Sanity check - Buying a 1 bed new build with estate charges

snowqueen555

eddddy said:

snowqueen555 said:

...it was just the estate charge that worried me. It's supposed to go up by RPI but this year it went up 20%. Despite lots of complaints from residents they don't really care. It looks like they use a trailing 18 month rather than a 12 month. It still doesn't make sense, and going by that logic will probably go up a similar figure next year as inflation is still pretty high.

That sounds very intriguing - can you explain the reference to RPI in a bit more detail?  Was it a general statement that somebody made, or is it part of a formula that appears in the estate charge deed?


An example of a general statement might be:

• "You should expect the Estate Charges to increase each year, roughly in line with inflation (RPI)."

Just like somebody might say:

• "You should expect the cost of your groceries to increase each year, roughly in line with inflation (RPI)."

Or is it something formal in the deed like:

• "You must contribute to a reserve fund each year, and you contribution will increase with RPI each year"

In which case, the reserve fund could build-up a big surplus or deficit. For example...

• One year there might be a storm which brings down a number of trees. There might not be enough money in the reserve fund to cover their removal and replacement.

There is a statement of how they work but haven't received it as not gone through conveyancing. The setup is it goes up by rpi every year, but every 4th year it jumps £30. This year it went up 18%, despite lots of residents querying how it was calculated as RPI is 8.9%. They just respond to read the statement which noone understands. They have used figures pulled out of thin air from the ons website as they don't tell where they got the figures from.

By all accounts they can't increase willy nilly they must follow that increase plan, it has a sinking fund included. But if they are pulling RPI figures out their !!!!!! it doesn't really mean much. Not only that, 30% of the fees goes towards maintenance of the sports facilities which is hired out to football clubs, so a bit of a pisstake residents are funding them to rent it out. 

MFWannabe

JReacher1 said:

I know it’s not ideal but you want to buy further outside Bristol which has good commuter links into the city. You’ll get more for your money and will be easier to sell in the future.

This 👆 
Do you have to live in the centre? Put in + 1 mile on Rightmove and there’s some nice flats come up, would probably be even more at further out 

eddddy

snowqueen555 said:

There is a statement of how they work but haven't received it as not gone through conveyancing. The setup is it goes up by rpi every year, but every 4th year it jumps £30. This year it went up 18%, despite lots of residents querying how it was calculated as RPI is 8.9%. They just respond to read the statement which noone understands. They have used figures pulled out of thin air from the ons website as they don't tell where they got the figures from.

It doesn't really matter, as you've decided not to proceed - but if you were proceeding, you should investigate more deeply.

Leasehold charges for almost all properties work in the same way, so if you end-up buying any leasehold property, it's worth understanding.


Briefly, in simple terms, the charges typically work like this...

• At the start of the year, the management company estimate the charges for the upcoming year. You pay the estimated charge.

• The total charge is the total of all the bills the management company expect to pay during the year.

• At the end of the year, if it turns out the estimate was too high, you get a rebate. If it turns out the estimate was too low, you have to pay some more

So how does a management company arrive at their estimate?...

• A 'lazier' management company might just look at what they spent last year, and add inflation to give this year's estimate. (Maybe that's what's happened in your case. But remember you'd get a rebate, if the estimate turns out to be too high.)

• A 'less lazy' management company might make a list of all the things they expect to spend money on in the coming year. (e.g. The trees need pruning, a footpath needs resurfacing, a rotten fence needs replacing, etc - and they add up the costs to get an estimate for the year.)

The following year, the trees might be fine, the footpath might be fine, the fence might be fine etc - so the charges might be lower, in the following year.


So that's how most leasehold charges work - but occasionally, there are exceptions. 

snowqueen555

MFWannabe said:

JReacher1 said:

I know it’s not ideal but you want to buy further outside Bristol which has good commuter links into the city. You’ll get more for your money and will be easier to sell in the future.

This 👆 
Do you have to live in the centre? Put in + 1 mile on Rightmove and there’s some nice flats come up, would probably be even more at further out 

I usually do 3 mile radius. Yeah there's flats our there but usually electric heating and quite a bit of refurbishment. Then need to find a place with decent ground rent and low service charges 🤮

MFWannabe

snowqueen555 said:

MFWannabe said:

JReacher1 said:

I know it’s not ideal but you want to buy further outside Bristol which has good commuter links into the city. You’ll get more for your money and will be easier to sell in the future.

This 👆 
Do you have to live in the centre? Put in + 1 mile on Rightmove and there’s some nice flats come up, would probably be even more at further out 

I usually do 3 mile radius. Yeah there's flats our there but usually electric heating and quite a bit of refurbishment. Then need to find a place with decent ground rent and low service charges 🤮

First one that comes up 
https://www.rightmove.co.uk/properties/136826492#/?channel=RES_BUY
no service charge or ground rent 
Gas central heating 

tbh though won’t a lot of flats especially new ones be electric heating as we are trying to get away from gas usage? 

MFWannabe

https://www.rightmove.co.uk/properties/130885508#/?channel=RES_BUY

Properties like this one that have had new eco electric heating fitted 

eddddy

MFWannabe said:

First one that comes up 

https://www.rightmove.co.uk/properties/136826492#/?channel=RES_BUY
no service charge or ground rent 

If there's no service charge, things to consider include...

• How do repairs and maintenance get done? Would that be the OP's responsibility?
• How is the building insured? Would that be the OP's responsibility?

So, if the roof leaks -

• presumably the OP has to find a roofer to fix it (and obviously pay the roofer)
• does the OP have to chase the downstairs neighbour to pay half (what if the downstairs neighbour refuses?)

And arranging buildings insurance for individual flats isn't ideal. (For example, what if the OP arranges buildings insurance for their 1st floor flat, but the person downstairs doesn't arrange buildings insurance for their ground floor flat - and the building burns down?)


Also, it looks like there are communal walkways and parking on that estate - so I wonder who pays for their upkeep, if there is no service charge.

 
Having "no service charge" isn't necessarily ideal.

MFWannabe

eddddy said:

MFWannabe said:

First one that comes up 

https://www.rightmove.co.uk/properties/136826492#/?channel=RES_BUY
no service charge or ground rent 

If there's no service charge, things to consider include...

• How do repairs and maintenance get done? Would that be the OP's responsibility?
• How is the building insured? Would that be the OP's responsibility?

So, if the roof leaks -

• presumably the OP has to find a roofer to fix it (and obviously pay the roofer)
• does the OP have to chase the downstairs neighbour to pay half (what if the downstairs neighbour refuses?)

And arranging buildings insurance for individual flats isn't ideal. (For example, what if the OP arranges buildings insurance for their 1st floor flat, but the person downstairs doesn't arrange buildings insurance for their ground floor flat - and the building burns down?)


Also, it looks like there are communal walkways and parking on that estate - so I wonder who pays for their upkeep, if there is no service charge.

 
Having "no service charge" isn't necessarily ideal.

I just posted a property that fits what the OP was requiring; it’s not me looking for a property 

snowqueen555

MFWannabe said:

https://www.rightmove.co.uk/properties/130885508#/?channel=RES_BUY

Properties like this one that have had new eco electric heating fitted 

I've just seen this one too. All the places in At Anne's are electric. There's nothing eco about it on the pocket. I'm not sure I could buy a place with electric heating, though the no service charge is a big bonus, I assume it is a share of the freehold or similar.

I'm absolutely fed up of the market, I think I need a break, but will be looking everyday because that's how I am.

eddddy

MFWannabe said:

I just posted a property that fits what the OP was requiring; it’s not me looking for a property 

I know - my post was entirely in the third person. I didn't mention "you" a single time, I consistently referred to "the OP".

I was simply pointing out that "no service charge" isn't necessarily a good thing - and also there's a possibility that the statement "no service charge" is incorrect, so it should be investigated by a potential buyer.


If somebody posts details of a potentially problematic property on the forum, I think it's sensible to let people who visit the forum know that it's potentially problematic and why. The more people understand about property, the better decisions they can make.