Housing Association sinking funds

The_Deep

[FONT=Times New Roman, serif]I am about to exchange contracts on a flat owned 60% by a housingassociation and 40% by the vendor. It is in a complex of severalblocks of flats , most, (120 units) , are owner-occupied and the restshared by the HA and their tenants [/FONT]

[FONT=Times New Roman, serif]I already own aflat in the one of the private blocks which is managed by a privateproperty management company appointed by the leaseholders The servicecharges, which include a contingency fund. are £1,192. Both flats are very similar.[/FONT]
[FONT=Times New Roman, serif]The service chargesfor the flat which I am buying are £1,538.00, which includes £50.00 amonth for a “sinking fund”. In others words, HA tenants arepaying £ 346.00 a year more than owner occupiers for roughly thesame service.[/FONT]

[FONT=Times New Roman, serif]Flats in this complex are now selling for considerably less, (some 20%)than they cost when new, (mainly with 125% Northern Rock mortgages),so I suspect that the HA are using the sinking fund to supplementtheir losses.[/FONT]

[FONT=Times New Roman, serif]The blocks weretraditionally built 8-9 years ago, and, as far as I am aware, haveincurred no major expenditure nor are they likely to in the near future.[/FONT]

I am waiting on the final papers from the HA, and have expressed to him my concern about sinking fund.

Does anyone know where I stand if I wish to take this to a tribunal?

bitsandpieces

Sounds peculiar. I wonder if the Housing Association is more cautious - and wants to build up a bigger contingency fund - then the company managing the other block? Or maybe some in the HA block haven't been able to afford their service charges - in which case, I don't know if HA is allowed to pass this on to other owners.

By the way, are you buying this as a shared ownership property? Unusual to be eligible for these if you already own a similar flat nearby.

AlexMac

I've no experience of the legal position, but I suspect you’re not in a strong position to challenge any charges set out in the lease? I know that Freeholders (the ‘Landlord’ in lease terms) aren’t allowed to make a ‘profit’ from management charges but I suspect that the HA’s lawyers will have cautioned against unreasonable charges. I also assume that your conveyancing solicitor will have drawn your attention to whatever it says in the lease.

I agree that both service charges seem a bit steep (unless the flats are huge?) compared with my current and recent experience of four leasehold properties, but a differential of a few hundred quid doesn't really surprise me. I have 2 identical ex-Local Authority BTL flats only a mile apart, in the same borough, and their annual charges at £650 and £950 pa differ by a similar % to yours. I think both mine seem reasonable value, albeit they don’t include sinking funds (one-off items like replacement windows are charged when they crop up).

I've also owned two 2-3 bedroomed 'shared freehold' leasehold flats in recent years. Service charges were £1k and £1.4k pa respectively; the first was toppy because of historic neglect and as routine maintenance was heavy for a seafront property requiring painting every couple of years. The second’s was great value as it included costs of the posh private estate’s landscaping & roads as well as a sinking fund similar to yours at around £300pa. This was great value as it covered the £16k costs of external decorations every 7 years to our early 19th Century mansion block.

So your sinking fund , while steep, would probably be defended by the freeholder as legitimate, and, presumably is built into the lease as ours were? Although you say no major works are planned, eventually there will be some major routine maintenance - such as scaffolding and external decorations every few years, or work to lifts or communal areas.

So as I say, while £1.2 and £1.6k pa both seem steep, I suspect you'll find it hard to challenge these charges. Good luck if you do

moromir

A sinking fund cannot be used to '[FONT=Times New Roman, serif]supplementtheir losses' and will appear on the annual accounts denoted as the sinking fund.

Its a bit rich to say theres not going to be any large costs in the near future, you don't know that.

A 3 year old block of flats near me had its roof ripped off in the recent storm, they had to pay contractors to come and clear the debris, scaffold and make safe etc and thats just so the insurer's loss adjusters could get close enough in safety to even assess the situation.

I'm aware of a development in London that was shut down last year (all 60 units) when a gas safe engineer condemned a boiler installation that didn't have adequate ventilation.

These things can and do happen, the management company needs funds on hand to deal with them.
[/FONT]

vivatifosi

moromir wrote: »

A sinking fund cannot be used to '[FONT=Times New Roman, serif]
I'm aware of a development in London that was shut down last year (all 60 units) when a gas safe engineer condemned a boiler installation that didn't have adequate ventilation.

These things can and do happen, the management company needs funds on hand to deal with them.
[/FONT]

Precisely. Where I live we accrue for a sinking fund. The fact that something doesn't need doing regularly, doesn't mean it never happens. Our sinking fund is for a housing estate rather than flats, but has come in useful when our fences blew down in the storm. Going forward, it is also going to be a big cost when all of the car parks need resurfacing.

Given a choice, I'd much rather live somewhere with a healthy sinking fund. It avoids nasty shocks. Also, as others have posted, they would not be allowed to use the sinking fund for other purposes.

leveller2911

The_Deep wrote: »

[FONT=Times New Roman, serif]I am [/FONT]
[FONT=Times New Roman, serif]about to exchange contracts on a flat owned 60% by a housingassociation and 40% [/FONT]
[FONT=Times New Roman, serif]by the vendor. [/FONT]

[FONT=Times New Roman, serif]

[/FONT]

[FONT=Times New Roman, serif][FONT=Times New Roman, serif]

[FONT=Times New Roman, serif]I already own aflat in the [/FONT][/FONT][/FONT][FONT=Times New Roman, serif][FONT=Times New Roman, serif][FONT=Times New Roman, serif]one of the private blocks [/FONT][/FONT][/FONT]
[FONT=Times New Roman, serif][FONT=Times New Roman, serif][/QUOTE[/FONT]



[/FONT]

[FONT=Times New Roman, serif][/FONT]
[FONT=Times New Roman, serif]
[/FONT]







Well you learn something new every day. Your buying a shared ownership property whilst already owning another property.....

Is this legal?.....

The_Deep

How it works is that the vendor buys the remaining 40% from the HA and then sells me 100% of the property, perfectly legal.

I have just returned from the Residents' Association AGM of the flat I already own. We have £100,000 in the contingency fund. I bet the HA is iis sitting on a lot more.

leveller2911

The_Deep wrote: »

How it works is that the vendor buys the remaining 40%
from the HA and then sells me 100% of the property, perfectly legal.

mmmm thats not what your opening posts says... You said "I am about to exchange contracts on a flat owned 60% by a housingassociation and 40% by the vendor."

Which I'm not sure is legal as they haven't purchased the other 40% at the time of exchange. Meaning your buying a SO property whilst already owning another property........Which is against the rules and fraud..........So best edit your opening post to clarify things.

Kynthia

leveller2911 wrote: »

mmmm thats not what your opening posts says... You said "I am about to exchange contracts on a flat owned 60% by a housingassociation and 40% by the vendor."

Which I'm not sure is legal as they haven't purchased the other 40% at the time of exchange. Meaning your buying a SO property whilst already owning another property........Which is against the rules and fraud..........So best edit your opening post to clarify things.

Different associations have different rules when it comes to this. I know one SO scheme that only insists that owners market the property with them for 8 weeks. After this they can sell through an EA and can sell the whole 100% without stair-casing first.

The_Deep

OP needs no editing, or indeed clarification leveller, The thrust of this post is about sinking funds not purchasing ex shared ownership HA properties.

My vendor is buying the HA's 60%, he will then own 100% which he will sell to me. I am not buying a HA flat, I am buying a flat 100%
owned by Mr. Vendor.

You are right, the HA was given 2 months to sell the property, they failed to do so, Mr V then gave it to a High Street EA to sell.

Which is against the rules and fraud..........

ALL perfectly legal, I took advice from the HA before making an offer