Leasehold service charge higher than advertised

loki20

Hello,

We are most of the way through buying our first flat, however when we put in our offer the estate agent said that the service charge for the leasehold was just over £100 per month, around £1300 per annum.

However, we've just been forwarded the leasehold documents from our conveyancer, and the estimate for next year is £1900. They had this report on next year's estimate well before we put our offer in, and I suspect before they put it on the market.

The service charge for them in 2010 and 2011 was around the £1300 mark that they quoted us, but was £1600 last year.

What would people's advice be? Should we revise our offer based on this new information, or is this just something that happens?

Many thanks

BitterAndTwisted

It's something that happens.

The agent communicated to you what they were told by the vendor and accepted that figure in good faith.

Notice that the ESTIMATE for next year is £1900 so the actual expenditure could turn out to be a whole lot less or significantly more. Such is life with service-charges. Just cross your fingers that the roof does need substantial repairs once you've moved in!

Is there a sinking-fund?

princeofpounds

I would look at the lease and fully understand the basis on which service charges can be made.

NEVER rely on what an EA tells you. For one thing, they only know what the vendor has told them. For another, they exist only to make a transaction happen.

Past service charges are not always a good guide to future ones. Charges can escalate, major works can come along.

The only reason you were surprised it because your expectations were being framed the wrong way.

loki20

The way the service charge works though is that the estimate is calculated for the year, and then a monthly standing order is payed to the leaseholder based on a 12th of that. Any over (or under) payment at the end of the year is then subtracted (or added) to the next year.

The fact that they knew the standing order was now higher surely means that we have been mis-sold by the vendor? I understand that the estate agent was just going on what they were told.

I don't think there is a sinking-fund no.

loki20

What I also didn't mention was that they are currently paying the standing order for £1900 a year, and were doing so when they put the house on the market.

princeofpounds

Sorry but there is no come-back on this. You either deal with, reduce your offer commensurately, or back out. It would not yet count as a misdescription because it was a) verbal, b) an estimate and c) given to you by the EA, not the vendor in a reply to your solicitor like the SPIF.

Tinks32

My advice to you is avoid buying a leasehold property if at all possible! Is there any reason why you are thinking of buying a flat rather than a house? Are you getting a good deal, how long is the lease, do they have a managing agent to run things or maybe they have a RTM company organised?

BitterAndTwisted

£600 is not a significant amount when buying a leasehold property. There is no "mis-selling" here. Discovering the current s/c on account and/or any balancing-payment due/refund is what you're paying your conveyancer for.

loki20

I live in London, so I can't get anywhere near being able to afford a house in the kinds of areas that make commuting doable.

The lease is roughly 100 years, and I will look into the other questions you asked.

harrys_dad

Run, and quickly! Seriously though, this is a real minefield, and you may end up paying much more than you think in the future. Who is the Managing Agent? There are some poor ones out there. Why has the charge gone from £1300 to £1900 on two years? What will it be next year and the year after? Without a "sinking fund" do you know if there are any major works likely to be needed in the near future that will cost a large amount of money? You seem to be entering into an open ended financial commitment with very little knowledge.

loki20

BitterAndTwisted wrote: »

£600 is not a significant amount when buying a leasehold property. There is no "mis-selling" here. Discovering the current s/c on account and/or any balancing-payment due/refund is what you're paying your conveyancer for.

Perhaps my terminology is off here. When I say mis-selling, I simply mean that we were told one thing and it turns out to be wrong. So my question was really, is it reasonable to revise our offer to reflect this discrepancy?