Service charges on flats

bbarroso

Can someone please en light me regarding service charges with flats? Are these only payable for blocks of flats or also where I get a converted house that is now composed of 2 or more flats?

Is there a way to check before going to buy a property what amount this could be? It seems most estate agents don't provide such details upfront!

Lastly, give it is the landlord responsibility to pay these, am I right assuming a flat would be a far worse investment versus a house, for the same price? Or did I got this wrong and rentals for flats do expect tenants to pay this on top of the rent itself?

Thanks

sparkey1

What does the lease / tenancy agreement say? Whats the service charge for?

elsien

https://www.lease-advice.org/fact-sheet/service-charges/

eddddy

Service charges usually work like this...

Let's say a house has been converted into 3 flats.

The building (roof, walls, foundations, etc) have to be maintained and repaired; the common areas have to be maintained; the building has to be insured etc.

All those costs are added up and shared between the 3 flat owners. Your share of the costs is called your service charge.

It would be the same principle with a block of 10 flats. Each flat owner might pay a 1/10th of the costs of maintenance - as a service charge.

If you owned a freehold house, you would also have to pay for maintenance and repairs of the building etc - but it's not called a service charge.

need_an_answer

If you rent the flat out to tenants they do not pay the service charge on top of rent it is the LL who is billed for this expense.

AlexMac

bbarroso wrote: »

...Service Charge?...Is there a way to check before going to buy a property what amount this could be? It seems most estate agents don't provide such details upfront!
....

Have a look at recent post #13 elsewhere on this forum at

https://forums.moneysavingexpert.com/discussion/comment/74568728#Comment_74568728

where I prefer not even to make an offer nor commit legal fees, search and survey expenses and mortgage arrangement fees, etc on a leasehold til I have at least partial answers to several key questions including what the Service Charge is (£430 p.a, £1,300 p.a - both of which I've paid on different flats, or £5,000 p.a which mates of mine got landed with on a 2-bedder in a new development with gym & concierge, etc) and what this covers.

Some idle Estate Agents make no attempt to establish these, fearing misrepresentation; so I ask 'em to ask the vendor, and I also research other stuff as I say in that post.

And as regards

bbarroso wrote: »

...am I right assuming a flat would be a far worse investment versus a house, for the same price?
Thanks

...not necessarily. On one of my little BTLs, I pay £600 p.a Service charges plus on average £4-5k every 10 years or so on major repairs, so less than £1k p.a.... Which is more than offset by the £12k annual rent...

I'd reckon on paying up to a grand on insurances, repairs and maintenance on a comparable freehold house. So do the research and do the sums! Freehold may give you more cotrol, but if the rents ain't right its not a good investment

InterestedParty2018

Just to add what others have already said:

Service Charges (sometimes refered to as a maintenance charge) is basically the cost of maintaining communal areas.

If you own a leasehold flat, you and your neighbouring flats will all contribute to the running costs. This can be split equally, or by percentage. The method of split will be set out in the lease.

If you own a freehold house on an estate, you may have a service charge obligation too, for the maintenance of communal areas shared with other homes (flats or houses), for example, any unadopted roads, communal playground, and generally communal gardens etc.

Home owners that have service charge obligations cannot "pass" the service charge liability to their sub-tenant. (ie not like a utility bill or council tax).
One cavaet I should made when saying this - is that some new build flats have "plant rooms" which have communal boilers and water pumps for hot water, cold water, heating etc, the cost of running, maintenance and consumption is collected via the service charge. Unless there is a clear method of calculating (and presenting) the individual consumption from the sub-tenants, it may be necessary to build this element of the service charge into the rent.

Service Charges can vary significantly based on the communal facilities (lifts, gyms, 24h concierge etc) will result in much higher s/charges. Whereas a simple converted house with three flats would be much lower. Some buildings/estates also allow a reserve fund to be collected each year for future major projects, whereas some dont.

Finally, EA should be able to tell you (via their client) what the service charges are for the current year. It will be a budget figure, and can easily change, but this should give you a guide. Of course, if you do progress with the sale, you will undertake "Pre-Contract Enquiries", which will include a request for historical accounts. Assuming it is not a new build, this history will exist and you can see the level expenditure over the previous years. Again, it is no guarantee of future expenditure, but will offer you a guide of what level is currently being collected and how it is spent.

Hoploz

Just to add, service charges are not just for repairs to the building. They may also cover other maintenance such as grounds (eg cutting grass) replacing bulbs in communal areas, cleaning communal areas, sometimes window cleaning, maintenance to car park, gates etc. These are ongoing costs.

Leaseholders are entitled to be given a breakdown of all the charges to ensure they know where their money is being spent.

If you're interested in buying a leasehold property, ask the estate agent to obtain info on the service charges. It'll give you an idea, then you can check it against the paperwork submitted to the solicitor to make sure it's accurate!