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  • FIRST POST
    • qwerty0223
    • By qwerty0223 2nd Oct 17, 11:55 AM
    • 9Posts
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    qwerty0223
    Buying Flat Leasehold - Utilities recharged by management company
    • #1
    • 2nd Oct 17, 11:55 AM
    Buying Flat Leasehold - Utilities recharged by management company 2nd Oct 17 at 11:55 AM
    Hi

    I viewed a property and would be willing to make an offer. The only thing concerning me is that regardless of usage the management company of the block recharge the elec, gas and water at a standard rate for the year (£228)
    This also includes the upkeep of the grounds.
    As I will be living on my own, this seems a lot of money for my utilities, and will be much more than I will be ever using I imagine.

    Has anybody ever had any experience of this kind of arrangement before and if these (already high costs) can be expected to rise even further?

    I have ask the current owner so I am just going off their word when they claim they have received a rebate the past year - can I go straight to the managing company to confirm (though I do not know who they are?)
Page 1
    • aneary
    • By aneary 2nd Oct 17, 12:04 PM
    • 799 Posts
    • 699 Thanks
    aneary
    • #2
    • 2nd Oct 17, 12:04 PM
    • #2
    • 2nd Oct 17, 12:04 PM
    Is £228 the total for the year?

    If it is that is a bargain! My water and sewage costs are nearly £40 a month and there is just me!
    • eddddy
    • By eddddy 2nd Oct 17, 12:06 PM
    • 5,529 Posts
    • 5,220 Thanks
    eddddy
    • #3
    • 2nd Oct 17, 12:06 PM
    • #3
    • 2nd Oct 17, 12:06 PM
    I'm wondering if you've misunderstood something.

    £228 per year is an unbelievably small amount for gas, elec and water for a flat.

    For a small house or flat with one or two occupants, the average monthly utility bill is £61, which is an annual cost of £734

    Link: https://www.cooperativeenergy.coop/news-and-views/what-is-the-average-energy-bill-in-the-uk/
    I suspect that the £228 is some or all of the flat's service charge. What type of building is it? Does it have a garden?

    The service charge would include a share of the electricity costs for the communal areas (e.g. lights in the hallway). It would be unusual to have any gas appliances in the communal area, but f there's a garden, there may be a communal water supply.

    You probably need to find out a bit more detail.
    • qwerty0223
    • By qwerty0223 2nd Oct 17, 12:15 PM
    • 9 Posts
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    qwerty0223
    • #4
    • 2nd Oct 17, 12:15 PM
    • #4
    • 2nd Oct 17, 12:15 PM
    Apologies, they work out a standard rate for that year and recharge it, so it's £228 a month for the electric, water and gas used within my home.
    • eddddy
    • By eddddy 2nd Oct 17, 1:11 PM
    • 5,529 Posts
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    eddddy
    • #5
    • 2nd Oct 17, 1:11 PM
    • #5
    • 2nd Oct 17, 1:11 PM
    Apologies, they work out a standard rate for that year and recharge it, so it's £228 a month for the electric, water and gas used within my home.
    Originally posted by qwerty0223
    But you also mention in your first post:

    This also includes the upkeep of the grounds.
    Originally posted by qwerty0223
    So is £228 per month just a charge for utilities, or the total service charge?

    It would be a big number, just for utilities. (If it is just utilities, what is the total service charge?)

    In general, Freeholders (and their management companies) cannot charge whatever service charges they like.

    For example, if there are 10 flats each paying the Freeholder £228 per month for utilities, the Freeholder must be able provide bills showing that they are spending £2280 per month on utilities.

    You probably need to read the lease to see what types of charges are payable, and how those charges are allocated between the flats.

    And then look at some past service charge statements, to see how much those charges actually are.
    • BorisThomson
    • By BorisThomson 2nd Oct 17, 1:38 PM
    • 538 Posts
    • 885 Thanks
    BorisThomson
    • #6
    • 2nd Oct 17, 1:38 PM
    • #6
    • 2nd Oct 17, 1:38 PM
    Apologies, they work out a standard rate for that year and recharge it, so it's £228 a month for the electric, water and gas used within my home.
    Originally posted by qwerty0223
    Buildings insurance
    Cleaning of communal areas
    Maintenance and repairs (is there a lift?)

    Are these in addition to the above or included?
    • Jenniefour
    • By Jenniefour 2nd Oct 17, 2:17 PM
    • 1,238 Posts
    • 1,271 Thanks
    Jenniefour
    • #7
    • 2nd Oct 17, 2:17 PM
    • #7
    • 2nd Oct 17, 2:17 PM
    This seems so cheap, they must be making a loss on it unless they have their own wind farm/generator and water well. I would be double checking all this.
    • vuvuzela
    • By vuvuzela 2nd Oct 17, 2:48 PM
    • 3,222 Posts
    • 3,742 Thanks
    vuvuzela
    • #8
    • 2nd Oct 17, 2:48 PM
    • #8
    • 2nd Oct 17, 2:48 PM
    This seems so cheap, they must be making a loss on it unless they have their own wind farm/generator and water well. I would be double checking all this.
    Originally posted by Jenniefour
    If it's per month as the OP says, then it's not that cheap at all.
    • bouicca21
    • By bouicca21 2nd Oct 17, 4:59 PM
    • 3,287 Posts
    • 4,099 Thanks
    bouicca21
    • #9
    • 2nd Oct 17, 4:59 PM
    • #9
    • 2nd Oct 17, 4:59 PM
    Ask the vendor for sight of the paperwork to see just what that £228 covers.
    • chappers
    • By chappers 2nd Oct 17, 5:39 PM
    • 2,948 Posts
    • 1,701 Thanks
    chappers
    For example, if there are 10 flats each paying the Freeholder £228 per month for utilities, the Freeholder must be able provide bills showing that they are spending £2280 per month on utilities.
    Originally posted by eddddy
    I'm not sure that is true. if you charge a fixed price for third party gas and electric, regardless of consumption, I think you can charge whatever you like.
    However if you use a secondary meter and re-bill someone then it is illegal to charge more than the rate per unit that you are paying
    • AlexMac
    • By AlexMac 2nd Oct 17, 6:10 PM
    • 1,959 Posts
    • 1,720 Thanks
    AlexMac
    Your concerns are reasonable; Service charges are usual in leasehold flats, but having owned and lived in three of them (plus havng two small BTLs) I always ensure I know what the charges are and what they cover before comitting too far.

    In fact, I am deeply suspicious of anything other than "shared freeholds"; a term with no legal precision, but which is genarally taken to mean flats where the freehold of the block is owned collectively by the leaseholders as memebers or partners or directors of the freehold company. That Company then issues leases to individual owners, but its my preferred arrangement as you have more control.

    Tha alternative, of a commercial freeholder- an individual or a Business - is less attarctive becuase generally, service charges cannot easily be challenged (to answer one of your Q's) and might not even cover everything; they will, almost inevitably cover routine annual stuff like Buildings (but not contents) Insurance, energy for the communal lighting, maybe some maintenance, grounds, roads, gardens, etc, but might or might not cover a "sinking fund" for major maintenance like external decorations, window or roof or balcony repairs- So you may be hit by one-off bills for these (in the past couple of years each of my BTLs have hit me with one-offs of £5k+ for these in addition to the routine annual £600-800 service charge.

    So ask, as they say above.

    The probalm is, you may not get a definitive answers from the freeholder til your Solicitor gets responses from the Freeholder- which, IME they will cahrge you admin fees for providing!

    £2,700-odd is a fairly toppy charge for communal areas alone, but looking at it more optimistically, its fairly cheap if really does also cover the utilities for the stuff you use inside the flat;
    - water (I pay £350 pa),
    - energy for your flat (I pay £1,400 pa)

    and also the communal stuff as mentioned above;

    I used to pay from £1,000-£1,500 pa for my own three consecutively owned leasehold flats- (which was cheap as we managed them ourselves; and that did include sinking funds for major repairs) but friends paid up to £5k pa (which is outrageous) for gym, posh landscaping, concierge etc.

    So ask questions and since, as I said, it is unlikely you'll sucessfully challenge this, make sure you know the deal. It's very unusual to have shared utilities unless there is some weird shared district heating system as used to exist in some ex-council blocks? And if there is such; ask yourself how much that will cost to fix? I don't mind paying £2-3k to replace my own boiler every te years (as I've had to) but would not care to pay thousnads for a communal heating system if it broke down!
    Last edited by AlexMac; 02-10-2017 at 6:14 PM. Reason: I type fast but can't be 4r5ed with smellck
    • Jenniefour
    • By Jenniefour 2nd Oct 17, 6:18 PM
    • 1,238 Posts
    • 1,271 Thanks
    Jenniefour
    If it's per month as the OP says, then it's not that cheap at all.
    Originally posted by vuvuzela
    Ooops! You're right.
    • eddddy
    • By eddddy 2nd Oct 17, 8:47 PM
    • 5,529 Posts
    • 5,220 Thanks
    eddddy
    I'm not sure that is true. if you charge a fixed price for third party gas and electric, regardless of consumption, I think you can charge whatever you like.
    Originally posted by chappers
    What legislation are you basing your opinion on?

    The Landlord and Tenant Act 1985 doesn't allow freeholders to charge "whatever they like" as Service Charges under any circumstances.

    It allows them to recover costs that they have incurred.

    As LEASE says:

    The Landlord and Tenant Act 1985 (as amended) states that a service charge is only recoverable by a landlord so far as the costs have been reasonably incurred.

    Link: https://www.lease-advice.org/fact-sheet/service-charges/
    Or looking at the Landlord and Tenant Act itself:

    18 Meaning of “service charge” and “relevant costs”.

    (1)In the following provisions of this Act “service charge” means an amount payable by a tenant of a [F1dwelling] as part of or in addition to the rent
    (a)which is payable, directly or indirectly, for services, repairs, maintenance [F2, improvements] or insurance or the landlord’s costs of management, and

    (b)the whole or part of which varies or may vary according to the relevant costs.
    (2)The relevant costs are the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a superior landlord, in connection with the matters for which the service charge is payable.

    Link: https://www.legislation.gov.uk/ukpga/1985/70/crossheading/service-charges
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