Should I buy a flat with increasing Service Charges?

Lunchbox

I live on a Network development and I suspect it’s this one. Our service charges are an eye watering £200/month and this year we received a bill for another £1000 when the actuals were calculated (so over £3000 this year - but it depends on property size). We have nothing particularly expensive; no gym, extra services etc. We’ve had to comb through the invoices, as we do every year, because Network are completely incompetent; we found charges allocated to the wrong buildings, from the wrong billing period etc. We don’t know how much we’re due to be refunded because they refuse to reissue the accounts and take 21 days to answer every enquiry (badly). They always default to billing leaseholders rather than pursue insurance etc. and don’t monitor repairs or contractors so we’re billed for multiple call outs to the same issue. We’re also charged £400 a year per property for a <30 second sprinkler inspection. The development is 5 years old and this year has been billed £50,000 for faulty water pumps and £20,000 for a replacement lift belt. Good to hear they’ve got plans for more section 20s for us..... (to give your sellers the benefit of the doubt, we haven’t been told about any plans for major works, so they don’t know about them).

The fire safety costs this year were due to cladding investigations and the issue of the EWS1 certificate. These costs will recur every 5 years but shouldn’t be as high.

numbercruncher8

I'm sure the sellers and the estate agents are gonna say anything to try and get it sold. I wouldn't take that at face value. 

If the charges are being challenged every year I can bet the relationship between residents and the management company is acrimonious. If the charges were OK wouldn't people just pay them without complaining?

For these big developments, you could try trawling social media for comments. A lot have Facebook groups you may be able to infiltrate. Or you could simply ask on social media if anyone knows of anything regarding living there. Google reviews may also turn up some things.

The only concrete thing you can say is that these costs are not going down, and very unlikely to even stay the same as many of the things it purchases increase with inflation. 

bouicca21

My service charge is in the region of AlexMac’s, but I’m in a 60 year old low rise, without a lift.  My service charge is paid in arrears, quarterly, for actual expenditure.  Looks like this one is in advance and so there has to be a reconciliation to actual expenditure at year end.  That’s without considering the possibility of incompetence and error spotting.   

Given that there is a lift and the grounds seem to be being maintained well, then it doesn’t look too bad.  But what is ‘neighbourhood management’?  It’s obviously not the same as grounds maintenance as that is a separate heading.  Nor is it security or fire safety.  I’d really want to know what I would be getting for that (and for the security and fire safety).  I’d even want to know about the trivial door entry charge (I don’t get charged for door entry except when it needs repairing, and my share wouldn’t be nearly £40 over the year).  These may all be good things that are worth paying for, but you need to form your own judgement on that.  

NameUnavailable

I would look for another flat. It gets very very stressful dealing with these issues especially when you get demands out of the blue and have very little time to challenge them (particularly if the management company are difficult to speak with).

The annual charge is for the minimum service - any periodic works will be billed additionally (section 20 notices for larger sums as you have found). There is no limit on what they can bill you in any year - I was in a flat where we were billed £30K in one year, followed by another £6K for the next year! We managed to win a tribunal case to limit the costs but it was still over £20K.

Consider also that larger blocks are going to need significant sums spending on them soon to bring them up to required fire safety standards, which is regardless of the EWS1 issue.

Ash_29

@bouicca21 From what I gather the Managing Company and the landlord are two different companies. They aren't willing to offer much time to answering enquiries and turnaround times are very slow so asking anything would be futile. 

Does your service charge increase yearly or?

Ash_29

Lunchbox said:

I live on a Network development and I suspect it’s this one. Our service charges are an eye watering £200/month and this year we received a bill for another £1000 when the actuals were calculated (so over £3000 this year - but it depends on property size). We have nothing particularly expensive; no gym, extra services etc. We’ve had to comb through the invoices, as we do every year, because Network are completely incompetent; we found charges allocated to the wrong buildings, from the wrong billing period etc. We don’t know how much we’re due to be refunded because they refuse to reissue the accounts and take 21 days to answer every enquiry (badly). They always default to billing leaseholders rather than pursue insurance etc. and don’t monitor repairs or contractors so we’re billed for multiple call outs to the same issue. We’re also charged £400 a year per property for a <30 second sprinkler inspection. The development is 5 years old and this year has been billed £50,000 for faulty water pumps and £20,000 for a replacement lift belt. Good to hear they’ve got plans for more section 20s for us..... (to give your sellers the benefit of the doubt, we haven’t been told about any plans for major works, so they don’t know about them).

The fire safety costs this year were due to cladding investigations and the issue of the EWS1 certificate. These costs will recur every 5 years but shouldn’t be as high.

I sent you a PM, maybe we can get in touch. 
You are charged £200 a year including or excluding insurance and parking?
Is the £400 a year included under the service charge or is this a separate cost? I haven't heard of this one...
Have the 2020 - 2021 actuals been issued?
They are asking for £1000 again? I recall seeing a £1000 bill in 2019 - 2020 accounts but I haven't seen final accounts for 2020 - 2021...

bouicca21

Ash_29 said:

@bouicca21 From what I gather the Managing Company and the landlord are two different companies. They aren't willing to offer much time to answering enquiries and turnaround times are very slow so asking anything would be futile. 

Does your service charge increase yearly or?

My service charge is pretty well constant - it’s crept up by maybe £50 to £100 over the past 6 years.  Next year will be higher as there is a section 20 in the offing - which is for works that we all agree need doing, so not contentious.   But mine is a small block, which is a very different proposition to the sort of block you are looking at.  Actually our worries are more that the management company is a bit too careful about spending money!

Our management company like yours is separate to the freeholder.  If I rang them up and asked what £x in the accounts actually covered, they would give me the answer. 

Lunchbox

Ash_29 said:

Lunchbox said:

I live on a Network development and I suspect it’s this one. Our service charges are an eye watering £200/month and this year we received a bill for another £1000 when the actuals were calculated (so over £3000 this year - but it depends on property size). We have nothing particularly expensive; no gym, extra services etc. We’ve had to comb through the invoices, as we do every year, because Network are completely incompetent; we found charges allocated to the wrong buildings, from the wrong billing period etc. We don’t know how much we’re due to be refunded because they refuse to reissue the accounts and take 21 days to answer every enquiry (badly). They always default to billing leaseholders rather than pursue insurance etc. and don’t monitor repairs or contractors so we’re billed for multiple call outs to the same issue. We’re also charged £400 a year per property for a <30 second sprinkler inspection. The development is 5 years old and this year has been billed £50,000 for faulty water pumps and £20,000 for a replacement lift belt. Good to hear they’ve got plans for more section 20s for us..... (to give your sellers the benefit of the doubt, we haven’t been told about any plans for major works, so they don’t know about them).

The fire safety costs this year were due to cladding investigations and the issue of the EWS1 certificate. These costs will recur every 5 years but shouldn’t be as high.

I sent you a PM, maybe we can get in touch. 
You are charged £200 a year including or excluding insurance and parking?
Is the £400 a year included under the service charge or is this a separate cost? I haven't heard of this one...
Have the 2020 - 2021 actuals been issued?
They are asking for £1000 again? I recall seeing a £1000 bill in 2019 - 2020 accounts but I haven't seen final accounts for 2020 - 2021...

I’ll reply to your PM in the morning

It’s £200 a month, so £2400 for the year then we were charged another £1000 when the actuals were calculated in September. This does not include ground rent, insurance and parking which are charged separately in some blocks. 2020/21 actuals won’t be issued until September 2021, 6 months after financial year end.

The £400 was included in the annual figure above but we paid more than £400 as the way they’re calculated means the entire invoice for the development is allocated based on floor space - 1 beds will have paid less than £400, 3 beds more. However, this amount isn’t rechargeable to leaseholders due to various issues with the Section 20 issued for the contract years ago, but they still demanded the full end of year excess was paid despite all the issues.

Ash_29

Lunchbox said:

Ash_29 said:

Lunchbox said:

I live on a Network development and I suspect it’s this one. Our service charges are an eye watering £200/month and this year we received a bill for another £1000 when the actuals were calculated (so over £3000 this year - but it depends on property size). We have nothing particularly expensive; no gym, extra services etc. We’ve had to comb through the invoices, as we do every year, because Network are completely incompetent; we found charges allocated to the wrong buildings, from the wrong billing period etc. We don’t know how much we’re due to be refunded because they refuse to reissue the accounts and take 21 days to answer every enquiry (badly). They always default to billing leaseholders rather than pursue insurance etc. and don’t monitor repairs or contractors so we’re billed for multiple call outs to the same issue. We’re also charged £400 a year per property for a <30 second sprinkler inspection. The development is 5 years old and this year has been billed £50,000 for faulty water pumps and £20,000 for a replacement lift belt. Good to hear they’ve got plans for more section 20s for us..... (to give your sellers the benefit of the doubt, we haven’t been told about any plans for major works, so they don’t know about them).

The fire safety costs this year were due to cladding investigations and the issue of the EWS1 certificate. These costs will recur every 5 years but shouldn’t be as high.

I sent you a PM, maybe we can get in touch. 
You are charged £200 a year including or excluding insurance and parking?
Is the £400 a year included under the service charge or is this a separate cost? I haven't heard of this one...
Have the 2020 - 2021 actuals been issued?
They are asking for £1000 again? I recall seeing a £1000 bill in 2019 - 2020 accounts but I haven't seen final accounts for 2020 - 2021...

I’ll reply to your PM in the morning

It’s £200 a month, so £2400 for the year then we were charged another £1000 when the actuals were calculated in September. This does not include ground rent, insurance and parking which are charged separately in some blocks. 2020/21 actuals won’t be issued until September 2021, 6 months after financial year end.

The £400 was included in the annual figure above but we paid more than £400 as the way they’re calculated means the entire invoice for the development is allocated based on floor space - 1 beds will have paid less than £400, 3 beds more. However, this amount isn’t rechargeable to leaseholders due to various issues with the Section 20 issued for the contract years ago, but they still demanded the full end of year excess was paid despite all the issues.

The one I am buying is a 2 bed.

I have been told that the sellers are currently paying £210 per month for Service Charge + Buildings Insurance + Parking.

I haven't heard of the £400 charge, was this part of to the £1000? Do you know of any Section 20 notices that were sent this year, like setting up of fire alarms, lift maintenance etc.?

I can see service charges rising year on year and I am being told that there are more Section 20s anticipated but they haven't explained. 

Overall from your experience would you buy in this estate again?