Management company but no ground rent or service charge?

Rabihy

Hello,

I am buying a property, leasehold. The freehold is just 2 flats. The EA informed me that there is a management company (not an RTM), but there is no service charge and no ground rent. There is only a building insurance. It felt a bit dodgy.

How is this possible? How does the management company recover its costs? A company managing something without income?

I am worried to waste my time committing to it and then find out that the leasehold has dodgy clauses and I will have to pull out after wasting money and time.

Any advise on how this is possible?

Thanks.

G_M

Who owns the freehold? £3 here to check.

Quite likely it is jointly owned by the owners of the 2 leasehold flats (but either check yourself or wait for your solicitor to do so).

The 'managemment company' may just be there to hold the freehold with the 2 leaseholders being joint Directors and owning all the shares.

If so, it could be it's simply run in an informal way with the 2 owners paying the insurance jointly each year, and then doing repairs by agreement as and when they arise.

Communal areas may not exist so no communal lighting to pay and no cleaning.Or if there is a small hallway maybe they just hoover it it themselves periodically. One or 2 lightbulbs may be off one flat - minimal cost and easier than a separate account with standing charges ......

But I'm just guessing!

Arrangements like this can work very well, and much more economically than blocks with formal management arrangements.

Only risk is if the 2 joint owners fall out, or one is or becomes an absentee landlord etc...

Rabihy

G_M wrote: »

Who owns the freehold?

Thanks for the link. The freehold is owned by a third party / estates company (...... ESTATES LIMITED), not by the leaseholders. The title of the freehold is for 40 houses in the same street (Edwardian period). This is why it is a bit strange that there is a management company and no service charge or ground rent. There is no communal area.

Thanks.

cattie

As it's a third party freeholder who currently levies no ground rent or service charges I'd think twice about the purchase before I fully commited myself. What happens if the roof or another major repair needs doing, will you suddenly be presented with a hefty bill as part of your share of payment?

It might help if you can try to talk to some of the other leaseholds in the street to find out what happens when works need doing & if the communal parts of the properties are kept up to a good standard & how charges for such works are apportioned.