[Scotland]Buying a house with an unknown service charge

UndergroundSaxClub

TLDR: Completion date soon - property has an unknown service charge, buildings insurance may/may not be included, solicitors not helping.

Hi all,

Bit of an odd one, I'm not really sure what to do or who to ask, so any advice or comments are appreciated.

Over the past few months I have viewed, made an offer, and had it accepted on a flat in the same town as me. During my initial viewing the seller told me there is a factor charge for the flat, the surrounding buildings and the grounds. However, they were unsure the cost, frequency or if this includes buildings insurance, which is important as my mortgage requires insurance. We both agreed this would be something the solicitors would sort out and I didn't pursue further, this was the end of May.

Now at the start of August, with an estimated completion date of the 31st of August I still do not have this information. I have been sending an email weekly asking my solicitors for an update and each time they say they will "chase this up". I hear nothing until I send my next weekly email, where I receive the same reply.

As luck would have it, I ran into the seller in the supermarket a few days ago and they were able to steer me in the right direction. They told me the name of the maintenance company and said the charge was "around £40 a month" and that they were unsure if buildings insurance was included, which I find odd? You would know where your buildings insurance is paid each month. I have since emailed the company and explained the situation (5 days ago) and yet to receive a response. I'm unsure if they would share this information if I am not yet responsible for the bill.

I'm getting quite concerned that completion is just over 20 days away, and I have an unknown, monthly cost associated with the property. I don't want to pull out, but it would be nice to know this information before there is nothing I can do. Any advice or tips or what to do or who I should contact about this?

user1977

So your seller does know who the factors are (would be a bit odd if they didn't - how did they answer the relevant question in the Home Report?) - in which case they give that information to their solicitors, who asks the factors to get a fairly standard form of letter to pass on to your solicitor (no, they're not likely to chat directly to you about it), which will confirm what (if any) insurance is included, and what the current position with common charges generally is.

20 days is plenty of time to sort out this (and everything else really) unless an actual problem crops up.

theartfullodger

Odd.  Sold 3 Scottish houses in last 4 years and in each case such charges i put in home report. 

Is there a very local housing association?  If so ask them and / or talk to neighbours who are probably very aware 

Brie

UndergroundSaxClub said:

They told me the name of the maintenance company and said the charge was "around £40 a month" and that they were unsure if buildings insurance was included, which I find odd? You would know where your buildings insurance is paid each month. 

Assuming it's the same up north as down here on the sunny south coast building insurance might not be paid every month.  More likely it's paid annually for the whole building and the share is built in to the monthly payment the leaseholder makes.  

But someone should be able to confirm that.

UndergroundSaxClub

Thanks all for the replies so far.

The home report says there is a factor charge, but neglects the cost or frequency, they did list the name of the company responsible who I have contacted, yet to hear anything since I sent an email on Tuesday.

As for the 20 days, I'm a bit concerned as I first as for this 42 days ago

user1977

UndergroundSaxClub said:

Thanks all for the replies so far.

The home report says there is a factor charge, but neglects the cost or frequency, they did list the name of the company responsible who I have contacted, yet to hear anything since I sent an email on Tuesday.

As for the 20 days, I'm a bit concerned as I first as for this 42 days ago

As I said, you don't contact the factors yourself, the solicitors deal with it. And like I said, 20 days isn't a problem. Chill.

Is there any particular relevance to 31 August other than just a target date somebody has picked? If it takes longer, it takes longer.

maladict

The factors won't tell you anything because you're not their client.  It is a very standard process for your solicitor to get the information though, and 20 days is plenty of time, even if it doesn't feel like it.

You could ask the estate agent to ask the seller to contact the factor for the info or supply their most recent bill(s) which would get you the info a bit sooner - I just sold my late mother's flat and the buyers were worrying about what the service charges would be, so the factors provided me with the statement of account and copy of the latest bill to pass on via the estate agent.

UndergroundSaxClub

Received an email from my solicitor a few moments ago, I'll paste the important parts below:

"I attach further missive/contract letter which we have received from the seller’s agents. 

1. We still await the factoring information which has yet to be supplied by the current owner.
   
   
2. <HouseBuilder> have still not bought the property from the current owner so they won’t conclude an unconditional contract to sell to you. <HouseBuilder> will only conclude a contract which is conditional upon them acquiring from the current owner.  Are you happy to conclude the contract on this basis? (you can withdraw if completion does not take place by 31st August 2023) or do you want to hold off until we have the factoring information?"

Still no closer to finding out the cost or if insurance is included. I have had a look at the factoring companies website and they do offer buildings insurance, however like another poster said they have not replied to me as I am not a customer of theirs. I don't know if I could phone and ask if they at least cover the building?

I'm not sure how to proceed here. I do want to go forwards with the purchase, ideally as soon as possible. Yet, the seller being unsure of the cost, and if they have been paying buildings insurance separately for the past 10 years or not seems unbelievable to me. Almost feels like they are hiding a very unattractive factor charge they don't want to disclose.

Any advice is welcome.

user1977

Why are you so concerned about the buildings insurance? It's unlikely to be a significant cost however you pay it, and if you do end up having to arrange it yourself, you can do so in a matter of minutes.

What sort of age/type of block is it? More modern ones are more likely to have block insurance policies arranged by the factors. Other factoring costs will largely depend on what services are provided - so if they clean the stairs, maintain lifts, do the gardening etc, those all add up. If it's just a standard tenement and all they do is deal with repairs as and when needed, the regular costs are unlikely to be much.

UndergroundSaxClub

Thank you for the reply.

I'm mostly trying to avoid any unexpected costs arising. I am brand new at this and figuring out how things work/how much they cost as I go.

The block is purpose built, 1970s, 12 flats within and a completely flat roof. The seller did mention a leak in the roof during the viewing, however this is not on the home report or sellers survey? I believe the factor company cover the grounds such as paths, gardening, stairs etc, I am unsure if the roof is part of this.

I have had a (very) quick look online for insurance and have a total with everything factored in. With my record high, 2 year fixed 6.19% mortgage, (possibly) a £40 service charge per month and a middle-of-the-road quote for insurance I am still £15 cheaper than my current rental situation.

From what I read in the most recent email from the solicitor it appears that the seller themselves is dragging their feet, as they are being part exchanged by a national builder.

Do I say yes to concluding missives to hurry things along, or continue waiting (now on week 6) for the factor information?

alligin

No.

You should absolutely not sign the missives until you know what the charges are, what they include (and what they don't), and whether there is a deliberate overcharge for an emergency fund.

In addition you need to know whether the factors have scheduled or scoped any future work that you could find yourself liable for.

For example roof work may have been scheduled or scoped and you could face a bill of thousands just after moving in.

Having been involved in a recent flat transaction in Scotland, it is your solicitor's responsibility to get this information - including any future work that is scoped or scheduled by the factors.

If there is future work scheduled then you can request a retention of the price you pay to be held back by their solicitor to cover it.

For example purchase price 150k.

Scoped/scheduled work 5k liability.

Solicitor holds 5k back from seller for 12months.

Don't sign until you have the information.