Service Charges - ex local authority / ex housing assoc

stoker48

Hi All

Has anyone any experience of service charges on ex local authority or ex housing authority properties?

I am looking to buy a flat and you seem to get more for your money with these and some of the blocks seem in good condition and in central areas.

My question is : even though the service charges often look quite good on paper, could you get stung when larger things need doing? Someone mentioned on this site that privately own householders could end up paying proportiately more and in effect subsidising the non owning tenants.

Thanks in advance.

Fire_Fox

Service charges only cover ongoing maintenance, not large repairs or improvements - what can be charged for will be laid out in the long lease. Read up on 'Decent Homes' legislation - councils and housing associations have to comply with this and it can mean major works costing thousands and even tens of thousands per flat. Owner-occupiers should not be subsidising rental tenants, the amount each unit pays should again be laid out in the long lease: it may be pro rata on size of flat or the same for each.

stoker48

Thanks Fire Fox. I am happy to pay my share but not anybody elses!

Richard_Webster

Some (not all) private managing agents will collect contributions annually for future major works so that you do not suddenly get a big surprise increase one year because most of the money has already been put away in a sinking fund.

Local authorities are less likely to do this so when they do do major works you are more likely to get hit for a big bill. They may let you pay it over a few years but you still have the liability and if you sell the flat your buyer won't want to inherit what's left of it.

hermione47

Don't do it! We did and now we deeply regret it! Service charges are itemised, but some of them are quite absurd (50 pounds just for a lift engineer to turn up without doing any work) so it's clear that they just want the leaseholders to subsidise the council tenants. As if we were not subsidising these benefit scroungers already with our taxes!
DON'T GO NEAR AN EX-COUNCIL PROPERTY - STAY WELL CLEAR!!!
(Not to mention the company you have to keep - we are surrounded by louts and feral kids!)

boomerangs

Fire_Fox wrote: »

. Owner-occupiers should not be subsidising rental tenants, the amount each unit pays should again be laid out in the long lease: it may be pro rata on size of flat or the same for each.

That's the theory, but it doesn't seem to happen in practice though. On a weekly basis I read in my local paper of leaseholders getting stung for tens of thousands of pounds for very suspect repairs.

Fire_Fox

hermione47 wrote: »

Don't do it! We did and now we deeply regret it! Service charges are itemised, but some of them are quite absurd (50 pounds just for a lift engineer to turn up without doing any work) so it's clear that they just want the leaseholders to subsidise the council tenants. As if we were not subsidising these benefit scroungers already with our taxes!

Leaseholders have the legal right to inspect any documents they wish to which relate to the service charges, including the invoices from contractors. Furthermore each year a qualified accountant should check and sign off each years accounts. Are you seriously suggesting councils and housing associations routinely FORGE invoices and accounts?? :rotfl:

boomerangs wrote: »

That's the theory, but it doesn't seem to happen in practice though. On a weekly basis I read in my local paper of leaseholders getting stung for tens of thousands of pounds for very suspect repairs.

That is what a Leasehold Valuation Tribunal is for! I'm £4K up by disputing by the book.

Service charges must be "reasonable", "reasonably incurred" and all work must be to a "reasonable standard". IMO the law is strong in this area - it's simply that many leaseholders do not understand what they are paying for and randomly withhold money instead of properly disputing excessive charges. Also way too many people seem to think an unrecorded phone call is going to be admissible in court ... or perhaps they don't think they will be taken to court.

Furthermore any major works MUST be consulted upon and the process is strictly legislated. Some leaseholders have got their mate to take a look at the roof and put together an estimate, then expected the council to take his opinion over that of a qualified surveyor or registered contractor.

blckbrd

Leaseholders do not subsidise tenants any more than any other tax-paying Jo. Services charges - annual and major works - are, as Fire Fox says, apportioned according to the lease.

Major works can be cripplingly expensive for some leaseholders and many have issues with 'value for money'/quality of works. The only people making a profit are the contractors so, if the ones who tender charge a fortune, that's going to be passed on.

Do your research beforehand OP and make an informed decision on whether to buy or not. So that you don't end up as bitter as hermione47 perhaps the thing to remember is that council housing may be tenanted by all sorts of people, in all sorts of circumstances, with all sorts of values. Just like anywhere else.

GDB2222

I have some ex-council flats in a small BTL portfolio. Typically, the works cost around 3 times as much as you could reasonably expect. So, external block painting and minor repairs is usually in the region of £5-10k every 5 years. There's also around £1k annual service charge. On a BTL basis, that's not too bad, as it works out at around 20%-30% of the rent and I just grit my teeth and budget for it. Last time round, they included double glazing, which was an extra £5k.

If you are an owner occupier, I would suggest budgeting say £3k a year towards these costs. Of course, if you had your own freehold property, there would be outgoings, but the difference in costs would service a sizeable mortgage - maybe £30k+.

ET1976

A disadvantage of having the council as a freeholder is they tend to do work which, whilst legitimate, is not strictly necessary, particularly under the auspices of the Decent Homes standard. You could look at this as a positive thing, in that they are pro-active with maintenance and are keeping your asset in good shape.

I own (but no longer live in) and ex-council maisonette, which is one of 2 in a converted house. As there is nothing communal (apart from walls and roof), there is very little the council is actually responsible for in terms of maintenance - just the roof, gutters and external painting.

They repaint all their properties every 5 years. I don't know anyone who paints their own house every 5 years, but I don't think it's something that could be challenged as 'unreasonable'. It's just a cost you have to accept.

We have just had our roof replaced under the Decent Homes standard, even though there was absolutely nothing wrong with it. My lease does not provide provision for improvement works, but the council have got around this by saying that the existing roof was 'failing', even though it wasn't, and the council freely admitted they had not even looked at the roof to check its condition, they were just replacing all rooves on all their properties. My lease prevents me from entering my loft, so I could not have a survey done to prove that the work was not necessary. Both myself and my neighbour objected to the work (supported by roofing contractors' reports from external inspections - more evidence than the council had), but we were told it was compulsory under the Decent Homes scheme. In the absence of my own survey I felt it was too much of a risk to take up an LVT case over it.

The work appears to have been done to a good standard, however the contractors were pretty slow, and they kept disappearing. They put scaffolding up and then vanished for 3 weeks. When I asked the council what was happening they said they didn't know, but would phone the foreman, and magically the builders appeared on site at 8.30 the next morning. They told me it would take 5 days (based on other properties they have already done) - it took 9, even though there weren't any problems. One day they turned up at 8.30, laid about 10 ridge tiles and then left for the rest of the day. At the end of the work, the scaffolding was left up for another 3 weeks. Again, I asked the council what was going on, they said they didn't know why it hadn't been taken down. Next day guess what, the builders reappeared and started to take it down. I haven't had the final bill yet so I don't know if it will go over the original estimate and if it did, I don't know how I would challenge it. Am I going to be paying for 8 weeks scaffolding hire for what should have been a 5 day job?

I don't think the council manage their contractors very well (there is not much incentive to as the cost is just passed onto leaseholders after all). Apart from the issues during the actual work, about 6 months before hand the contractors dumped a load of stuff in my front garden, including dangerous rubbish plus hundreds of pounds worth of brand new building materials (tiles, guttering...). To cut a long story short they never removed it despite 4 calls to the council, and doubtless they will ultimately be charging the cost of replacing it to the leaseholders (plus I have disposed of all their rubbish for free...). There is no saying a private freeholder would do any better, but given that the council generally undertake far more maintenance these extra costs are more significant. Another point to make is that despite the official 'consultation' they must undertake, in practise you are likely to have absolutely no say whatsoever in which contractors they use as they offer such high value contracts that they have to be advertised in the EU and there is no opportunity for leaseholders to suggest contractors.

When I bought the place, I was not able to afford freehold, and I spent a long long time looking for a suitable leasehold property that had minimal communal aspects to it so I was not too much at risk from high maintenance charges. I accepted that I would have to pay for painting and probably a new roof at some stage, but I was happy with this as I knew it was limited to these things. A positive aspect is that the council offer 5 years interest free to pay for any major works.

I wouldn't contemplate buying an ex-council flat in a communal block, but neither would I buy one with a private freeholder - I wouldn't want to own a flat in a block, that's just my personal preference. If you do want to do this, in some ways the council - a 'tangible', (hopefully) accountable body with offices you can actually go into and hassle people - is in my mind preferable to some faceless management company who just send demands for money through the post.

To summarise this massive rant, I would say check very carefully what your lease stipulates - some allow improvement work to be carried out, which can get very expensive particularly where you have lifts, fire escapes etc involved, some include paying for work to be done on neighbouring blocks. Just be aware of what you could be liable for. Also check with the council what major works are planned for the next 5 years so you know what's in store in the short term at least.

HTH a bit!

GDB2222

ET if you and the other lessee in that block wish to, you can take over the management yourselves.