Service Charge - what's reasonable

[Dazedandconfused28]

I live in SE London, 2 bed flat in a 1910 conversion - 4 flats in total. We are currently trying to sell our 2 bed, but most prospective buyers are deterred by our service charge according to our estate agent. We are paying £2250 per year - this covers building insurance, cleaning in communal areas, fire alarms, entryway phone contract, general repairs, gutter clearance, management fees and an annual transfer to the reserve fund. According to our agent - the average in the area would be £1400.

I've scrutinised the breakdown of costs, but I can't immediately see where we are paying over the odds - mainly because this is my first home & I'm not familiar with what other people pay! Would anyone mind sharing what they pay before I pursue a right to manage?

How much is the contribution to the reserve fund?

and ask the estate agent to list the service charge minus the reserve fund contribution and list the reserve fund contribution separately.

3 bed flat in SE London - purpose-built post-war, 6 flats per block. We pay per month rather than annually, but on average it's been around £100/month, so £1200/annum, and has been reasonably consistent over the last 7 years. Ours covers pretty much what yours does plus external grounds maintenance (we have a caretaker who looks after a number of blocks) - not sure about the reserve fund though.

That said, it's a housing association who are the freeholders, so able to operate economies of scale etc, whereas if your place is just the one building with 4 flats (share of freehold?) it's likely to be higher.

I found estate agents totally clueless when we asked them about service charges 🙄

How much do you contribute to the reserve fund and how much is in there? I live a a 3 conversion flat property and pay c. £500 for buildings insurance annually - everything else is done ad hoc on a need to do basis which does rely on a certain level of trust that all the freeholders have the cash to do any works required (which they have to date).

I too think it’s the reserve fund. But that’s potentially a good thing if it means there’s decent funds accruing - we bought a share of freehold and not long after moving in the bloody roof needed replacing, and reserve funds weren’t enough…

Recently moved from a two bed SE London. Ours was £1200 a year. I would scrutinise every bill. And then see how the reserve fund is doing. How much is in it and what (if any) upcoming work there is.

Ours is similar in SE London and we have RTM … Our issue is very high buildings insurance.

Transfer to the reserve this year is £1400 - total bill for all the flats is £9,000 for the year. Our insurance premium is high at £1900 😕

Only £1500 in the reserve as we've just had major roof works (which we had to supplement by £5k).

Our reserve fund was approx £8k - after 7 years of no major works, but half of this pot was surplus money from services like 'gutter clearance' which haven't been carried out every year - but we have paid for.

Currently £1440 per annum in the flats where I used to live. But the difference is their reserve fund is tiny (£20 per month) so if I moved back would potentially be lumbered with big repairs. Definitely put in the advert about the large proportion that goes to the reserve fund that is huge and brilliant not to have that worry of having an unexpected large bill.

Yes I think the agent needs to make this clear on sales particulars . Some will just look at the headline figure quite naturally-

Three bedroom flat in a warehouse conversion in Canary Wharf, £14,000 per year.

It doesn't sound too high to me? Nowadays just the health and safety compliance is ridiculous.

Right to manage is such hard work.

Ours has just gone up to £2000 a year, from £1560 a year for many years. It’s in a block of 6 in N London. Covers the same things as yours. We were told it’s now closer to the average for similar properties in the area.

Re building insurance - if you are all claiming for every little incident then it will be high. Who arranges your building insurance? Have you seen a schedule to check there are no extra admin fees being applied?
Once you know the claims history and the schedule then you can ask an independent insurance broker to offer you a quote. You'll then know if you're paying too much.

I'd make sure your sales listing shows VERY clearly, at the top, that the roof has recently been repaired and also shows the annual charge separately from the sinking fund contribution.

The roof not needing imminent work is a bonus!