Flat Buying + Service Charge

mimi1234

Hi all.

Could one of you advise me please.

I've seen a flat for £60K. It's 2 bed and is on the 2nd floor. I've been to see it and quite like it, but the service charge is giving me the willies. Last year it was almost £2K and I know the service charge can vary and can either go up or down.

What do you guys make of that? Yay or nay? Please and thanks to anyone who can help.

I'm a first time buyer and knowing how thick I am, I know I would make the wrong decision if it was left to me. I have asked some friends, most are saying no, but some said yes and now I have no idea what to do.

Please can someone help? Thanks.

phill99

It depends on what the service charge covers. Some are more comprehensive than others and may include sinking funds for major works, for example.

You need to determine what it includes.

michelle2008

That sounds really steep to me. £160 a month is a big whack out of your disposable income - on top of mortgage etc.

It usually includes buildings insurance (but not contents), cleaning oh communal areas, gardening (if common areas) and a sinking fund for maintenance. But as phill99 says you need to check this.

In my experience they can be very badly managed and not everyone pays.

kiddakidda

michelle2008 wrote: »

That sounds really steep to me. £160 a month is a big whack out of your disposable income - on top of mortgage etc.

It usually includes buildings insurance (but not contents), cleaning oh communal areas, gardening (if common areas) and a sinking fund for maintenance. But as phill99 says you need to check this.

In my experience they can be very badly managed and not everyone pays.

Yes, check it out.

£160 for a service charge is a lot but a mortgage of only 60k will be pretty low.

Is 60k right?

vansboy

Place I'm looking at to buy is in block of 12, the managment company is actually the residents themselves, so the costs are more controlled, possibly. Last year (including the building insurance) was just under £600.

Where I am now has 53 masionettes/flats, with annual groundrent charge of £10.50 not missprint £10.50.

There was an attempt to put in a managment company who would activly maintain the garden areas and everything else. That didnt work, as so many residents objected, or arent interested (rental tenents). So we all do our own little bit to keep the grass cut and area tidy. Well most of us do, anyway.

We did have big bill between us of about £400each for reapairing a wall which was affecting neighbors, a couple years back.

VB

mimi1234

Thank you all for your time and your responses. I really appreciate it.

I am so glad I asked as I was genuinely thinking about putting an offer in.

I will have to find out about exactly what the service charge is for. One of my friends said that it is variable and could go up or down. I know the flats have a lift so I guess if that broke down, then the charge would go up up up.

60K is right.

It is quite a new block of flats. They sold for a lot higher about 7 years ago when they were first up for sale.

The only thing that had me slightly worried was a lot of those flats are up for sale and all at the same time. I don't know what the reason for that could be. Why would everyone want to up and run at the same time? :o

StumpyPumpy

In a non-scientific poll of some of the people I know who live or who have lived in flats with service charges, none have ever known the charge to go down. That is, unless you count it going up one year to cover extra maintenance that isn't covered by the sink fund, but everyone considered that to be a return to previous levels, rather than a true drop.

Not applicable to you as you say it is quite a new block of flats, but as an illustration of what can happen... the residents of a development around here, built in the 1960's, have each been presented with a demand for £80k+ for essential maintenance. This is about 1/3 of the current market value of their properties. Their lease is such that they will forfeit it if they don't/can't pay. It really is necessary maintenance and has been in the pipeline for quite some time, but the quotes given to the residents were in the region of £35k and they now have 2 months to find the difference. Cue a lot of panicking leaseholders. It is still in progress, so there is no conclusion to the story but I know the Management Company already have lawyers on standby to enforce it.

michelle2008

Can you chat to one of the residents? I had a bad experience with a management company - we had to pay every month (around £40), but nothing was ever done. I sold up pretty quick as I could see where it was headed. Years later the development looks unkempt and values have fallen much faster than the market.

Tread carefully.

AlexMac

£2kpa, is an outrageously high service charge for a £60k flat, and almost twice most I've ever paid. The exception was £1,300 a year for a flat which I sold for ten times your one's value, on a private estate in a really good area, and that included not only insurances, maintenance of estate roads and gardens to a high standard, routine maintenance and communal area lighting and also included a really big annual contribution to a sinking fund so we never got hit with supplementary bills for big occasional things like external decorations or roof repairs.

So unless the roof is gold-plated, your management company are levying an obscene admin overhead and using you as a source of profit or to fund their Mercs or Beemers.

We just bought a little flat for £82.5k and the service charge- including a maintenance sinking fund, is £420 a year. So they're 'avin a laff.

But thats just my opinion.

Look at it another way; how much more mortgage would £160-odd per month buy you?

And when you come to sell, will prospective buyers be put off by a hugely disproportionate hidden cost in perpetuity?

And if they are extracting the urine on this, what will they try on (in terms of other admin charges or inaction)when you ask for any other help? Urgent repairs? Lease extension? Permission to make internal changes...?

Hoploz

Maybe ask whether there were any unusual expenses in the previous year, ie. is it normally that much?

When I was looking at flats I found those with lifts were usually more due to maintenance contracts for the lifts ... Although these were in older blocks than the one you're looking at.

Four flats in my family service charges are £600, £1000, £1100, £700 per year, if that helps. All in Surrey/Sussex, none with lifts!

BTW their values are between £150k and £250k so a good deal different in proportion than your example.

AdrianC

The lift is going to be a big contributor to that service charge, and I suspect (hope!) there's a goodly contribution to a sinking fund (piggy bank for future maintenance). Even so, though, that's high... The flat's cheap, but is the block fairly flash, with a load of bling (concierge, even?)

Is it shared ownership?

To give you another reference point, we've got a flat in a city-centre modern block. Quite nice development, nothing overly flash. With a lift, no carparking, no internal common areas. Service charge is ~£350/quarter, so 2/3 of what we're talking about here...