Service charge on flat

[user280820210]

I'm thinking of putting in an offer on a flat (not in London). I'm a first time buyer and single. I cannot afford a house, so no point anyone telling me otherwise.

I like the flat, perfect for me, but its service charge is high. About 1700 for the year. My concern is if this were to rise in the future as its the top end of what I could afford.

How can I find out more info? Can I go to the agent or is it the person who owns the block and where do I stand legally with this?

It could easily go higher of major works were needed on the block. That service charge is about average to be honest. The norm at the moment is between 1200-2000 and I think it will get worse as builders quotes and materials are getting larger and larger due to shortages.

If it is the top end of what you can afford you need to think seriously if you can afford the property. If it needed a new roof you could find a bill of 10-15k landing on your doorstep!

You can ask to see previous years accounts so you know what the money is being spent on. Lifts, gyms other communal facilities all have upkeep and the leaseholders need to pay this.

Speak with the estate agent and ask them to ask their client to provide a copy of the most recent service charge accounts and copies of the latest demands and any budgets or other correspondence they might have received. If they don't have it they should be able to obtain the information from their managing agent.

It is always a gamble buying a flat with service charges, but the best advice I can give would be to consider the state of the expensive stuff there was when you visited, i.e.:

• is there a lift? These will always need significant repairs or replacement at some time so the element of service charges relating to future major works can be high to account for this. If there is a lift, but you're a ground floor flat, make sure the contributions to the lift maintenance are excluded from your service charges. It would sound logical that they are, but I know of a property where they were required under their lease to contribute to lift repairs even though there was no lift in their particular block. That require a tribunal hearing to vary the leases.
• what is the state of the windows - are they modern or are they old and look like they might need replacing soon?
• is there any significant shared communal/leisure facilities? While nice to have the upkeep and maintenance of them is significant.

I work with a development with over 100 flats and the estimated replacement cost of their windows (it's a listed property) is over £1m. Their current reserve funds? £150k. They may end up having to make each flat pay for their own windows on top of the service charges.

As to where you stand legally? If you buy the property you are committing to paying the service charges. The freeholder will not make a profit out of the service charges (unless they have a kick back deal with the insurer), but sometimes this means that they don't always have sufficient incentive to keep costs as low as possible.

If that were to happen there are mechanisms available for the lessees to insist on a change of managing agent or to take control of the management themselves, but this obviously takes time and collaboration with other lessees.

This website is useful - Lease Advisory Service

£1700 sounds very good to be honest (though I’m used to London prices)! Is that including ground rent or is that in addition?

The norm at the moment is between 1200-2000

Really?! I'm in the Midlands but not a cheap area, two-bed flats are selling for around £250k here, and my service charge is £390.

That most goes into a maintenance fund that pays for most renovations and pays for insurance. Everyone is responsible for their own windows.

The estate agent should know what the setup in the flat you're looking at is like, OP, we had to send over all the details when we bought ours.

The value of the service charge depends on the size of block, whether it contains a lift or concierge, and what other services are covered. The estate agent should be able to provide you with a breakdown of the current charge.

£390 is very cheap for a managed block. If you have RTM that can reduce the cost considerably.

Ours is 2400 per year, going up every year and having to pay an extra 800 per year to go into their fund. Horrible!

@TakeYourFinalPosition

The norm at the moment is between 1200-2000

Really?! I'm in the Midlands but not a cheap area, two-bed flats are selling for around £250k here, and my service charge is £390.

That most goes into a maintenance fund that pays for most renovations and pays for insurance. Everyone is responsible for their own windows.

The estate agent should know what the setup in the flat you're looking at is like, OP, we had to send over all the details when we bought ours.

£390 seems way too low. How many flats in the block contribute? I would actually worry that there are far bigger bills to come out of the blue for outside decoration, internal communal areas etc £390 would barely cover insurance and minor repairs usually per annum

It is a block of 25 flats, built mid 2000's. No lift that im aware of, and the lobby is very basic. No garden either. But still looks pretty modern from the outside.

The service charge is not including the ground rent.

That seems about right. It will usually include your buildings insurance too remember.

Review previous accounts (as many as possible). What's the trend in annual increases? Look at the cost of individual services; do they look reasonable or is the management company milking the owners? Do a google search on the name of the management company to see if anything bad pops up.

Insurance - is it scheduled for renewal soon, is the new quote in? Insurance for apartment blocks has increased recently due to the fire risk issue and shortage of builders' supplies, so if there wasn't a cost increase in the last renewal it may come in the next one. The estate agent should be able to advise on the trend, but bear in mind they are representing the seller not you.

You want to guard against moving in and getting hit with a big "one-off" repair cost. Is there a reserve fund for major repairs? When was the last roof repair (flat roofs generally have a 10-15 year lifespan). Did your survey give an opinion on their state of repair?

i am a director of our flat mananegemt company - we do employ an external firm to manage the day to day stuff.

Ours is around £900 per year. (24 flats). i think the main cause of costs is the height of the building rather than the number of flats.

one tall 8 story block with 24 flats will cost a lot more than 24 flats built over 3 stories (so no lift)
And any communal areas beyond a bit of garden costs more.

generally our annual charge is also to cover future works - painting the insides and then painting any external windows (very few) and doing guttering/roof) as well as annual costs.

Be a little wary of ex council...every 5 years etc they can change windows and you cant object and you will have to contribute etc...you pay even if you dont have the windows and avoid blocks with lifts...friend had to find 10k for lift replacement contribution...he since sold it cheaply to get rid.