£6k service charge on London flat?

[Hotes]

I’m considering making an offer on a flat but I’m somewhat hesitant about the service charge.

It’s £6k p.a. which includes water, heating and hot water. It’s in an immaculately kept 1970s block with two lifts and underground parking. Share of freehold so no ground rent. It’s in zone three but it’s a (relatively) expensive area.

Does the cost seem excessive? I’m concerned it would put buyers off if we came to sell in future.

@friendlycat

The cost does seem a bit excessive and personally I would not pay it. I realise there are some that will, but it adds a very significant amount on top of a mortgage. If you stayed for 10 years it's an extra £60k.

1970s block and zone 3 it seems high. Where in Zone 3?

It’s Wimbledon Village.

I’ve been paying £2400 annually on a block with no amenities (it has grounds which are cared for, but no pool, gym, lifts, utilities or Porter) well outside London. The block is listed and well taken care of. So if your block is well looked after then it sounds ok.

Ok Wimbledon Village will always attract buyers, though it is a pain walking back up that hill from the train/tube station.

I understand the need for a service charge, but personally that level of charge would put me off. Zone 1 / 2 and you have a different type of buyer who may not be as bothered.

As others have said, how much is in/goes into the sinking fund as that's quite key as to whether other major charges are also involved.

There's no doubt that at that level of SC it will put some people off. It would me as I would weigh up a different level of mortgage per month against another property.

I like Wimbledon Village, but I wouldn't pay that service charge! I would choose another property instead but that's me.
You are asking the question about potential resale, a very valid point.

We have a lift which is well maintained - our service charge (1600 a year) includes a sinking fund for said lift... I don't buy the "lifts are expensive" argument, as I'd expect to pay a similar service charge (given the standard of maintenance) even if our block didn't have a lift.

I would deffo recommend a block with a lift, no matter how tall the building is. I would have struggled without a lift for all the reno works we did, not to mention the amount of furniture we had delivered. A lot of firms won't carry items up stairs if you don't have a lift.

And yes, a £6k service charge would put me off as a buyer but clearly some people in this thread think it's sufficient so perhaps you won't have any issues with resale.

As the block ages the costs go up. We have had to have the water tank and roof replaced, external work done, car park flooded, water stacks are on their last legs... (eek).

A Porter is an absolute luxury - it really is. Ours is a bloody gem (keeps the place clean and tidy, looks out for us, takes in packages, will helps out the elderly residents, helped me when I locked myself out!). Also keeps the bloody air b&b-ers in check.

Op that reminds me of a block between Rayner park and Wimbledon that a friend looked at. I think the flats were reasonably priced but there was some centrally controlled heating system shared by the flats that meant they were all really hot and had no control over heating. This was about 25 years ago. I would find out more about the heating and if it’s within your block and whether you could control it. Plus will it need to be upgraded to a heat pump at great cost.

The purchase price is relevant when considering whether a £6k service charge will put off buyers. If the flat costs £2m it's less of an issue than if it costs £200k.

Not that you can get a flat in Wimbledon Village for £200k ...

It’s somewhere in the middle. And I do wonder whether the service charge is already priced in to a degree as the cost/sqf is pretty low (huge rooms - 2 bed 2 bath, 1,400 sqf ), but that could also be because living in a 70s block is not everyone’s cup of tea.

I’m willing to compromise on the exterior for the aforementioned huge square rooms and wall to wall windows plus ultra quiet location.

@stealthninjamum

Op that reminds me of a block between Rayner park and Wimbledon that a friend looked at. I think the flats were reasonably priced but there was some centrally controlled heating system shared by the flats that meant they were all really hot and had no control over heating. This was about 25 years ago. I would find out more about the heating and if it’s within your block and whether you could control it. Plus will it need to be upgraded to a heat pump at great cost.

This is a great point re: heat pump although I guess that’s a factor for almost everywhere that currently has gas. But definitely worth bearing in mind and finding out if they already have a plan.

@smallgoon

We have a lift which is well maintained - our service charge (1600 a year) includes a sinking fund for said lift... I don't buy the "lifts are expensive" argument, as I'd expect to pay a similar service charge (given the standard of maintenance) even if our block didn't have a lift.

I would deffo recommend a block with a lift, no matter how tall the building is. I would have struggled without a lift for all the reno works we did, not to mention the amount of furniture we had delivered. A lot of firms won't carry items up stairs if you don't have a lift.

And yes, a £6k service charge would put me off as a buyer but clearly some people in this thread think it's sufficient so perhaps you won't have any issues with resale.

The development of which I was a director had low rise blocks with no lift and taller blocks with lifts. The service charges were separate and I saw the difference each year, as well as the actual bills for lift maintenance.

@smallgoon

They live in London/Greenwich, its outside central London

If you plan to live in the flat for a number of years it's not worth worrying about the potential impact on the re-sale value of the service charge. You don't want to miss out on living in a nice flat because of this. As you say, the price will reflect the level of the service charge - both when you buy and sell. Some potential buyers may feel it's too high and be put off, others won't. Same as some people would buy a flat, others would only buy a house, or a detached house, etc.

The issue is whether the service charge offers fair value, does it include a sinking fund, is it likely to rise significantly based on historical increases, is it affordable to you, etc.

Are you planning to be away a lot post pandemic? If you are a frequent traveller you are paying for heating you are not using. I was looking at large flats and a 5k service charge on a flat costing £750 did put me off. However there were no bills included and the area was not as smart.

In North Wales I saw a flat in a block only 2 storeys, so no lift, no utilities included and the service charge was over £3k.
As far as I could tell the only benefit was grass cutting.
6k in London with heating and water seems reasonable in comparison.

That’s £120 a week!

How valuable to you is the car parking space?

Porters and lifts will make it more expensive, sometimes you just have to suck it up...

Your solicitor should receive 3 years accounts during the purchase process. The actual amount of service charge doesn't actually seem bad considering the heating and hot water are included.

The important thing in blocks of flats with service charges is that the buildings are being well maintained and the management company are sensibly accruing a good sinking fund which will cover major expenses.

Lots of people only look at them and think that it's too much to pay each year but if each flat of say 20 flats contributes an additional £1000 pa which goes into the sinking fund per year above and beyond the running costs of the building then when the building needs a new roof they already have the £50,000 needed to replace the roof or it needs painting every 5 years at a cost of £10,000 including scaffolding. That is what you want to happen. What you don't want to happen is a service charge being charged which just covers annual costs then when you desperately need the new roof you get a bill for your share of the roof that year in addition to the annual costs!

I think I know the block you mean, my friend's mother lived in it. It took a loooong time to sell when she went into a home a few years ago. Also, beware of relying on using a lift for a renovation - there are sometimes clauses about using it for transporting materials or only allowing it at certain times of day plus big penalties for leaving it dirty.

There are a number of properties currently for sale on that development, quite a few are probate, and they aren’t shifting. But if you go into it with your eyes open, does the (relatively) low price/sqf make up for the fact you might be trying to sell it for a while… that’s the question I’m currently asking myself.

@Hotes

There are a number of properties currently for sale on that development, quite a few are probate, and they aren’t shifting. But if you go into it with your eyes open, does the (relatively) low price/sqf make up for the fact you might be trying to sell it for a while… that’s the question I’m currently asking myself.

In my opinion sadly no it doesn’t as the service charge is still an issue and what percentage does it increase by each year?

Whilst Wimbledon Village is an attractive location it’s not central London where high end properties often have high service charges that often include everything you mention plus a gym on site.

I also can’t help but feel it’s an extra barrier to selling in this current era where flats with lack of dedicated outside space are suffering.

As you can see yourself there are currently a number not shifting that presumably are priced to sell if probate properties.

You are also weighing up all the negatives of this level of SC even though you can currently afford it but are looking to the future and resale issues. It definitely does reduce your future pool of buyers as you can see from the responses on this thread. In my mind why buy something that’s going to be harder to sell in the future?

That’s over twice the cost of the morgage on my six bed house! I just can’t imagine paying that annually and never “paying it off”.

Btw OP. Have you ever lived in an apartment before? If not, along with the other bits I said in my first post here, consider these:

Food and worse still cig smells in the com areas and when people smoke below your window or sides it lingers into your place.

Noise others make above, below, to the left to the right and in the front of your door.

Never by an apartment next to the front com door or fire doors in the com area as these make a lot of nosie banging/shut/open people walk past

Are animals allowed and I mean our 4 legged friends, lol as I've seen dog mess in a com area - not the 4 legged friends fault but that of the real animals, lol.

more chances of having fall outs due to the nature of apartment blocks.

if there are lifts, a lift/lifts can break and take a long time to get repairs/parts/etc.

Good luck

The other point to bear in mind is what percentage does the service charge increase by each year? So if it is currently £6k today and if it increases say at 3% each year in year 5 it's nearly £7k when you come to sell the apartment. Making it even less attractive for your future buyer.

Years ago when these types of properties had much lower service charges they perhaps were not so much of an issue but now the numbers have multiplied so much over time they are quite off putting.

You will always have people like me for instance who when buying my first flat in London wanted Putney but refused point blank to consider any of the mansion blocks with the service charges of £800 - £1,200 (and this was 30 years ago.) I bought in Clapham instead then moved to Earlsfield to a maisonnette and then bought a house in Earlsfield.

With the cost of stamp duty these days (which was very different when I first started) many people miss out a step and go straight from one bedroom flat to the 3 bedroom house by moving further out.

The stamp duty and the service charge are in effect "dead money". You can't do anything about stamp duty but you can avoid high service charge.

We pay £3,5k per annum for a similar sounding flat (very nice) which includes a building manager (onsite six days a week), gardening, cleaning, lifts, maintenance of all common parts incl heating and lighting them etc, a sinking fund for repairs and water (but no other bills).

It's very well run and this is good value in my view. Yours sounds reasonable if it is comparable. I would check out the accounts and management company.

Mine is currently £3K pa (zone 2) + £250 ground rent with water charges included in the service charge. We do have an underground garage (wonderful!) and concierge (5 days a week mornings only since Covid). It's pretty normal for a block of 70 flats (converted in 2002) but am worried about future costs due to some cladding issues. I agree that the lifts do cost a lot to maintain, also our entry gates.