Service charges and Indemnity

Londonseller

We're buying a leasehold flat and was initally told that there was a service charge. We waited for the management pack to see how much the service charges would be but it only says 'not known'. Now the solicitor is saying there are no service charges, I can not find any document that confirms this. 'Not known' seems very vague and I don't want any surprise service charges after purchase.

Any advice on what I should be requesting from the sellers would be greatly appreciated

Another issue is that the leasehold is missing a mortagage protection clause. Who is responsible for paying the indemnity, the buyer or seller?

Thanks in advance!

loubel

Who is the freeholder? Often where you get a "share of freehold" set up there won't be a regular service charge but ad hoc payments when repairs are needed. It suits some people but means you have to keep money aside.

Sellers usually pay for title insurance but they don't have to. Why do you want the indemnity?

Londonseller

Thanks for your response. Unfortunately there is no share of freehold, it is a 900 year lease. Solicitor has stated that there needs to be an indemnity for the missing mortgage protection clause or the lender will not approve mortgage. Seller has refused to pay for the indemnity clause.

eddddy

Londonseller said:

We're buying a leasehold flat and was initally told that there was a service charge. We waited for the management pack to see how much the service charges would be but it only says 'not known'. Now the solicitor is saying there are no service charges, I can not find any document that confirms this. 'Not known' seems very vague and I don't want any surprise service charges after purchase.

Any advice on what I should be requesting from the sellers would be greatly appreciated

You should start by asking the seller (possibly via the estate agent) how the service charges work. And cross reference their answer to the lease and/or your solicitor's report.

You will have to pay towards buildings insurance, buildings maintenance and buildings repairs - you might pay through the service charge, or you might pay directly.


Here are a few example options of how this might work.

Option 1 (the most usual)

• The lease says the freeholder (or management company) must insure the building and do building maintenance and repairs.

• The freeholder (or management company) will divide the cost between all the flats, and issue a service charge bill every 6 or 12 months.

Option 2

• The lease says the freeholder (or management company) must insure the building and do building maintenance and repairs.

• Each time a bill comes in (e.g. for insurance), the freeholder (or management company) will issue a service charge bill to each flat owner for their share

Option 3

• The lease makes each flat owner responsible for their part of the building - they have to insure, maintain and repair their own part of the building (and pay the costs)

• So the freeholder (or management company) doesn't have to spend any money on anything, so there is no service charge

Is the flat purpose built or a conversion?
How many flats are in the building?
Are there any communal areas (like a shared front door, shared hallway, shared garden)?

Londonseller said:

Another issue is that the leasehold is missing a mortagage protection clause. Who is responsible for paying the indemnity, the buyer or seller?

There is no specific rule (or law) about that. It's down to a negotiating between the buyer and seller.

35har1old

eddddy said:

Londonseller said:

We're buying a leasehold flat and was initally told that there was a service charge. We waited for the management pack to see how much the service charges would be but it only says 'not known'. Now the solicitor is saying there are no service charges, I can not find any document that confirms this. 'Not known' seems very vague and I don't want any surprise service charges after purchase.

Any advice on what I should be requesting from the sellers would be greatly appreciated

You should start by asking the seller (possibly via the estate agent) how the service charges work. And cross reference their answer to the lease and/or your solicitor's report.

You will have to pay towards buildings insurance, buildings maintenance and buildings repairs - you might pay through the service charge, or you might pay directly.


Here are a few example options of how this might work.

Option 1 (the most usual)

• The lease says the freeholder (or management company) must insure the building and do building maintenance and repairs.

• The freeholder (or management company) will divide the cost between all the flats, and issue a service charge bill every 6 or 12 months.

Option 2

• The lease says the freeholder (or management company) must insure the building and do building maintenance and repairs.

• Each time a bill comes in (e.g. for insurance), the freeholder (or management company) will issue a service charge bill to each flat owner for their share

Option 3

• The lease makes each flat owner responsible for their part of the building - they have to insure, maintain and repair their own part of the building (and pay the costs)

• So the freeholder (or management company) doesn't have to spend any money on anything, so there is no service charge

Is the flat purpose built or a conversion?
How many flats are in the building?
Are there any communal areas (like a shared front door, shared hallway, shared garden)?

Londonseller said:

Another issue is that the leasehold is missing a mortagage protection clause. Who is responsible for paying the indemnity, the buyer or seller?

There is no specific rule (or law) about that. It's down to a negotiating between the buyer and seller.

Who's responsible for the roof?
Guttering and downpipes

loubel

Who has said they don't know what the service charge is?It is possible that the question has not been asked of the right person.

With the indemnity, if it's just to satisfy your lender, then I'd say you need to pay for it. A mortgagee protection clause is not standard and it is to protect your lender against your actions leading to repossession rather than anything in the seller's control.

eddddy

35har1old said:

Who's responsible for the roof?

Guttering and downpipes

You have to read the specific lease to find out.

With most leases, the freeholder is responsible for their repairs and maintenance - and so the freeholder arranges the work, and then divides the costs between the flat leaseholders.

But some leases say the top floor flat is responsible for the roof (and the ground floor flat is responsible for the foundations).

And there can be other variations as well.