FTB Leasehold Flat - advice please

kacy89

Hi all, 
I've had an offer accepted on a leasehold property. I've since found out that the service charge is going to quadruple. The current seller has also agreed for the neighbour to do some work on a party wall. All of this puts me at unease, and I think I will have to pay for some of the costs towards this the party wall works. 

Can I get some advice on when a freeholder is able to increase service charges? 
Can I get some advice on whether the seller is able to agree with some works and then have me foot the bill? 

Thanks, 

eddddy

kacy89 said:

Can I get some advice on when a freeholder is able to increase service charges? 

The service charge is simply your share of the bills (The bills for insurance, maintenance, repairs of the building and maybe a management fee). 

A bunch of people each own a flat in the building, so any costs relating to the building are shared between them.

If, for example, there are 6 flats in the building - you might have to pay 1/6th as your share of the bills (and that amount is called your service charge).

You normally pay an estimated service charge in advance. If the estimate is 4 times what it was last year, I guess a lot of maintenance and repairs are required. (Maybe the freeholder is planning to re-paint the exterior and/or redecorate the communal areas and/or repair the roof and/or replace the communal front door etc, etc in the coming year.).

If less work is planned for the following year, the service charge will go down again.

You need to look at the service charge accounts to see what the bills were for last year, and see what the estimated bills are for this year.

kacy89 said:

 
Can I get some advice on whether the seller is able to agree with some works and then have me foot the bill? 

The seller (leaseholder) won't be asked to agree with some works (unless you're talking about a section 20 consultation).

The lease will state what the freeholder is required to do, and the freeholder will usually just get on and do it.

kacy89

Thanks. 
On the works the neighbour in the adjoining house wants to do some work on the party wall. This has just come out. 

eddddy

kacy89 said:

Thanks. 
On the works the neighbour in the adjoining house wants to do some work on the party wall. This has just come out. 

You need to check the details, but it's probably something like this:

• The neighbour wants to do some work that affects the party wall. The law requires them to contact the owner of your building (your potential freeholder) to tell them.

• If your freeholder is worried about the work, your freeholder can ask for a 'party wall surveyor' to be instructed to check it all. Typically, the neighbour has to pay for the surveyor and for all the work affecting the party wall.

• UNLESS... the neighbour is saying that the party wall is defective, or that your freeholder hasn't maintained the party wall correctly. In that case, your freeholder might have to pay for some work to fix the wall, and the freeholder will want you to pay a share of that. (The surveyor will confirm whether your freeholder needs to pay anything.)

There's some info here: https://www.gov.uk/party-walls-building-works


It sounds like you probably need to take a step back with this property - and take a look at it's condition. If it's in old property in poor condition, it's likely that you're going to have big service charge bills moving forward.

So you might expect to pay a lot less for a flat in an old property in poor condition, than for a similar flat in a new property in good condition.

You could ask a surveyor to survey the building, and give you an indication on the amount of repairs and maintenance that may be required in the coming years. (Obviously, you'd have to pay a surveyor a few hundred pounds for this.)

kacy89

Thanks that's really helpful. It is an old building, but it looked like it was in good condition. Would that be a home buyer's survey? 

greatcrested

Find out as much as you can about the neighbour's planned works, then when getting quotes from surveyors, ring and dscuss it with them. Ask if they can include comments in their report specifically on that.

The surveyor may, or may not, include it in a standard Homebuyers report, or may suggest you need to pay a bit extra for specific advice on that.

NameUnavailable

Why is the service charge going up by so much?

Of course a service charge can vary widely year to year depending on what works are required. There is no cap on what the freeholder can ask you to pay from one year to the next, although you can challenge costs at Tribunal if you think the work is unecessary or the costs are not reasonable.

Some flats are going to need very costly works to bring them into line with new fire regulations, so perhaps it's to do with that?

Be careful if you proceed because you need to make sure that you are going to be able to pay these charges in the future.

kacy89

So the freeholder is using a management company to look after the building going forward, hence the increase in charges. It only has 3 flats in the building so this seems a bit onerous. 

bouicca21

If the freeholder/management company are going to do works that cost more than £250 per flat they have to enter into a consultation process.  Is this is what is happening? If so it's a one off. I'd be asking what the anticipated cost is and negotiate with the seller, but bear in mind that that whatever is being done will be a benefit to you.

I am in the early stages of such a consultation.  Obviously no one can predict just what the actual cost will be, but  when asked the management company gave us a rough indication of what they anticipate it will be. It is likely that the 2021 service charge will be bit more than double 2020, but it should fall back to normal levels in 2022 and stay there for several years.

NameUnavailable

An issue you have with only 3 flats in the block is that the management company will want to earn a minimum for themselves to 'manage' the block. That alone is likely to account for a fair proportion of the charge, before a penny is actually spent on maintenance.

Also if they are just taking over the management they will probably carry out a full survey (to determine works needed now and in the near future), asbestos checks, electrical checks etc., which the leaseholders have to pay for. 

Perhaps the current leaseholder saw this coming and wanted to sell before having to pay out for the charges/works.....

kacy89

I think the service charge is going up because of the party wall costs. They are just being increased, and a sinking fund is being added.