New-Build Mortgage application refused because of Service Charge!! Help!

Sam3007

Hi there,


After completing the final stage of valuation and as we were expecting the offer to be issued, Halifax got back to us saying that the valuation was "not acceptable" and advised that 

‘The estate charge detailed within the DIF relates to the service charges. The valuer has come back saying that they are too high and likely to affect marketability and saleability. As a result the case will be unable to proceed, unless the service charge is lower and a CML form is uploaded to reflect this or the customers choose another property.’

House price is 250K - Free hold

Service charge is £30 per month.

We are very confused! Is £30 a month too much for a service charge? Do we ask Halifax to review the valuation report or ask the builder to lower their service charge? 

What is the best course of action please? 

[Deleted User]

The service charge is unlikely to be lowered. It'll be standard across all the properties.

Your broker should be looking at lenders would be more lenient, if there are any. 

Sam3007

Deleted_User said:

The service charge is unlikely to be lowered. It'll be standard across all the properties.

Your broker should be looking at lenders would be more lenient, if there are any. 

Thanks. Do you recommend any specific bank/building society please ? I am just worried the same thing might be raised again regarding the service charge.

tinytiddles

We’re in a new build. Once our neighbourhood has been handed over to the estate management company ours will be roughly £32 a month and we got a mortgage with HSBC without any drama over the charges, maybe try them if you meet the criteria otherwise?

MWT

Sam3007 said:

We are very confused! Is £30 a month too much for a service charge?

Do you get access to some sort of amenity like a playground, or recreation area or is this just for the usual maintenance of the green bits around the estate?

Generally you see people dealing with small payments on an annual basis, not £30/month.

Have you looked to see what controls their are over who manages the work and how much they can charge?

With it starting that high I'd be concerned at how much higher it could go...

K_S

Sam3007 said:

Hi there,


After completing the final stage of valuation and as we were expecting the offer to be issued, Halifax got back to us saying that the valuation was "not acceptable" and advised that 

‘The estate charge detailed within the DIF relates to the service charges. The valuer has come back saying that they are too high and likely to affect marketability and saleability. As a result the case will be unable to proceed, unless the service charge is lower and a CML form is uploaded to reflect this or the customers choose another property.’

House price is 250K - Free hold

Service charge is £30 per month.

We are very confused! Is £30 a month too much for a service charge? Do we ask Halifax to review the valuation report or ask the builder to lower their service charge? 

What is the best course of action please? 

@sam3007 £30 a month service charge for a leasehold property is significantly different than that for a freehold property.

Leaseholders' rights in this regard are well established but (crudely speaking) freeholders on a private estate may find themselves in a position of having to pay whatever charge the estate management decides with little to no room for dispute or oversight.

It may be that in the above context, £30/month service charge is deemed to have a potentially significant impact on future marketability.  

This shouldn't necessarily be a deal-breaker, but I would recommend using a broker who can run it past a prospective lender and/or their surveyors prior to placing the case.

I would recommend trying to get as much information you can about the reasons for the Halifax decline as that could be very useful when looking for a new lender (if needed).

Sam3007

MWT said:

Sam3007 said:

We are very confused! Is £30 a month too much for a service charge?

Do you get access to some sort of amenity like a playground, or recreation area or is this just for the usual maintenance of the green bits around the estate?

Generally you see people dealing with small payments on an annual basis, not £30/month.

Have you looked to see what controls their are over who manages the work and how much they can charge?

With it starting that high I'd be concerned at how much higher it could go...

Yes it does have gated parking, landscaped paths and organic play areas in the middle of the development. That is why we thought that the £30 a month was reasonable. Thanks for the suggestion, we would definitely look into who will be managing the work.

Sam3007

K_S said:

This shouldn't necessarily be a deal-breaker, but I would recommend using a broker who can run it past a prospective lender and/or their surveyors prior to placing the case.

I would recommend trying to get as much information you can about the reasons for the Halifax decline as that could be very useful when looking for a new lender (if needed).

Thanks we will do that.
Can we appeal the valuation report / mortgage decision to avoid losing the valuation fees? The things is other houses/flats is the area are paying between 85 and 100 a month for a service charge (leasehold).

K_S

Sam3007 said:

K_S said:

This shouldn't necessarily be a deal-breaker, but I would recommend using a broker who can run it past a prospective lender and/or their surveyors prior to placing the case.

I would recommend trying to get as much information you can about the reasons for the Halifax decline as that could be very useful when looking for a new lender (if needed).

Thanks we will do that.
Can we appeal the valuation report / mortgage decision to avoid losing the valuation fees? The things is other houses/flats is the area are paying between 85 and 100 a month for a service charge (leasehold).

In principle, I would say yes you should appeal the valuation. It's not so much the hope that the outcome will be overturned but just to make sure that they weren't any human errors (the valuer considering the wrong amount for the service charge for example) and to know more details (if any). In practice, Halifax's standard valuation appeal process is tailored to down-valuations so it may be a bit tricky.

The leasehold comparisons can be ignored to a large extent. As far as service charges are considered, leaseholders have well established regulations, etc to allow oversight (annual accounts for example) and protection, which free-holders don't. I know it sounds counter-intuitive.

Cheese1990

Silly question but have you asked your solicitor about the service charge too? As it may be only £30 a month at the moment but their could be a clauses stating that it increases x% each year and that your also reliable for any renovation costs or landscaping of the communal areas too. Meaning not only could that service charge be nearer to £100 a month but also you may suddenly get a bill of several £1000's which could mean that someone else wouldn't buy it and meaning the bank would struggle to sell it on

Redwino222

It is a steep service charge.  Slightly more than I paid for an apartment and that included lifts, window cleaning P, sinking fund for roof etc and communAl insurance.

to be honest it would put me off buying so I can see where the lender is coming from.

are other houses selling okay in the development?