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How high service charges work out for buyers of leasehold

When I was in the property market 100% (*), I noted leasehold flats with very high (to my eyes) service charges. E.g., while I can't find it now, a 3 bed flat with a service charge of £1300 a quarter. This morning the most I could find was £4000 per annum. 

My gut reaction on seeing these was that it was like still paying rent, and it very much confirmed that I was going freehold. 

However, I'm curious about how these properties work for others. I'd very much appreciate if anyone has a story of owning or having owned such a property, and how it worked out for them. And, I'm more interested to hear stories where it was the right decision and the reasons why it was the right decision. 

(*) My offer to buy something to gift to my son is currently on hold, so currently one eye on the market. 
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  • daveyjp
    daveyjp Posts: 12,385
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    Service charge is the cost of running, managing, repairing, insuring a property with many owners or tenants.  All costs you have if you own a freehold house with no management charges, but you have the responsibility for organisingbrepairs, insuring, maintaining etc,

    They can be a few hundred a year to thousands a month depending on the building type and services offered.

    How does £60k a year sound?

    https://www.primelocation.com/for-sale/details/62722004/

  • eddddy
    eddddy Posts: 16,127
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    Taking a step back - the service charge is calculated as follows
    1. All the bills for maintenance, repairs, insurance, administration, etc for the building and the communal areas are added up to get a grand total
    2. Then the grand total is split amongst all the leaseholders

    So maybe the starting point is to look at all the bills, to see what they are for.

    If there are lifts, gardens, gardeners, water features, residents gym, concierge, caretaker, etc - the annual cost for those might be quite high. (And those costs get split amongst all the leaseholders.)

    (If you owned a freehold house with lifts, large garden, water features, a gardener, a caretaker etc - you'd have to pay the cost of those yourself. With flats, the cost is shared across all the leaseholders.)

    On the other hand, if you look at a flat with no communal areas, no garden, low maintenance requirements - the service charge should be much lower. 



    There's a further question of whether managing agents get "good value for money" when they pay for stuff, plus the managing agents charge a fee for the work they do.
  • user1977
    user1977 Posts: 13,314
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    Quite - it isn't "like still paying rent", it's taking most of the property maintenance hassle from you, though possibly not with the timing, costs and decisions you would have made by yourself.
  • RHemmings
    RHemmings Posts: 3,144
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    edited 4 February at 12:38PM
    I agree with what is said above. And, I've seen properties where the service charge is say £1300 per year. And, that seems reasonable to me and not like paying rent. And, I know what the service charge is for.

    But, when the service charge gets to £4000 per year, £5000 per year, £6000 per year. Then given my location that feels a bit more like paying rent to me personally. It's not paying a service charge in itself that I'm asking about. It's paying what looks to me to be a very high service charge. 

    For the £9.5 million flat in central London, I guess the £60k would be chump change for someone who can afford that. And, they'd be looking for luxury in the services supplied. I'm more interested in hearing from someone more similar to me financially who has paid a relatively high (compared to others local to me) service charge, and what more they got for it. 
  • propertyrental
    propertyrental Posts: 2,189
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    edited 4 February at 12:57PM
    You are missing the point. Whether a service charge is 'reasonable' or not depends on the service being provided.

    £1300 pa might be unreasonably cheap if maintenance work is being left undone.
    £4 or 5 or 6000 pa might be reasonable if the building is old/needs repairrs and/or has shared facilities as explained above.

    My last house was a freehold, 1851 building which required constant repairs. Was expensive to insure, and had a big garden so I employed a gardener.  I easily spent £2K pa.  And any one off major costs of improvements (eg I added elecrtic doors to the garage) or repairs (eg roof) were mine and mine alone.  No one to share the costs with. Plus I had all the responsibility and hassle of managing contractors (nightmare!) myself.


  • RHemmings
    RHemmings Posts: 3,144
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    You are missing the point. Whether a service charge is 'reasonable' or not depends on the service being provided.

    £1300 pa might be unreasonably cheap if maintenance work is being left undone.
    £4 or 5 or 6000 pa might be reasonable if the building is old/needs repairrs and/or has shared facilities as explained above.

    My last house was a freehold, 1851 building which required constant repairs. Was expensive to insure, and had a big garden so I employed a gardener.  I easily spent £2K pa.  And any one off major costs of improvements (eg (eg roof)I added elecrtic doors to the garage) or repairs were mine and mine alone.  No one to shatre the costs with. Plus I had all the responsibility and hassle of managing contractors (nightmare!) myself.


    But, this 'point' is exactly the question in my OP. I'd like to hear from people for whom the £5000 or so was reasonable and why it was reasonable. If, e.g., there was a gardener covered and that was something they wanted and otherwise would have paid for (as you did), then that's the kind of thing I was asking for in my OP. 

    I'm aware that freeholders such as myself have to pay for repairs such as roofs. 
  • eddddy
    eddddy Posts: 16,127
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    RHemmings said:

    I'm more interested in hearing from someone more similar to me financially who has paid a relatively high (compared to others local to me) service charge, and what more they got for it. 

    So is your question more of a "lifestyle poll" - along the lines of "what percentage of your annual income do you spend on leasehold service charges"?

    Obviously, that stems very much from a lifestyle choice. Some people are happy to spend a high percentage of their income on stuff to make their home environment look nice, or flashy, or classical.

    Others prefer to spend less.


    Just like some people are happy to spend lots each year on owning and driving a nice, or flashy, or classical car.

    Others are happy to spend less by driving an old banger, or riding a bike.


  • El_Torro
    El_Torro Posts: 1,424
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    I live in a 1 bedroom flat. The communal spaces have no communal garden to speak of, no concierge, no gym, etc... Yet I am paying roughly £3k a year in service charges. This £3k does include the water bill, plus all the other things that one would expect to be included in a service charge. The lifts need to be maintained, the cleaners for the communal areas paid for, the building insurance covered, etc...

    Ultimately I am happy living in a flat. There is less to worry about and owning a 1 bedroom flat means my mortgage payments are lower than if I had bought a house. 

    I'm not sure if this answers your question, mainly because I'm not too sure what your question is. There are pros and cons to leasehold vs freehold. You can look at it by comparing leasehold service charges to freehold maintenance costs. These are not the only factors at play here though. Especially if you are comparing living in a block of flats to living in a terraced (or semi detached, or detached...) house.
  • propertyrental
    propertyrental Posts: 2,189
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    RHemmings said:
    You are missing the point. Whether a service charge is 'reasonable' or not depends on the service being provided.

    £1300 pa might be unreasonably cheap if maintenance work is being left undone.
    £4 or 5 or 6000 pa might be reasonable if the building is old/needs repairrs and/or has shared facilities as explained above.

    My last house was a freehold, 1851 building which required constant repairs. Was expensive to insure, and had a big garden so I employed a gardener.  I easily spent £2K pa.  And any one off major costs of improvements (eg (eg roof)I added elecrtic doors to the garage) or repairs were mine and mine alone.  No one to shatre the costs with. Plus I had all the responsibility and hassle of managing contractors (nightmare!) myself.


    But, this 'point' is exactly the question in my OP. I'd like to hear from people for whom the £5000 or so was reasonable and why it was reasonable. If, e.g., there was a gardener covered and that was something they wanted and otherwise would have paid for (as you did), then that's the kind of thing I was asking for in my OP. 

    I'm aware that freeholders such as myself have to pay for repairs such as roofs. 

    I don't see how this is helpful.

    When considering a particular leasehold flat, look at
    * the average service charge over the last few years
    * what the annual accounts show it was spent on
    * what facilities the building has
    and then decide if you think it's reasonable, and either buy, or don't.

    Other people's experiences are subjective. Only you can decide what is 'reasonable' (and hence acceptable) to you.
  • RHemmings
    RHemmings Posts: 3,144
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    eddddy said:

    RHemmings said:

    I'm more interested in hearing from someone more similar to me financially who has paid a relatively high (compared to others local to me) service charge, and what more they got for it. 

    So is your question more of a "lifestyle poll" - along the lines of "what percentage of your annual income do you spend on leasehold service charges"?

    Obviously, that stems very much from a lifestyle choice. Some people are happy to spend a high percentage of their income on stuff to make their home environment look nice, or flashy, or classical.

    Others prefer to spend less.


    Just like some people are happy to spend lots each year on owning and driving a nice, or flashy, or classical car.

    Others are happy to spend less by driving an old banger, or riding a bike.


    Yes, like that. People have different lifestyles, and for other people they may receive services for that £5000 or so that works for them.

    The gardening from a few posts above is a good example. If someone wants to live with a beautiful sculpted garden without doing all the work themselves, then living in flats where the cost of the gardening is spread out among many people would work. I'm not sure I've noted flats around here with relatively for-the-area high service charges with beautiful gardens, but I'm sure there are many. I deliberately rejected a property with a fairy-tale garden and bought a similar one with a rectangular flat piece of grass. But, other people have other priorities. 

    It's easy to come up with reasons why service charges may be high without it being a ripoff. Or to invent fictional cases where those service fees were great value. But, I'd like to hear from someone who had experience of that. 


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