How high service charges work out for buyers of leasehold

RHemmings

dander said:

I think you're wildly undervaluing the gym and pool. You wouldn't even get membership of your local council leisure centre for that. Having those clean quality facilities in your building where you don't have to fit in around kids swimming lessons etc is more like a £140 value per month, if not more.

My workplace has a pool, which I can pay a reasonable one-off fee to use (and should do so more), and I belong to The Gym which costs me £19 per month. Hence, I considered the value of the block of flats gym compared to that. However, it could easily be worth a lot more than other people. I was basing that on swimming say once a week. Even if I swam twice a week, that's still about £60 value for me. 

eddddy said:

FWIW, I was speaking with somebody who has a 9am to 5pm concierge for his block of flats. (A fairly prestigious block in central London.)

He was questioning the value. He said the only tangible benefit he could see was that the concierge accepted deliveries, and kept them safely.

But perhaps the intangible benefits include:

• Prestige - it might impress visitors that you have a concierge
• Deterring 'bad people' - it might put off intruders, vandals, mischief makers from trying to get into the block
• (And maybe they do minor helpful things like tell visitors where the lift or the stairs are.) 

But only between 9am and 5pm.

This company has some properties with 24/7 concierge services. But, they look like they will be very expensive properties all round. 

https://www.l-r-m.co.uk/block-management/block-management-projects/

DullGreyGuy

RHemmings said:

bouicca21 said:

Friend’s daughter has a flat with a £4K + service charge.  They get the usual stuff plus lift maintenance (for some reason modern lifts are incredibly unreliable), a concierge service, gym and a pool.  She thinks that’s fine.  I’d run a mile, very quickly.

Thanks. I have never lived anywhere with a concierge service. I don't know what they do apart from keep an eye on the front door. I would hope that they would sign for packages. If I was somewhere with a gym and a pool I would make considerable use of those. For me, it would be worth wildly approximately £40 a month for those, and that's £480 a year or more than 10% of the service charge just for that. 

They sign for parcels, they deal with all the service people that come in to look after the lifts, pool, cleaners etc, they give visitors directions of how to get to a flat etc, hold keys to the meter cupboards etc if you lose yours, open the car parking gates for visitors, can order taxis, deal with bookings for the communal facilities... potentially other things depending on exactly what facilities you have. 


Our last rental was a share of freehold, so no greedy freeholder skimming off backhanders, but had a £8k service charge (the penthouses were £30k). The main reason for it though was trying to build up the sink fund. The development (2 buildings) had 8 lifts that were all being refurbished, roof and windows were getting to the point of needing to be replaced soon and the quote for scaffolding alone was £1m, had car parking, swimming pool with "spa" (aka jaccuzi and steam room/sauna), 24/7 concierge and underground parking, a fair amount of communal gardens that are grossly under used. 

The building next door shared the car park and swimming pool with us, they had their own gym, their concierge was only 07-21, they have lifts but only serve the higher floors. Their service charge was £4k for a 2 bed flat and can see one of their penthouses is for sale now with a £9k service charge. Again share of freehold. 

Clearly a lot of the service charge being on our place was funding the sink as the extra 10 hours of concierge doesn't add £4k per flat. 5 years later the service charge on properties up for sale remains about the same or slightly higher and no work has been done on roof or windows. 


With some of the newer flats around here you get a "residents cinema", lounge, bar etc have no idea how they work in practice as the flats in the building are more than twice the local average and never see anyone going in/out the buildings.

NameUnavailable

The question is a bit odd, in that one doesn't choose to pay a higher service charge (I can't say I want nicer gardens and more plants so I will pay a higher charge). The service charge is (should be) essentially down to the property and the requirements of the lease.

As mentioned, if as part of the lease, the services should include concierge/caretaker, a pool/gym, electric gates etc., then they all have to be paid for and therefore the service charge will be much higher than that for a similar kind of property without those facilities.

Likewise a listed building will likely have a higher charge, older buildings with extensive grounds, etc.

When looking at a leasehold property to buy you need to consider the service charge and also what regular 'major works' are required and any obvious maintenance issues (does it need a new roof?). These are costs that one will pay in addition to the regular service charge. It's also worth checking if there's a sink fund.

RHemmings

NameUnavailable said:

The question is a bit odd, in that one doesn't choose to pay a higher service charge (I can't say I want nicer gardens and more plants so I will pay a higher charge). The service charge is (should be) essentially down to the property and the requirements of the lease.

As mentioned, if as part of the lease, the services should include concierge/caretaker, a pool/gym, electric gates etc., then they all have to be paid for and therefore the service charge will be much higher than that for a similar kind of property without those facilities.

Likewise a listed building will likely have a higher charge, older buildings with extensive grounds, etc.

When looking at a leasehold property to buy you need to consider the service charge and also what regular 'major works' are required and any obvious maintenance issues (does it need a new roof?). These are costs that one will pay in addition to the regular service charge. It's also worth checking if there's a sink fund.

You're right in that it's down to the property. But, particularly in a buyer's market, people will have a choice of properties and may select the one with the higher service charge because of things they like about the property. Which could be things such as a gym which would reasonably result in an elevated service charge. 

If I was buying a flat, I think that in some ways I would prefer a flat which is in part of a historical building. I once lived in such a flat in Leeds, and found mention of the (now divided) building I lived in and its history. Here: https://historicengland.org.uk/images-books/photos/item/IOE01/12328/26  But, older historic buildings tend to require more maintenance and may have higher bills, which might affect the service charge with a really tangible advantage. 

user1977

RHemmings said:

NameUnavailable said:

The question is a bit odd, in that one doesn't choose to pay a higher service charge (I can't say I want nicer gardens and more plants so I will pay a higher charge). The service charge is (should be) essentially down to the property and the requirements of the lease.

As mentioned, if as part of the lease, the services should include concierge/caretaker, a pool/gym, electric gates etc., then they all have to be paid for and therefore the service charge will be much higher than that for a similar kind of property without those facilities.

Likewise a listed building will likely have a higher charge, older buildings with extensive grounds, etc.

When looking at a leasehold property to buy you need to consider the service charge and also what regular 'major works' are required and any obvious maintenance issues (does it need a new roof?). These are costs that one will pay in addition to the regular service charge. It's also worth checking if there's a sink fund.

You're right in that it's down to the property. But, particularly in a buyer's market, people will have a choice of properties and may select the one with the higher service charge because of things they like about the property. Which could be things such as a gym which would reasonably result in an elevated service charge. 

Yes, but that isn't really much different from choosing a house (and opting for, say, an older one because you like the traditional features, high ceilings, larger room sizes, and are prepared to take a view on the heating bills and maintenance costs).

If buyers choose a flat which e.g. has gardens attached, they know that either they're paying for someone to do the gardening, or there needs to be a well-organised rota of keen residents...

arthurdick

daveyjp said:

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/

Wow, I have always loved that building, many times I have sat opposite having a few pints outside O'neill's pub, never once have I remembered to look it up on Rightmove. Lovely location, 10 mins walk from where my son lives.

Edit.  I have just had a look on street view at the building and on that I saw the bright pink McLaren 570S, car, many times I have seen tourists having their photo's taken standing by it.    £60,000 P.A service charge is very very steep but if I had that sort of money, I would live there like a shot.

I am soon going to be buying my first ever Leasehold property, I have always had Freehold houses, but they have never been in locations I would have liked to live forever. 35-70 miles too far out.  The service charge will be around £1350 P.A.  which was, until I read this thread, to me very high but after reading on here, it does not seem too bad.

I have searched Google and found an article on that motor,  It has been left outside that building for 2 years, mystery motor that may have been stolen and dumped there, if I had a motor worth £150,000 stolen, I would be looking for it.  Or maybe it has not been stolen, maybe the owner has too many pints to drive it.

eddddy

arthurdick said:

The service charge will be around £1350 P.A.  which was, until I read this thread, to me very high but after reading on here, it does not seem too bad.

Just to be pedantic, I suspect you mean something like...

• The estimated service charge for the current year is estimated to be £1350. It might end up being more or less than that. (And it may be more or less than that in future years.)

Or maybe...

• The service charge for the last few years has been around £1350, so it may or may not remain at a similar level in future years. (Depending on things like how much maintenance and repairs were done in past years, versus how much maintenance and repairs will be needed in future years.)

As I say, I'm just being pedantic - maybe you knew the above already.

arthurdick

eddddy said:

arthurdick said:

The service charge will be around £1350 P.A.  which was, until I read this thread, to me very high but after reading on here, it does not seem too bad.

Just to be pedantic, I suspect you mean something like...

• The estimated service charge for the current year is estimated to be £1350. It might end up being more or less than that. (And it may be more or less than that in future years.)

Or maybe...

• The service charge for the last few years has been around £1350, so it may or may not remain at a similar level in future years. (Depending on things like how much maintenance and repairs were done in past years, versus how much maintenance and repairs will be needed in future years.)

As I say, I'm just being pedantic - maybe you knew the above already.

Yep, cheers Eddddy, you are right,  as I am going to be new to Leasehold, I still do not know too much about it.

RHemmings

user1977 said:

RHemmings said:

NameUnavailable said:

The question is a bit odd, in that one doesn't choose to pay a higher service charge (I can't say I want nicer gardens and more plants so I will pay a higher charge). The service charge is (should be) essentially down to the property and the requirements of the lease.

As mentioned, if as part of the lease, the services should include concierge/caretaker, a pool/gym, electric gates etc., then they all have to be paid for and therefore the service charge will be much higher than that for a similar kind of property without those facilities.

Likewise a listed building will likely have a higher charge, older buildings with extensive grounds, etc.

When looking at a leasehold property to buy you need to consider the service charge and also what regular 'major works' are required and any obvious maintenance issues (does it need a new roof?). These are costs that one will pay in addition to the regular service charge. It's also worth checking if there's a sink fund.

You're right in that it's down to the property. But, particularly in a buyer's market, people will have a choice of properties and may select the one with the higher service charge because of things they like about the property. Which could be things such as a gym which would reasonably result in an elevated service charge. 

Yes, but that isn't really much different from choosing a house (and opting for, say, an older one because you like the traditional features, high ceilings, larger room sizes, and are prepared to take a view on the heating bills and maintenance costs).

If buyers choose a flat which e.g. has gardens attached, they know that either they're paying for someone to do the gardening, or there needs to be a well-organised rota of keen residents...

Yes, that's right. I've just bought an older house, and I know that sometime in the next few years it will need a new roof. That's probably a year's worth of rent right there, let alone service charge. But, it's something I've mentally ticked off. 

I was aware of those swings and roundabouts, but I wanted to hear the reasoning of the people who went the leasehold route, to see how it works for them. 

BikingBud

NameUnavailable said:

The question is a bit odd, in that one doesn't choose to pay a higher service charge (I can't say I want nicer gardens and more plants so I will pay a higher charge). The service charge is (should be) essentially down to the property and the requirements of the lease.

As mentioned, if as part of the lease, the services should include concierge/caretaker, a pool/gym, electric gates etc., then they all have to be paid for and therefore the service charge will be much higher than that for a similar kind of property without those facilities.

Likewise a listed building will likely have a higher charge, older buildings with extensive grounds, etc.

When looking at a leasehold property to buy you need to consider the service charge and also what regular 'major works' are required and any obvious maintenance issues (does it need a new roof?). These are costs that one will pay in addition to the regular service charge. It's also worth checking if there's a sink fund.

If you are self managed why can't you make those decisions?

Self-determination based upon the desires of the management group. You might want to improve things that improve the quality of your lives, take out 12 parking spaces and put the spa or bowling alley in. Design new gardens and pay for their upkeep.