PLEASE READ BEFORE POSTING: Hello Forumites! In order to help keep the Forum a useful, safe and friendly place for our users, discussions around non-MoneySaving matters are not permitted per the Forum rules. While we understand that mentioning house prices may sometimes be relevant to a user's specific MoneySaving situation, we ask that you please avoid veering into broad, general debates about the market, the economy and politics, as these can unfortunately lead to abusive or hateful behaviour. Threads that are found to have derailed into wider discussions may be removed. Users who repeatedly disregard this may have their Forum account banned. Please also avoid posting personally identifiable information, including links to your own online property listing which may reveal your address. Thank you for your understanding.

How much is a service charge apportionment - any maths wizards understand this?

annetheman
annetheman Posts: 1,042 Forumite
Eighth Anniversary 500 Posts Photogenic Name Dropper
edited 12 December 2020 at 10:47AM in House buying, renting & selling
I was told by my solicitor many months ago that I would need to pay a service charge apportionment in their words: "The balance of our legal fees will need to be settled in the days running up to completion, alongside your deposit monies and apportionments funds (the HA request one full month and one  apportioned month of rent and service charge in advance on completion)."

But my understanding through my own research (they are too slow and on-word answer'y to help me understand anything) is that how much I pay is dependent on what time of year I buy and how many months are left in that financial year. The Housing Association (it's a new build) would pay for the amount "spent" in that financial year, then I would pay for the estimate amount for the rest of the financial year.

Is this right? How much was your (or someone you know's) apportionment to pay upon purchase?

Impossible for me to know if I should set aside £1,500 or £150 for this!

If it helps, my service charge estimate is £113.40 per month, I estimate I may complete March 7th 2021 and I assume the financial year runs from April 1st. Rent is £545 per month (Shared Ownership leasehold).

Thanks for any help!
Current debt-free wannabe stats:
Credit cards: £9,705.31 | Loans: £4,419.39 | Student Loan (Plan 1): £11,301.00 | Total: £25,425.70
Debt-free target: 21-Feb-2027
Debt-free diary

Comments

  • davidmcn
    davidmcn Posts: 23,596 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Surely it's no more complex than being pro rata by the number of days in the financial year? So £93.21 by my calculations (£113.4 x 12 / 365 x 25).
  • annetheman
    annetheman Posts: 1,042 Forumite
    Eighth Anniversary 500 Posts Photogenic Name Dropper
    davidmcn said:
    Surely it's no more complex than being pro rata by the number of days in the financial year? So £93.21 by my calculations (£113.4 x 12 / 365 x 25).
    Doesn't this contradict what the solicitor said - one full month plus one apportioned month, so if I complete on March 7th it would be 113.40 x 12 / 365 x 23 PLUS 113.40 for service charge, and the same calc for 545 rent?

    And if so, is that normal, because my understanding of apportionment is that you pay what's left of the year, not a random month?
    Current debt-free wannabe stats:
    Credit cards: £9,705.31 | Loans: £4,419.39 | Student Loan (Plan 1): £11,301.00 | Total: £25,425.70
    Debt-free target: 21-Feb-2027
    Debt-free diary
  • davidmcn
    davidmcn Posts: 23,596 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    That's the calculation for the apportionment, yes add another month if that's what they need. But you know how much that is. 
    I can't say whether or not that's normal, but given the payments are estimates (with the actual accounts being reconciled some time after the financial year end) it's understandable that they'd want a margin for error. 
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    You will pay the HA monthly for both rent and service charge on an ongoing basis. What remains of the rest of the financial year is irrelevant in terms of the funds required for completion. 
  • annetheman
    annetheman Posts: 1,042 Forumite
    Eighth Anniversary 500 Posts Photogenic Name Dropper
    You will pay the HA monthly for both rent and service charge on an ongoing basis. What remains of the rest of the financial year is irrelevant in terms of the funds required for completion. 
    Yeah, this is definitely not what the solicitor has advised. I will pay the HA monthly for both rent and service charge on an ongoing basis and that has been included in my affordability assessments.

    In order to complete, apportionment must also be paid by me, so that's what I'm trying to find out - how does the amount of service charge for the rest of the financial year affect the amount I must set aside for apportionment funds, as advised by the quote I included?
    Current debt-free wannabe stats:
    Credit cards: £9,705.31 | Loans: £4,419.39 | Student Loan (Plan 1): £11,301.00 | Total: £25,425.70
    Debt-free target: 21-Feb-2027
    Debt-free diary
  • annetheman
    annetheman Posts: 1,042 Forumite
    Eighth Anniversary 500 Posts Photogenic Name Dropper
    edited 12 December 2020 at 12:41PM
    davidmcn said:
    That's the calculation for the apportionment, yes add another month if that's what they need. But you know how much that is. 
    I can't say whether or not that's normal, but given the payments are estimates (with the actual accounts being reconciled some time after the financial year end) it's understandable that they'd want a margin for error. 
    Thanks!

    Given that apportionment depends on the quote/estimate for the next financial year, less or including any excess from the previous one, this is what I'm confused about:
    Solicitor advised I would pay one month rent + SC, plus an apportionment amount for the remainder of month
    So if I complete e.g. on 7th March, that would be apportionment of 23 days worth of rent + SC, plus 1 full month of rent + SC. So I must set aside around £1,500 to be safe.

    If I complete e.g. on 7th April, would that then mean that I would be apportionment of 1 months' worth of rent + SC, plus 1 full month of rent + SC, and since SC is paid in advance for the remainder of the financial year, the rest of the quote of that years' financial SC?

    So 23 days worth of rent + SC plus 1 full month - then pay the remainder of SC for the year after completion e.g. circa 10 x 113.4 in one lump sum, then monthly rent?

    Very confusing!
    Current debt-free wannabe stats:
    Credit cards: £9,705.31 | Loans: £4,419.39 | Student Loan (Plan 1): £11,301.00 | Total: £25,425.70
    Debt-free target: 21-Feb-2027
    Debt-free diary
  • davidmcn
    davidmcn Posts: 23,596 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    Not sure where you're getting the idea that you'd have to pay for the whole financial year upfront. You're paying the odd amount for the remainder of the month in which you complete, plus one month. And then you just pay it monthly.
  • annetheman
    annetheman Posts: 1,042 Forumite
    Eighth Anniversary 500 Posts Photogenic Name Dropper
    davidmcn said:
    Not sure where you're getting the idea that you'd have to pay for the whole financial year upfront. You're paying the odd amount for the remainder of the month in which you complete, plus one month. And then you just pay it monthly.
    Ahhhh so I pay one month in advance all year, then they will either refund surplus or collect shortfall at the end of the financial year -- I got it!

    Thanks, you got to the bottom of my confusion: you don't pay the full year of SC in advance! That's what I had been budgeting for...!
    Current debt-free wannabe stats:
    Credit cards: £9,705.31 | Loans: £4,419.39 | Student Loan (Plan 1): £11,301.00 | Total: £25,425.70
    Debt-free target: 21-Feb-2027
    Debt-free diary
  • annetheman
    annetheman Posts: 1,042 Forumite
    Eighth Anniversary 500 Posts Photogenic Name Dropper
    edited 12 December 2020 at 12:52PM
    So I need to set aside
    113.40 + 545 = 658.40
    PLUS, if I completed on 7th March
    113.4 x 12 / 365 x 25 = 93.20
    PLUS
    545 / 31 x 25 = 439.51
    =
    1,191.11 before completion to solicitor! Right?
    Current debt-free wannabe stats:
    Credit cards: £9,705.31 | Loans: £4,419.39 | Student Loan (Plan 1): £11,301.00 | Total: £25,425.70
    Debt-free target: 21-Feb-2027
    Debt-free diary
Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 350.3K Banking & Borrowing
  • 252.9K Reduce Debt & Boost Income
  • 453.2K Spending & Discounts
  • 243.3K Work, Benefits & Business
  • 597.8K Mortgages, Homes & Bills
  • 176.6K Life & Family
  • 256.4K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16.1K Discuss & Feedback
  • 37.6K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.