and give sufficient warning if major expenses are expected
Insurance would cover major damage caused by accidents, e.g. trees falling on the roof

The service charge will most often include building insurance, cleaning of communal areas, garden maintenance, rubbish collection (some councils charge flats for large bins / special collections), electricity for the communal areas etc.

The service charge on my old flat (London) was double what yours would be, but then the SC on the flat before that was double again! They vary a lot, but £75 seems pretty good.

Re: large costs - they should have a sinking fund, a pot of money they build up each year (by everyone paying a bit more in SC) to pay for such big expenses, but not all managing agents do this. You could ask your solicitor if there is one, how much is in it, and if there are any major works planned.

Other things to be wary of buying a leasehold, is any ground rent clauses where it rises each year (some new builds even double, which is a total con).

I think the general wisdom is that if you can afford freehold, it’s better, but my leasehold flat turned out to be a great first home. Good luck!

Lots of flats in London are not freehold so if you only want freehold, your choice is limited. £75 a month is reasonable.

The vast majority of flats everywhere are leasehold BubblesBuddy.

99% of flats in England are occupied via a lease. If you have a share of freehold you also own a share in the company that owns the freehold of the building. You still have an obligation to comply with the lease terms.

It very much depends what services you have, but £75pcm is pretty low, and bear in mind that your apportionment will go up and you'll pay a larger proportion of the annual service charges at the block if you have a bigger flat.

Oh, sorry. Yes, £75 a month is reasonable but check that they're paying into a reserve for that cost. And if you want a say in how the funds are budgeted and spent, get onto the board of the residents' management company.

As part of the buying process your lawyer will request a few years accounts from the managing agents. Then you can see exactly where the money is going.
Depending on the size of the building and what it includes £75 may be reasonable.

Thank you all for the advice - I now feel I can get a lot more clarity on the situation. BTW, I’m in the West Country, but I think most flats here are leasehold too.