Major works and flat sale

[Hari223]

I live in a really nice flat which I'd like to sell in the next couple of years. The service charge is high at 3.5K a year but it includes heating and hot water so doesn't feel too painful. However the managing agent has just proposed a programme of major works to the tune of around 35K per flat over the next 6 years, on top of the s/c we already pay.will this be a bar to a sale? Will future buyers be put off? Does anyone have experience of selling with major works going on? We are hoping to do right to manage so that we can get some control over some of these costs but getting the right number of people on board is proving challenging.

I guess I could always knock the cost of then works off the purchase price of the flat, but might mean I end up selling for the same price i bought for.

Any thoughts?

If the freeholder of your block happens to be the local council, it may be worth asking if they would want to consider buying the flat from you.

It would put me off. The average service charge in London is £1800 so even including water and heating it feels expensive, plus £35k major work, plus the hassle and inconvenience of major work. When is the work due to finish? Could you stay until that's done?

The cost, timeline and potential disruption will put buyers off, especially investors. Why 6 years? That's a LONG time. Is that the savings for the works or the actual works themselves or both? (surely not the works as you could build a new building in less time?!). If you want to sell during that period, you're going to have to reflect it in the price.

Ideally I would sit tight and sell after the works are completed as (dependent on the works themselves), that may mean an uptick in selling price but 6 years is a long time to wait.

Questions are going to come up from buyers are to why you seem to have no reserve fund in place already and what exactly your service charge includes. £3.5k annually could be considered at the higher end of average but if you have a large flat and/or lifts, a gym etc, it's to be expected.

Completely forgot to add (duh!) that my building has just finished 6 months of external major works. The waiting for the works to start/end impacted sales and of course the actual works themselves also impacted rentals (and sales to investors). We still have internal major works to come but that is a couple of years away now as we recently agreed to reduce the current contribution to the reserve fund (included as part of our service charge demand) due to the cost of living crisis.

Not in this country, but a family member sold a flat with ongoing work and huge financial expense. They split the cost of it (so say it was £10k, they paid £5k towards it).
It important to have it as a separate expense (rather than reducing the price).
I think any long term works and expense will put off any potential buyer.

I did sell a flat like this (the freeholder was Lambeth Council, it was ex-council). Basically they kept proposing wild costs about various things like updating the communal boiler, but never actually issued a Section 20 notice. I think once they tried but they didn't follow the process correctly so it got voided (or whatever the correct term is). From what I remember, the information provided to the buyer by Lambeth council was that there was a proposal of £17K (again, a random figure plucked out of thin air). We just said "take it or leave it". The flat was in a very desirable area so they took it (the flat was sold for £400K in 2017 so that gives you an idea of % of value).

I have a friend who had a similar situation with a private (not an ex-council property). But there were only a handful of flats so they took over the freehold and got the works done for much less than the freeholder had quoted.

So I think in summary it very much depends on your situation what approach you take. It sounds like you say it's a nice flat so hopefully you can just negotiate with a potential buyer to get a price you're both happy with.

Good luck 🙂

Wouldn't touch something like this with a bargepole.

The service charge is really high and the costs of the works suggested sounds extreme and 6 years of disruption is completely unreasonable.

I would seriously query what your freeholder is doing and ask for a breakdown of works planned and costs.

Because all of this is going to make your flat really hard if not impossible to sell.

You should have a sinking fund for your building and I would also question why this is not in place or being used for major works.

I would wait until you kick your managing agent out and have the right to manage the building yourself before selling your flat.