Fair service charge costs?

Leedsbuyer82

Hi, everyone

I'm only a few weeks away from exchanging contracts on a leasehold 2 bed flat in a building of 11 leasehold flats plus 1 shop. Have just received the management account for one year and the totals are as follows, per year. Do these seem fair / standard costs?! I can't find any examples online. in the building, there are lifts and CCTV but no concierge nor gardens or anything extra. And no sinking / reserve fund?!

As you can tell, there has been a leak which caused damage but I'm not sure whether there is a credit from each of those repairs from the insurance company as I'm still waiting for the next few years' statements.

(FYI The management fees per flat are based on total area and ours is 705 square feet)

Light replacements £108
Lift maintenance! £3158
Lift insurance £400
Premises insurance £3498
Internal repair (boiler leak in shop) £1386
Internal repairs - water damage in shop. Faulty light in Flat 5. £1347
Fire alarm!and emergency light testing £1572
Management fees £2118
External repairs - cleaning gutters £877
Electric! £1228
Bank charges £87
Cleaning £2060

Repair - redecoration of Flat 1 due to boiler leak £1982
Lift phone £248
Window cleaning £511

Total = £20,580 pa (divided by 12 properties)

Thanks in advance!

HampshireH

Why as a leaseholder would your service charge cover repairs in other leaseholder flats?

That's

* decorating after a leak (Should be insurance)

* fixing boiler leak - owners responsibility

* Faulty light in flat 5 - owners responsibility

* water leak to shop - insurance

* why are there bank charges?

As a leaseholder are you not all responsible for your own properties and insurance policies. Seems odd that a service charge would be made up if the aforementioned repairs but I am no expert.

HampshireH

Also .... If there is lift insurance that too is a lot in maintenance costs.

Mickygg

I too question the internal flat repairs. Why on earth is everyone Paying for each persons repairs.

£1700 with no sinking fund is not ideal. Whenever there is a big bill you will all be hit. What happens if the roof needs replacing? A huge bill is what that means.

Leedsbuyer82

Thanks, all - I did wonder whether this was normal procedure! As soon as I get the subsequent years' statements, I'll check whether these were reimbursed by insurance claims (which is what I'm hoping to see!). Otherwise I'll raise with my solicitor - he hasn't mentioned this as non-standard practice yet.

Yes, we've been told that the service charge is due to increase by more than 10% due to roof maintenance, so I'm worried about that - they are withholding the cost details until the very last minute, which is worrying! Luckily I'm not in a rush to move, so can still pull out.

AdrianC

Is it a communal boiler providing water and heating to all flats? If so, then that's the freeholder's responsibility - and if that leaked and caused damage to the flats, so would the repair costs be.

AlexMac

Its a bit toppy,as I've paid anything from £450-£1,400 pa over the five leaseholds I've ever owned, and the top one included a healthy contribution to a sinking fund. But none had lifts and as they were shared freeholds which we managed ourselves, that removed almost half the costs you quote (lift, fees, communal cleaning) so, in that context yours are consistent with my experience. (assuming you are happy to have chosen a nice new flat with lifts and a managing agent; I prefer "shared freeholds" as that gives me more control - but all three of those I've owned were coverions of 100+ year-old buildings)

The other two (both leasehold flats in small Council freehold blocks with no lifts) have averaged £800-900 p.a but then I tend to get one off bills of £4-5k every few years for cyclical maintenance, external decoration or new windows. So again consistent with your quote?

I too am puzzled by the cost of repairs after the leak; when that happened in a block where, as Company Treasurer I handled insurances, AVIVA who covered the building coughed up thousands for water damage from above my neighbour's flat, handled all the admin and contracting, and even paid for alternative accomodation/lost rent?

davidmcn

All the costs being split equally seems a bit odd - is the shop the same size as the flats? Does everyone have equal rights/need to use the lift and stairs? Might suit you but I can see scope for future arguments.

eddddy

You need to read the lease. It will tell you what the freeholder is responsible for maintaining and repairing, and therefore what costs will be recharged to the leaseholders.

The lease will also specify how costs are split between each leaseholder and the shop.

(You may think the split is unfair and/or the costs are unfair, but you won't be able to change them, if that's what the lease says. All you can do is walk away and not buy the flat.)

Leedsbuyer82

Thanks everyone.

No - no communal boiler, so it looks like everyone has coughed up for the repairs and the amounts are split according to the area of the property - so we would pay 8.45% of the total cost. Our solicitor is checking this, however after having requested subsequent service charge accounts / an estimate for 2016/17, the (new) managing agents have said the following:

"When we took over management in April 2016, we discovered that the previous managing agent left us with unreconciled estate and leaseholder accounts. We are still to this day working through what we inherited and right now, our FD cannot provide accurate estate accounts."

Which means they've had 19 months to reconcile one year of management accounts, and still they are not available! This worries me...

Also, some of the 12 flat owners have not paid the service charge but the MA won't give details about how much of a shortfall has been created, how many flat owners have failed to pay, the amount of the arrears involved, etc. The MA have replied as follows:

"As a matter of process, we are always debt collecting for unpaid service charges. I will come back to you with details when our FD is back".

Does anyone know whether this a common problem, collecting service charges?

Cheers, all

NeilCr

In my experience it depends on the managing agent. Our current management company (we are changing) has a very robust system for collecting service charges and keeps on top of it. Consequently, non payment is very low.

The previous agent had a slightly more laissez faire attitude and we had more defaulters.