Buying a leasehold flat - charges

tarmstrong004

Hi,

I've had an offer accepted on a leasehold flat in Norwich and am beginning to receive information on the lease etc from the vendor and freeholder. The lease has just over 100 years to run so I not too concerned about that although I presumably will want to renew before 80 years (?) after which I think it gets more expensive.

I've been provided with the last three years of service and maintenance charges and wanted to see if anyone had any views on the sort of costs which have been charged.

The freeholder appears to have set up his own company to administor the properties etc.

The flat I am looking to buy has quite high insurance costs at c£700 p.a. However, the building is old and listed so I was not surprised about that. I am still a bit cautious as I have read about freeholders getting kickbacks on some policies etc so have asked for a copy of the insurance policy.

The ground rent is seprate for the flat and the parking space but comes to £350 p.a. which seems quite reasonable. There is provision for this to increase after 33 and 66 years in the lease but this doesn't concern me too much.

There are then some other "normal" costs like checking of fire entinguishers/alarms etc which seem fair enough.

There are four groups of costs which I am most worried about and seem to have increased a fair bit across the three years of accounts I have access to.

1) "Bank charges, including facility costs and interest on expenditure" of the which the vendor seemed to pay around £150 p.a. I'm not sure what these really relate to?

2) "Administration" - £150-£200 last year.

3) Accountants fees - £330 last year.

4) Management fee of £273.04 last year.

They don't in themselves seem huge amounts but the total costs come to just over £2,000 for the last year and I wanted to see whether people felt that this was sensible or not.

Thanks

propertyman

On the insurance policy its more important to ensure that the declared sum - whats its insured for - is correct. While some freeholders exploit placing insurance business in most cases its a commission of 10 to 20% and no, going direct, does not reduce that by the same % its not how it works. Insurers pay people whether a broker freeholder or direct sales to bring in business and administer policies.

1) "Bank charges, including facility costs and interest on expenditure" of the which the vendor seemed to pay around £150 p.a. I'm not sure what these really relate to?

As a commercial account the FH will have to pay for bank charges and if there is not enough in the account interest on the OD. Now I suspect the lease does not allow that to be recovered under service charge and that aside at £150 for the vendor alone is excessive( its likely £150/x flats).See *

2) "Administration" - £150-£200 last year. This would be the landlords cost of managing and equates to a fee that an MA would charge. Again the lease may not allow for that to be recharged if the landlords manages himself see *

* Its important to look very carefully at the lease to see how service charges are run and calculated, what they can include, and what is actually being done.

3) Accountants fees - £330 last year.

Not that far off each year the lease will likely require that the actual costs are certified, and while it a little on the high side, but not by much, and are likely due to the limited accounting skills of the LL.

4) Management fee of £273.04 last year.

Given 2 I cant see the reason for two charges. See *

In addition I would also look closely at the building with your surveyor to identify future maintenance issues which you will need to pay for eg the peeling paint holes in the roof worn out carpets and that feint smell of burning in the common parts lighting

Take a long and careful look.

tarmstrong004

Thanks very much for your comments property man, that's really helpful.

If anyone has any further views or comments, please let me know.

Thanks

Richard_Webster

I echo Propertyman's comments - the admin type charges seem quite high so you have to wonder about the ethics/attitude of the landlord/freeholder.

Fire_Fox

Are the charges per block or per flat?

tarmstrong004

Charges are per flat. As I say I understand to some extent the high insurance costs given it is a listed building.
It is the admin/management charges which seem high as well as the bank charges.

Fire_Fox

Even for a listed building that insurance sounds excessive. My parents block is a grade 2 listed converted mill and in a flood area and they don't pay crazy money AFAIK. Perhaps a bit of an unfair comparison since they partially self manage AND it is a massive block of ~100 flats? But their entire service charge including ground rent and insurance is <£1500 a year AFAIK, they have car parks, gardens, lifts and hundreds of enormous wooden windows to maintain.

I live in a small badly managed block of <20 flats in Yorkshire, we pay £50 a year each flat for audit fee which I am guessing is our accountant, £190 for management fees that includes administration.

steve7487

Similarly to tarmstrong004 I feel that the insurance on our leasehold flat is high and would ask if anyone could give a view on this. We have been charged over £600 p.a. We are in a converted flat in South West London, in a house with two other flats. By my reckoning building insurance for the whole house would be around this sum so £600 each seems high.

zzzLazyDaisy

You will get probably a better response if you start a new thread, as it is frustrating to read through the facts of an old thread only to find that the current query is unrelated.

Dx