Selling a flat and buyer wants a rider for £600 to cover any unexpected charges

HildaM

It is not really a contingency fund when it is built up accidently. It wasn't factored in to the annual charge, just built up as an underspend on expected spending.

If we were charged £10 in year 1 but the expenditure was only £9, the £1 was left in the account.
The following year we may have been charged £12 but only spent £10, so the £2 was added to the £1.

(I only wish the figures really were that low, by you get my drift!)

We managed the block ourselves and EVERY year there was money left over from that years service charge which was not intended for anything in particular, just added to the surplus. It was a very laid back approach and there were lots of guesstimates used rather than budget planning. So I KNOW that my buyer will not have to pay any extra at the end of the financial year, as I know what works were planned for the remainder of the financial year after I moved out (about 6 weeks) and I KNOW there was more than enough money to cover it and to have left money over, equivalent to more than £1000 per flat.
Still we had to pay the retention fee.

Richard_Webster

G_M and Propertyman have explained the rationale here and it is pretty standard, I'm afraid. If you want to achieve fairness you have to do something like this.

It is worth while looking at the track record of the landlord/property manager in question. Have there been large discrepancies between on account/estimated figures and the finally calculated charge. It is more important to make a retention if there are big fluctuations or you have reason to believe there will be a large extra amount added in to the previous year's figures that a buyer will end up being asked to pay for.

Personally I have tried to resist this practice as often as I can because of the administrative hassles involved in recalculating it all months later generally outweigh the requirement for complete fairness. I am in the minority here though. If acting for a seller I have:

1. suggested to the buyer's solicitor that he should charge an extra amount for doing this (and in many cases the extra - £50-£75 + VAT - will offset the likely variation);

2. pointed out that many buyers simply forget that their solicitor went to the trouble of securing this retention for their benefit; and

3. asked if the buyer is prepared to pay his solicitor the same amount to be held in case the estimated amount is more than the final and the difference should be refunded in part to the seller. This often clinches it as the buyer certainly doesn't want to find another £200-£500

If acting for a buyer I fully explained the issue in my report about the lease - that he could end up having to pay an excess charge related to previous financial year that should be the seller's liability. I explain the possibility of requesting a retention and the hassles involved and that I will make an extra charge for dealing with it. I only requested a retention if, having had the explanation, my buyer client still wanted one. They rarely did.

Queenie_73

I've owned the property since 1998 so have a complete record of all previous years, I will dig through them and see what the biggest fluctuation was. Although I do recall in previous years where there has been an over-payment the service charge for the next year has been reduced, maybe I should ask for the money back if this is the case
I appreciate the advise which has helped me understand why they requested this but I am also going to question the Buyers Solicitor on why this didn't advise me to do the same when I purchased the property.....oh well, we live and learn