Buying a Flat- service charge doubled in the last 4 years

InterestedParty2018

I bit late to the conversation, but still want to add:

- new builds are exceptionally difficult to budget for in the first circa 3 years. Often the budget created for sales purposes is collated before construction is complete. Therefore inflationary allowances need to be considered. Equally, even the most experienced Managing Agents can not foresee ALL the expenditure; what is likely to be problematic, what regulations government will implement (which will need to be enforced) or circumstances which will give rise to an insurance premium increase. Add to this, that electricity (general utility) consumption is very difficult to predict, along with suppliers rates & charges.
- Obviously *fixed* categories are easy to budget for (ie management fees, provision for reserve funds.) Unless there is a change in managing agent, or an agreed increase based on extra duties, then the management fee should only increase marginally each year.
- With regards to utilities (especially electricity), these are often billed based on estimates (I believe they are only obligated for formally read meters once every 18 months, albeit many are more frequent than that.) Also, their billing dates are not in-line with the service charge year. thus, when readings are taken and invoices received for actual consumption, it may result in year-on-year fluctuations. (especially if the accountants dont allow for full accruals and pre-payments) They also change rates (consumption and standing charges) from time time to time. Your agent may change supplier to get the best deal, but as the account will be in the name of the freeholder (usually a company) it is likely you will only be offered "business rates".
- Gardening: Whilst in theory this should be fixed for the year (ie by having a contract in place with the gardener) However, climate/weather do have an impact. If there is an issue which was unforeseen (ie tree needs removing, extra weed treatment, topping up top-soil) then these will reflect - again, resulting in fluctuations.
- Health & Safety: Certain checks need to be done annually, some less frequently. Either way a provision needs to be made for both the checks (which could fluctuate between years), and then also a provision for the recommendations/works outlined in this checks/certificates. Again, one year nothing may need doing, but the following year there may be £300 worth of work!

I could go on, but I am sure you see the pattern.

One final point though - A budget is simply that. It is a list of anticipated expenditure to be incurred during the forthcoming financial year. If you are over-cautious and over-budget then lessees become concerned and fear that there money is being wasted/squandered. If you under-budget and lessees are hit with an excess service charge (ie a top-up), then the managing agents are criticised for miss-management and not keeping in the budget.

Without a crystal ball it is hard to prepare 100% for the year ahead. Make sure that you have the best managing agent on board, and trust them to use their knowledge and experience to make the best assumptions possible. When the year-end accounts are completed, exercise your right to inspect all the invoices and satisfy yourself that your service charge funds are being spent in the correct place.
If not - challenge it.

Good Luck.

that

Please do not read this post as unkind.

I would not buy this flat. I would walk away, but I am also not in your situation either. I also think those maintenance charges after a few years could empty your pocket.

Further than that today the BBC announced that the housing market sales is in decline, Bank of England warns of billions of pounds loss to business due to Brexit, meaning jobs. Will interest long term go up or down? Seen it in the 90 where it was capped at just over 16%. No one can predict a thing, but if you predict there will be a slump, it could be a buyers market, and possibly wrong to buy into a falling housing market.

masisu wrote: »

I can leave the bedroom to my son, whilst I use the front room.

As your kid gets older, you will always be in the way. The sharing of rooms, separate bedrooms, friends that both of you will have, it could get messy and not be friends. Brooding unruly teenager in a small flat - my idea of hell

I'll be happy living in a shared house/flat

You will have to find someone whom wants an older person as a sharer. Often with age one does not become more congenial to others. As you get older, possibly need care, he will possibly be forced to sell to pay your costs unless you plan in advance. Give him the flat but if he gets divorced then his partner may end up with that too.

martinlewisjunior

Hi, if it's anything.


I highly recommend a RMC being setup. I would also recommend getting a management agency to do all the finance work. Then you or with another leaseholder be the directors choosing your own contractors for the work. That's what we're doing in our leasehold.

masisu

I don't have anything to add after the last 3 posters.
I'm thinking about all that's been wrote and I'll take a decision.
Thank you guys for all the tips and time you gave away or shared with me.