Service Charge Increase

BecaRay

I am hoping someone can help me. 
My service charge is normally £765 a quarter, just had the budget for 2022/2023 and our service charge is going up to £3800 a quarter.
Not a typo!
They have said it is because of the cost to repair the roof and the outside of building and that we were given notice on April 2021. The letter they are referring to says that because the local council refused planning permission to extend the building, we would now have to pay for the roof work and outside building work. There was no proposed cost for this work. 
Surely they cannot raise it that much with no notice? We own our flat, but having spoken to an estate agent before covid, at £765 a quarter our flat was worth less than expected because of the abnormally high service charge for the area. This rules out any chance of being able to sell my flat now. 
I don't know what to do, and I am really worried that I am not going to be able to afford the new service charge. 
Any advice is welcome. 

eddddy

It sounds like the increase to £3,800 per quarter is specifically to cover some roof repairs and external repairs. Presumably, the service charge will go back down after that.

Assuming the roof repairs and external repairs are something that's only done once every, say, 20 years - a future buyer should see this as a good thing. You'll have recently paid for the roof repairs, so there shouldn't be another big bill for 20 years.


More generally, why has the service charge been £765 per quarter? For example, is it a period building, or are their lifts, or large communal areas, or large communal grounds?

If a buyer wants to live in a period property, or have lifts, or have large communal areas / grounds or whatever, they have to accept that there'll be a higher service charge.



(And I guess to be fair, the flat was cheaper when you bought it because of the high service charge, so you'll have to sell it cheaper for the same reason.)

coypondboy

What happens if you do not pay the service charge is it like not paying the rent or mortgage i.e could be evicted?

bouicca21

Have you been through the section 20 process?

eddddy

coypondboy said:

What happens if you do not pay the service charge is it like not paying the rent or mortgage i.e could be evicted?

If you don't pay the service charge, initially you will have late payment fees, solicitors fees, debt recovery fees added to the bill.

Next, the freeholder might start legal proceedings to forfeit the lease (i.e. cancel your lease, so you no longer own the flat).


Lets say the flat is worth £300k, and the lease is forfeited because of £15k unpaid service charges. You would lose the full value of the flat - so you would lose £300k for not paying a £15k debt.

However, if the flat was mortgaged, the freeholder is likely to contact your mortgage lender, and the mortgage lender would pay the £15k and add it on to your mortgage. (Because if the mortgage lender did nothing and the lease was forfeited / cancelled, the mortgage lender would lose their security.)

coypondboy

so of you were downsizing like me and did not have a mortgage and could not pay the service charge as on a fixed pension I would lose all my life savings tied up in the flat and be homeless. Crikey how unfair is that at least with renting or having a mortgage this won't happen?

HouseHunter223

coypondboy said:

so of you were downsizing like me and did not have a mortgage and could not pay the service charge as on a fixed pension I would lose all my life savings tied up in the flat and be homeless. Crikey how unfair is that at least with renting or having a mortgage this won't happen?

If you pay mortgage on a house and the roof collapses (in a way not covered by insurance) you would have to pay to replace it. At least here, the burden is shared among properties.

Someone has to pay for repairs if they're required.

eddddy

coypondboy said:

so of you were downsizing like me and did not have a mortgage and could not pay the service charge as on a fixed pension I would lose all my life savings tied up in the flat and be homeless. Crikey how unfair is that at least with renting or having a mortgage this won't happen?

There would have to be a court case - and assuming you turned up at court and explained your circumstances, and showed that you were actively trying to sell the flat to raise funds to pay the bill, the court would probably allow you time to do that.


In the very rare cases where leases are forfeited, it tends to be because the flat owners ignored bills, ignored court documents and didn't turn up for the court hearing. So the court ruled against them.

Or in one case, a flat owner returned home abroad - and nobody forwarded them the service charge bills, court documents etc that were sent to the flat - so the whole process happened without the flat owner knowing.

LHCalc123

bouicca21 said:

Have you been through the section 20 process?

This is a really important question. Has the freeholder/management company completed the section 20 process with you?

Norman_Castle

coypondboy said:

so of you were downsizing like me and did not have a mortgage and could not pay the service charge as on a fixed pension I would lose all my life savings tied up in the flat and be homeless. Crikey how unfair is that at least with renting or having a mortgage this won't happen?

Outstanding charges could be taken as a charge against the property paid from the sale proceeds.

bouicca21

Outstanding charges cannot be recouped unless they are legitimate. Hence the question about the section 20.