Service Charge

Rino1

I own a flat. No mortgage just service charge and ground rent.

The management company has just increased the service charge by 75% this equates to a £300 per month increase. Making my service charge £700 per month.  

My thoughts are to let it get repossessed as I have tried selling it several times with no success due to the high service charge.

Does anyone know what would happen if it were repossessed

Veteransaver

Who will repossess it if you don't have a mortgage. The management company?

eddddy

I guess you mean you'd let the freeholder / management company forfeit the lease - which means they'll probably evict you and take possession of your flat.

You would lose the entire value of the flat doing that. Is the flat really only worth £0 ?


As you suggest, £700 per month sounds like a very high service charge. What is that service charge money being spent on?

Brie

Can the management company justify the charge?  Do the other effected owners of flats agree it's too high for the service provided?

theartfullodger

Which country (eg Wales, NI..) ??

Does your lease (YOUR lease that you've read..) permit these service charges to be increased in this way, please??

Repo of your home would happen with all costs (legal etc, not cheap) charged against the value of the place (ie you'd get even less).  Your credit rating may well get damaged, making any further loans or credit agreements (eg mobile 'phone contracts, mortgages, bank loans) difficult/impossible or very expensive.

What do your neighbours in similar position say & suggest??

Suggest visit local CaB and speak to a debt advisor.... 

https://www.citizensadvice.org.uk/wales/about-us/contact-us/nearby/

https://www.citizensadvice.org.uk/debt-and-money/

Are you claiming all possible benefits ?? (I'm in receipt of 6, old..)
https://www.gov.uk/benefits-calculators

Good luck!

Mr.Generous

One hell of a good reason to avaoid flats or properties with a service charge.

eddddy

theartfullodger said:

Does your lease (YOUR lease that you've read..) permit these service charges to be increased in this way, please??

Almost all leases have variable service charges. Essentially that means that each leaseholder pays a share of insurance, repairs, maintenance and admin costs.

So the question is more like... "Why are those costs estimated to be 700 x 12 = £8,400 this year, for one of the leaseholders?" (And presumably a similar amount for all the other leaseholders.)

For example, is it because of a 'one off major repair' - like a new roof or the lifts being replaced? If so, the Service Charge might drop back down to 'normal' next year.

Or, for example, is to cover the cost of a waking watch due to unsafe cladding?

theartfullodger said:

Repo of your home would happen with all costs (legal etc, not cheap) charged against the value of the place (ie you'd get even less).  

It sounds like the OP is talking about having their lease forfeited for non-payment of service charges and ground rent.

In that case the OP would get £0.

It doesn't matter whether the debt including costs is £500, £5,000 or £50,000 - the OP would get £0.

EssexHebridean

Mr.Generous said:

One hell of a good reason to avaoid flats or properties with a service charge.

Which is lovely if you have the financial privilege to make a freehold purchase in the location you need to live in, or the flexibility to relocate to an area where that is possible. 

DullGreyGuy

Mr.Generous said:

One hell of a good reason to avaoid flats or properties with a service charge.

The OP hasn't clarified why the service charges have increased so much, so to say it would be better to be freehold is a bit premature. A house down the road is falling apart because the roof has failed and the person that owns it cannot afford to replace it, when our leasehold property had roof problems the cost of repair was much less because it was split 30 ways. 

The only advantage of freehold in this scenario is that you can let the home rot whereas leasehold they can make you pay for its maintenance. 

ReadySteadyPop

Mr.Generous said:

One hell of a good reason to avaoid flats or properties with a service charge.

Yep, many literally become unsellable.

ReadySteadyPop

EssexHebridean said:

Mr.Generous said:

One hell of a good reason to avaoid flats or properties with a service charge.

Which is lovely if you have the financial privilege to make a freehold purchase in the location you need to live in, or the flexibility to relocate to an area where that is possible. 

Just rent and let the landlord deal with the costs.