Service Charges/Sink Fund

OllyMorry

So I've seen a flat I really like and want to put down an offer.

However, the service charge is £180 a month, which I think is very steep.

The flat is one of 6 conversion flats in a large period Victorian building in South London. There are no communal gardens, merely a large drive at the front for parking.

The estate agent says part of the service charge goes into a sink fund.

She says the other residents are complaining the service charge is too high and are attempting to get it reduced.

Any advice please? Everything else about the flat is great, but I can't justify that amount in service charges.

Thanks

ognum

I think that is very very high. What exactly are you getting for that? Does it cover any utilities?

Dunroamin

How much is in the sinking fund and is there any major work planned?

cattie

The only advice I can give you is not to buy a flat with service charges you think are too high.

It would be extremely unlikely any leaseholders could get the charge reduced by a significant amount.

If it's a large Victorian house then the upkeep of the outside parts of the building, repainting etc could be quite high, as would the cost of any roof renewal needed, so these are the things that the sink fund would be for, once buildings insurance and management costs were deducted from the service charge.

john_white

I had a flat in a converted manor house. 10 flats in total. Needed a new roof ....


.... 250k

So you need a large reserve for old properties.

GDB2222

On the contrary, such a high service charge works in your favour.
1st of all, it will put quite a lot of other buyers off.
2nd, these properties are expensive to maintain, and it is only sensible to put money into a sinking fund.
3rd, you and your neighbours-to-be can take over the management and make it cheaper if you can. (Google right to manage.) That will tend to increase the value of the property. You say that your neighbours-to-be are concerned about the level of service charges, so it may well be possible to galvanise them into action.

Contrast that situation with one where the service charge is very low. There may be no money in a sinking fund, and it may be necessary to put the service charge up in future.

propertyman

The answer is to ask the vendor to send you copy of the current years budget to see what it is made up of !

The comment that it is high is entirely based on it being more outlay that you planned for, nothing else.

Even in a Victorian conversion, which as posted are expensive to maintain, your service charge budget would include
-buildings insurance, and you have no information on the past claims history
if it is resident managed the companies liability insurance,
the additional costs of a managing agent,- neither residents or freeholder should do the work for free and an agent might be the only option for them,
-utilities, cleaning which can include window cleaning
-running repairs, a well managed block will often have not only the simple day to day items but planned annual drain clerances and gutter clearances
-the various statutory compliance matters from common parts and fire safety risk assessments annual accounting company secretarial costs and annual accounting
- and there may be complex services such as fire alarms entryphones and water pumps.

When it comes to the sinking fund a well costed plan will work through cyclical painting roofing drive way replacement utilities and services replacement, carpets etc,

And £180 pcm suddenly sounds cheap.


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Richard_Webster

When it comes to the sinking fund a well costed plan will work through cyclical painting roofing drive way replacement utilities and services replacement, carpets etc,

And people moan when they are suddenly faced with an enormous service charge bill one year for, say, re-roofing, because there is no sinking fund!

propertyman

Richard_Webster wrote: »

And people moan when they are suddenly faced with an enormous service charge bill one year for, say, re-roofing, because there is no sinking fund!

or worse still the funds for that are beyond the immediate reach of the flat owners and the water starts to leak into the top flat and building.