Buying a flat - service charges concerns-please help

didnof

I am a cash buyer and have been accepted an offer on a 1 bed flat. Property is leasehold, and owner of freehold also acts as maintenance company. Following investigations from solicitors, we cannot get a definite answer on what the leasehold service charges actually are (the answer was no service charges). This seems odd, as the rent is only 25 pounds per year. Here are the concerns highlighted by our solicitors:


1The Lessor has stated that no service charge is payable and no past service charge accounts are available.


2The Lessor has given no warranty with regards to unforeseen costs or expenditure. It is therefore very difficult to advise you on any likely charges that may be imposed.


3. The Lessor has indicated that there are likely to be maintenance works within the next 12 months.


4. The management company do not know whether there will be an excess payment required to balance their accounts at the end of the financial year. You will note they state that they give no warranty with regards to unforeseen costs or expenditure.


5. The is no sinking/reserve fund for the flats in the building, therefore, if there are unexpected expenditure or major works required, (e.g. roof replacement) it is very likely that you and other flat owners will be asked for additional service charge to cover the cost of the works


Has anyone had any experience with leasehold fees issues? Is there any way to be protected, ensured from unreasonable service charges which the company seems to be entitled to charge?


Many thanks in advance.

Bantex_2

Is a large block or just a small conversion?

Snakey

I'd knock on a neighbour's door and ask them what happens when something needs doing.

If there's no garden, lift, or communal areas that would need lighting and cleaning then it's possible that there is no ongoing service charge, although it still seems unlikely (who's responsible for the buildings insurance?).

No sinking fund means that you need to ask some specific questions about big expenses like a new roof or re-pointing - when was it last done, when's it due next - and perhaps consider putting money into a savings account each year yourself so that you won't be hit for six when the bill arrives.

If the "management company" is just all of you tenants, since with no service charge there can't be any paid employees, who gets to decide whether something needs doing or not? Could be issues there if there is a skinflint tenant (or if that tenant is you but someone else has the majority or the casting vote). There must be something, somewhere which explains who decides what work needs doing and when, how they decide which contractor to use, all that sort of stuff. That will tell you what chance you have if you think works are excessive.

didnof

Thank you, there are 2 flats at the same number - small conversion.




The report states: it is the responsibility of the Lessor to arrange insurance for the property. The expense of this will be included in the service charge.


The invoice shown did include 225 for the insurance + 25 rent. No garden, lift, or communal areas that would need lighting , just hallway

Campervanman

I have recently been looking at flats to buy and found a victorian house which had been converted in to two flats. The answers to my questions were very similar about maintenance - its as and when, no maintenance charge etc.

All properties need regular and timely maintenance to keep them in good condition and protect the investment you have made in your flat. The situation you describe usually means that no one has a view on what needs doing and until it becomes a crisis and then it costs a lot of (your) money to fix.

In the property I was viewing the paint on the bargeboards was down to bare wood, the gutters had plants growing and the front garden (communal) had rotting fences. The estate agent was trying to sell the as-and-when approach as an advantage 'no huge maintenance bills with this one'.

The reality with your proposed purchase is that you might be lucky and have no big ticket items or the building may deteriorate due to lack of maintainence and then you are hit with a number of big bills. If it looks untidy and has been poorly maintained it will become hard to sell. Depends on your attitude to risk.

If you do proceed I would put away the amount of money you would usually pay in maintenance each year around £800 with 1 beds and hope nothing happens for a couple of years. I would also keep an eye out to spot things that need doing and nag the agents. However folks that follow the 'as and when' model in my experience rarely do anything to a building to keep it maintained.

What does it look like now? Is the exterior painted and everything neat and in order?

propertyman

The landlord is billing ground rent and insurance so that's good .

the solicitor should be pointing out what if any parts outside the flat are your responsibility either directly or through service charge eg repainting paths roof etc.

you then need to take a good look round and see what is, isn't,or needs to be done and cost it.

however the other concern is how willing the landlord is to actually do these works, as there us no real profit or money in it for them.

its one thing to have surprise service charges, and another a run down building.

sort of thing oh i don't know a solicitor might tell you......

i'd check the declared value of the insurance as well and when it was last revalued (no not increased every year by the insurer, and nothing to do with market values, but the cost of rebuilding), and who pays fir lighting, it could be on your metet.

dannim12345

I'm buying a flat with the same situation. Ground rent & building insurance is sorted/paid to the freeholder. There is no maintenance charge but there are no communal areas inside or out.

There are two flats so I'm figuring its like having a house but splitting it between two as its a really long lease (over 900 years left). My lease basically says works are split 50/50.

Its worrying me a little that the other flat might not want/be able to afford to contribute but I was looking at other flat where the service charge was £1 - 2k per year which seemed a lot to me.

Sallibee

I'm in a similar but different situation. After several unsuccessful attempts at buying, I have just received from the conveyancer the lease of a 5 bed maisonette. I'm planning to let it as an HMO (this is known by the freeholder and is already fitted out as such). The freeholder's management company has put on the questionnaire that there will be major works carried out in the next two years.

On of the major works is repair or replacement the flat roof (this is the terrace and access route of the maisonette and kitchen of the kebab shop downstairs - an aside is that they don't pay their maintenance charges). This is the size of a large garage (3mx5m). The form says 'repair £900, replacement £3,000. The seller, who doesn't know this, told me early on that there's a problem with the wall, not the roof.

The other is painting of the exterior of the building, most of which belongs to the maisonette (there being the shop and a basement flat with little exterior) and the seller has just painted the exterior. The form says it will be painted again in 2016.

I will be liable for 66% of expenses.

My questions are: Is it reasonable to paint the exterior every two years? I've read that six years would be the norm. Can the freeholder make such decisions without consultation or consent? Can the leaseholder object? Can the freeholder send in workmen and charge what he likes? I read that he takes 10% of the costs...I doubt if he has ever even seen the property. The company is in London and the property on the south coast.

I feel as if I'm spending a lot of money on 'buying' a property but am actually little more than a tenant (I do now realise that that actually is sort of what leasehold boils down to...)

How much say would I have in what gets done and for how much?

Any comments will be VERY gratefully received...

(Maybe this should have been a new thread...?)

Sallibee

I have started a new thread for my freeholder question. https://forums.moneysavingexpert.com/discussion/5118491