service charge

cardsharps

property.advert wrote: »

My last place in London was about £3000 a year service charge.

3 in a building is £2100, minus buildings insurance (£300 ?) leaves a little for maintenance and around £30 per week for cleaning.

Remember though that the true cost of a service charge is the amount you pay, minus things like buildings insurance which you'd have to pay anyway inverted by the mortgage rate into an amount of cash which you are not buying or "throwing away".

Thus, in my example of £3,000 and perhaps £500 costs, the £2500 at 5% means interest on £50,000. If prices were rising 10% per annum, then having that £2500 service charge was costing me £5000 in year one, compounded at 10% per annum thereafter.

Something to really think about when it comes to service charges.

I don't get it. How can the service charge for a flat outside London be a maximum of £1,000 per annum. Yet in London it's £3,000. How can that be possibly justified. Things may be more expensive in London but not 3+ times as much surely?

Fulham_Mark

Unfortunately any property larger than a house starts to operate like a small company - with all the overheads and problems.

Often a ltd company structure is needed to receive and spend money and give every resident a legal share and voting rights. That's nice but you now need to produce accounts, operate cash-flow and budgeting and produce reports for your share-holders. You'll also pay corporation tax and income tax on any interest you earn simply by having a reserve fund - crazy hey!

Almost certainly 20% or more of the residents will try to avoid paying a service charge and you will need to follow a proper legal process to get this money - all very expensive.

Now if you hire some chap to fix a boiler you have a duty to provide a safe working environment for them - yes health and safety checks need to be done. The buildings insurance may specify annual checks too on drainage or fire safety.

Before you know it you've spent £700 per apartment simply by meeting all the regulations. These are all well-intentioned but for a small block they jsut prove to be annoyingly expensive.

Ironically, at the £3000 a year level you are probably getting a good deal as the management company will be big and may be sharing the costs of the accountancy, operating software with other estates that they manage. They may also provide good-value staff to do most of the work and surveys with no call-out charges.

poppysarah

cardsharps wrote: »

I don't get it. How can the service charge for a flat outside London be a maximum of £1,000 per annum. Yet in London it's £3,000. How can that be possibly justified. Things may be more expensive in London but not 3+ times as much surely?

One at a council block in Manchester is a little over £2k a year. It's 8 storey, got a lift and being rented out whilst the poor chap tries to sell it.

http://www.rightmove.co.uk/property-for-sale/find.html?searchType=SALE&locationIdentifier=POSTCODE^505324&radius=0.0&displayPropertyType=&minBedrooms=&maxBedrooms=&minPrice=&maxPrice=&maxDaysSinceAdded=&retirement=&partBuyPartRent=&_includeSSTC=on&x=50&y=7&sortByPriceDescending=false&primaryDisplayPropertyType=&secondaryDisplayPropertyType=&oldDisplayPropertyType=&oldPrimaryDisplayPropertyType=&oldSecondaryDisplayPropertyType=&newHome=&auction=false

Fulham_Mark

Here's an example...

How much does it cost to change a lightbulb in the entrance hall?

1. Privately owned house:
£1 - dad replaces lightbulb

2. self-managed terraced property split into 3 flats:
£1 - the young man on the ground floor does lightbulbs and won't sue anyone if he falls of the ladder

3. Small block of managed flats:
£150 - the block is subject to the same electrical safety regulations as a factory. The management company could face jail sentences for flouting regulations. A qualified electrician is called who charges a call out fee and rather expensive rates

4. Large estate:
£75 - management company employs an electrician who makes a weekly visit to fix any electrical items at an hourly rate. No call out fee

This isn't just being funny. I know someone in a council flat where you aren't allowed to change any bulbs anywhere in your flat. The council maintenance people must do it. Someone is paying for all these bulbs being replaced..

Fire_Fox

Fulham_Mark wrote: »

Here's an example...

How much does it cost to change a lightbulb in the entrance hall?

This isn't just being funny. I know someone in a council flat where you aren't allowed to change any bulbs anywhere in your flat. The council maintenance people must do it. Someone is paying for all these bulbs being replaced..

Our caretaker invoiced our (now ex) management company for over £1200 in one year for replacement lamps, and they in turn billed the leaseholders. Note that this was parts only not labour, note too that my block comprises just fifteen flats. :eek:

We don't even have fancy fittings that require specialist lamps, although the management company representative claimed we do. I estimated that we'd have to change every bulb in the communal areas twice a week to spend that kind of money. :rotfl: