Proposed service charges

luvleighr

I'm considering buying my council flat and have just received the price including the service charges. To me they seem very high and I was hoping to get some feedback on what other people are paying and your opinions. The property is valued at £58500 and the service charges are estimated at £2310 per annum. They've sent me a breakdown of the charges and what concerns me most is the 'day to day repairs to the block and estate' for which they want to charge £900 per annum. The building had a major refurbishment in 1995 and is in good condition. It contains 90 flats and is situated on a small inner city estate which is reflected in the price. By my reckoning, the council are estimating that the afore mentioned 'day to day repairs' for the building and estate cost £81000 per year (£900 x 90 flats) - that is approximately 137% of the value of one of the flats. Does this sound right? Does anybody know if I have any right to appeal against this amount and if so, how I will have to go about it?

Many thanks
Leigh

clutton_2

my thought is - why are they charging the owners of flats "estate maintainance" - this surely is what the council itself has to pay for - surely you should only be paying for the building and immediate grassed areas/parking spots only.

i know someone who has a £50,000k ex LA flat in a block of 6, and pays less than £20 per month service charges

However, maintaining high rise flats is a lot more expensive with lifts and security system contracts, external scaffolding costs etc.

How much is in the contingency fund already ? If its not much, they are clearly trying to build it up.

How many other flats are in private ownership ?

Is maintainance done by the council itself or has this been put out to tender ?

Is there a management committee ? If there is, find out which residents are on it, and go talk to them.

The council will not have the income you have calculated unless every single flat is in private ownership.

There is legislation to stop landlords (private and council) from profiteering from service charges.

There is a thread on here about this very matter which was quite long.

UK007BullDog

If you are located in London you might find you have to pay more.

It could be that the quote you got is only an estimate? From my experience councils like to over-estimate than under-estimate. They also calculate by number of rooms.

Is the property part or fully concrete with lots of carparking space or a below ground carpark? Then the cost would be in that region.

UK007BullDog

Do a search in this forum for "service Charge" and about 3 pages of posts will show up. On one of the pages is a thread with 90 posts: http://forums.moneysavingexpert.com/showthread.html?t=273810&highlight=service+charge or this one: http://forums.moneysavingexpert.com/showthread.html?t=273810&highlight=service+charge and there are many other threads with lots of information.

Here are some threads I picked out but have not read all of them, just the original post which is similar to yours.

http://forums.moneysavingexpert.com/showthread.html?t=273810&highlight=service+charge

http://www.lease-advice.org/

http://forums.moneysavingexpert.com/showthread.html?t=208477&highlight=service+charge

http://forums.moneysavingexpert.com/showthread.html?t=224237&highlight=service+charge

clutton_2

i think i would also be weighing up the cost : -

since you may be getting a discount, is the amount of mortgage you will be paying, plus the service charge, equal to, less than, or more than what you would be paying if you bought a flat nearby but not council owned ?

even tho services charges are high, it may still be a bargain.

But as 007 says, DO investigate if it is concrete - as some types of construction will have huge maintanance costs (your local planning office should know this) - then find a whole market mortgage broker and ask him which lenders will lend on that type of construction and what % interest they will charge you.

luvleighr

Thanks guys for such quick responses.
I believe that I'm the first fool (just kidding - I hope) to buy a property in the building. The council usually sub-contract for repairs to properties and I believe that it was contractors who did the refurb and as the council don't seem to do very much themselves these days I would imagine that maintenance work would be done by others too. Surely if they want to charge me this much for 'my share', then other tenants shares would be recouped via rent payments and if not, then would it be fair to charge me a greater share than those who are renting? I'm not in London (I'm in Birmingham - one of the roughest areas of Brum too!) and we have a HUGE problem with parking as there are around 15 parking spaces for 90 tennants! I can't see any reason at all why they want to charge this much. A friend with a flat worth around £150 000 in a private building pays only £1600 pa. This IS an estimate and I sure hope that you're right in saying that councils tend to over-estimate as if these are a realistic expectation then it may put the kaibosh on my plans altogether. My rent is £333 per month now but with a mortgage repayments AND almost £200 per month in service charges on top, it might just push it out of my reach. Thanks for you input. I'm off on a mission now to look at all these links & see where I can go from here. Thanks again. Leigh

[Deleted User]

service charge on our town house is the same for the apartments and is £2000 pa which includes gardeners and security and a sinking fund of £500 pa. We have sufficient parking etc

Op perhaps find out where this £900 is going ie will it be in a special account

EdInvestor

luvleighr wrote:

I believe that I'm the first fool (just kidding - I hope) to buy a property in the building.

Hmm.I think that would make me nervous.I would want to know what policies the council follows in other blocks where there are more private owners, before committing myself to being the first one to test the water in this development.

UK007BullDog

Exactly! So be sure to call a couple of your local surveyor companies and ask them if they have surveyed any flats in your block by which lenders. Check out some websites to see if any of the flats have been bought/sold https://www.ourproperty.co.uk

If there are very few or you are the first to buy then most lenders will say "No Thanks". If you are in a rough neighborhood, its a high rise flat again most lenders will say "No Thanks". If it has concrete elements or maisonettes then it will be very difficult to get a lender as most don't want to know on ex-local authority high rise flats and maisonettes. Those lenders that might take it on are going to be the "adverse market ones" even though you have a good credit record and will charge you for the privilege.

You also need to contemplate a few other points:

If you ever want to move and sell up, is there a market for the property? You said its in a rough area, who would want to buy there privately? What if you had a difficult time getting a mortgage now, what could happen in a few years down the line for your potential purchasers? Maybe all lenders will refuse to lend on property like that by then. Then you are stuck. The only way then would be for you to rent it out and start anew.

Parking is an issue now and will definitely put off future buyers if they cannot get a guaranteed parking space.

If you know your budget is tight now, once you are the owner of the flat, any repairs inside your flat are your responsibility (heating, plumbing, general maintenance) and that is expensive.

If it is a high rise flat with lifts etc. then it will be expensive to maintain and if they outsource (they definitely outsource the lift maintenance) any works then the fee is about right.

Most of the excellent and good ex-local authority housing stock has been sold (sorry, flogged off by the government). What is left is the stuff no one really wants, especially not the lenders. If you are looking for a high mortgage of 80-85% or more it will be very tough for you and you would not be able to get an average deal. The surveyor might do damage as well and say it is a high risk due to location, type and repair state of property. Then if your income is low or you have credit issues the few lenders willing might not go up that high, so unless you have a sizable deposit it might just not work for you.

Rachman_2

Some authorities murder the private owners in their blocks for service charge. thinking it's not fair is irrelevant, what choice would you have - you could easily get landed with an extortionate bill for say a new roof or groundworks where you end up paying a huge amount of money - that's part of the risk of buying ex-council - I'd sniff about other blocks where there are private owners and ask how they have been treated.

luvleighr

Just a quick update:

Having read up on the basics I decided to approach the leashold team and ask them to explain the charges.
Obviously put on the spot and unable to give me a straight answer I was handed over to 'a colleague' who was more in the know.

Unfortunately, this lady could only tell me that the figure was 'only an estimate' and in reality the figure would be no where near that. (Leigh scratches her head) Apparently the amount is to be fixed for 5 years so they over estimate to 'cover' themselves.

I asked for a more realistic figure or a breakdown of what the £900 would cover but the lady was unable to help or to refer me.

Can anybody suggest where I go from here please. Aren't they legally obliged to give me the information I've requested?