Buying Flat Leasehold - Utilities recharged by management company

qwerty0223

Hi

I viewed a property and would be willing to make an offer. The only thing concerning me is that regardless of usage the management company of the block recharge the elec, gas and water at a standard rate for the year (£228)
This also includes the upkeep of the grounds.
As I will be living on my own, this seems a lot of money for my utilities, and will be much more than I will be ever using I imagine.

Has anybody ever had any experience of this kind of arrangement before and if these (already high costs) can be expected to rise even further?

I have ask the current owner so I am just going off their word when they claim they have received a rebate the past year - can I go straight to the managing company to confirm (though I do not know who they are?)

aneary

Is £228 the total for the year?

If it is that is a bargain! My water and sewage costs are nearly £40 a month and there is just me!

eddddy

I'm wondering if you've misunderstood something.

£228 per year is an unbelievably small amount for gas, elec and water for a flat.

For a small house or flat with one or two occupants, the average monthly utility bill is £61, which is an annual cost of £734

Link: https://www.cooperativeenergy.coop/news-and-views/what-is-the-average-energy-bill-in-the-uk/

I suspect that the £228 is some or all of the flat's service charge. What type of building is it? Does it have a garden?

The service charge would include a share of the electricity costs for the communal areas (e.g. lights in the hallway). It would be unusual to have any gas appliances in the communal area, but f there's a garden, there may be a communal water supply.

You probably need to find out a bit more detail.

qwerty0223

Apologies, they work out a standard rate for that year and recharge it, so it's £228 a month for the electric, water and gas used within my home.

eddddy

qwerty0223 wrote: »

Apologies, they work out a standard rate for that year and recharge it, so it's £228 a month for the electric, water and gas used within my home.

But you also mention in your first post:

qwerty0223 wrote: »

This also includes the upkeep of the grounds.

So is £228 per month just a charge for utilities, or the total service charge?

It would be a big number, just for utilities. (If it is just utilities, what is the total service charge?)

In general, Freeholders (and their management companies) cannot charge whatever service charges they like.

For example, if there are 10 flats each paying the Freeholder £228 per month for utilities, the Freeholder must be able provide bills showing that they are spending £2280 per month on utilities.

You probably need to read the lease to see what types of charges are payable, and how those charges are allocated between the flats.

And then look at some past service charge statements, to see how much those charges actually are.

BorisThomson

qwerty0223 wrote: »

Apologies, they work out a standard rate for that year and recharge it, so it's £228 a month for the electric, water and gas used within my home.

Buildings insurance
Cleaning of communal areas
Maintenance and repairs (is there a lift?)

Are these in addition to the above or included?

Jenniefour

This seems so cheap, they must be making a loss on it unless they have their own wind farm/generator and water well. I would be double checking all this.

vuvuzela

Jenniefour wrote: »

This seems so cheap, they must be making a loss on it unless they have their own wind farm/generator and water well. I would be double checking all this.

If it's per month as the OP says, then it's not that cheap at all.

bouicca21

Ask the vendor for sight of the paperwork to see just what that £228 covers.

chappers

eddddy wrote: »

For example, if there are 10 flats each paying the Freeholder £228 per month for utilities, the Freeholder must be able provide bills showing that they are spending £2280 per month on utilities.

I'm not sure that is true. if you charge a fixed price for third party gas and electric, regardless of consumption, I think you can charge whatever you like.
However if you use a secondary meter and re-bill someone then it is illegal to charge more than the rate per unit that you are paying

AlexMac

Your concerns are reasonable; Service charges are usual in leasehold flats, but having owned and lived in three of them (plus havng two small BTLs) I always ensure I know what the charges are and what they cover before comitting too far.

In fact, I am deeply suspicious of anything other than "shared freeholds"; a term with no legal precision, but which is genarally taken to mean flats where the freehold of the block is owned collectively by the leaseholders as memebers or partners or directors of the freehold company. That Company then issues leases to individual owners, but its my preferred arrangement as you have more control.

Tha alternative, of a commercial freeholder- an individual or a Business - is less attarctive becuase generally, service charges cannot easily be challenged (to answer one of your Q's) and might not even cover everything; they will, almost inevitably cover routine annual stuff like Buildings (but not contents) Insurance, energy for the communal lighting, maybe some maintenance, grounds, roads, gardens, etc, but might or might not cover a "sinking fund" for major maintenance like external decorations, window or roof or balcony repairs- So you may be hit by one-off bills for these (in the past couple of years each of my BTLs have hit me with one-offs of £5k+ for these in addition to the routine annual £600-800 service charge.

So ask, as they say above.

The probalm is, you may not get a definitive answers from the freeholder til your Solicitor gets responses from the Freeholder- which, IME they will cahrge you admin fees for providing!

£2,700-odd is a fairly toppy charge for communal areas alone, but looking at it more optimistically, its fairly cheap if really does also cover the utilities for the stuff you use inside the flat;
- water (I pay £350 pa),
- energy for your flat (I pay £1,400 pa)

and also the communal stuff as mentioned above;

I used to pay from £1,000-£1,500 pa for my own three consecutively owned leasehold flats- (which was cheap as we managed them ourselves; and that did include sinking funds for major repairs) but friends paid up to £5k pa (which is outrageous) for gym, posh landscaping, concierge etc.

So ask questions and since, as I said, it is unlikely you'll sucessfully challenge this, make sure you know the deal. It's very unusual to have shared utilities unless there is some weird shared district heating system as used to exist in some ex-council blocks? And if there is such; ask yourself how much that will cost to fix? I don't mind paying £2-3k to replace my own boiler every te years (as I've had to) but would not care to pay thousnads for a communal heating system if it broke down!