Estate charge increase, lender want proof it won’t double in 25years

Help1stT_B

Hi, I’m looking for some advice, myself and my partner are in to process of buying our first house, it’s a freehold property although has an estate charge which is currently £30 per month, the house was built in the 80s. Our lenders have now got a concern of the estate charge increasing and worried that we would then not be able to afford the monthly mortgage repayments. Our solicitors have said that the lenders want proof that the estate charge won’t double with in the next 25years. Although rightfully our solicitors have stated there is no way of proving it won’t increase double triple in the next 25 years, similar to the fact you can’t prove that the interest rates wont increase or decrease. We are currently in the process of waiting for our solicitors to discuss with our lenders. Our solicitors are shocked as they state they have never come across this being a problem on a freehold property before. Just looking for some advice and reassurance. 

DullGreyGuy

Help1stT_B said:

Hi, I’m looking for some advice, myself and my partner are in to process of buying our first house, it’s a freehold property although has an estate charge which is currently £30 per month, the house was built in the 80s. Our lenders have now got a concern of the estate charge increasing and worried that we would then not be able to afford the monthly mortgage repayments. Our solicitors have said that the lenders want proof that the estate charge won’t double with in the next 25years. Although rightfully our solicitors have stated there is no way of proving it won’t increase double triple in the next 25 years, similar to the fact you can’t prove that the interest rates wont increase or decrease. We are currently in the process of waiting for our solicitors to discuss with our lenders. Our solicitors are shocked as they state they have never come across this being a problem on a freehold property before. Just looking for some advice and reassurance. 

How is the estate charge set?

Help1stT_B

It is set by an estate management company 

anselld

I think the previous poster meant how is it set legally?  Lease, covenant, etc?  And what is the wording in that agreement that controls increases, if any?

poseidon1

Help1stT_B said:

Hi, I’m looking for some advice, myself and my partner are in to process of buying our first house, it’s a freehold property although has an estate charge which is currently £30 per month, the house was built in the 80s. Our lenders have now got a concern of the estate charge increasing and worried that we would then not be able to afford the monthly mortgage repayments. Our solicitors have said that the lenders want proof that the estate charge won’t double with in the next 25years. Although rightfully our solicitors have stated there is no way of proving it won’t increase double triple in the next 25 years, similar to the fact you can’t prove that the interest rates wont increase or decrease. We are currently in the process of waiting for our solicitors to discuss with our lenders. Our solicitors are shocked as they state they have never come across this being a problem on a freehold property before. Just looking for some advice and reassurance. 

See below a useful article on Estate charges ( which I read as essentially service charges).

https://www.commongroundestates.co.uk/leasehold-library/i-own-the-freehold-of-my-property-why-do-i-have-to-pay-an-estate-charge/

If this describes your position, not at all clear what your lenders are getting panicky about. 

As you say, no one  has a crystal ball and can  say on what basis such charges will increase in the future. However you say the house was built in the 1980s, so if current charges are only £30  per month now,  that should give a fair indication of past increases ( or decreases ) over the last few decades, depending on the original starting level. 

Have to wonder how they would view service charges on leasehold flats of several thousand pounds per year, if £30 per month on a freehold house is giving them palpitations!

la531983

poseidon1 said:

Have to wonder how they would view service charges on leasehold flats of several thousand pounds per year, if £30 per month on a freehold house is giving them palpitations!

The OP must be exceedingly close to the bone on the affordability scale.

newsgroupmonkey_

la531983 said:

poseidon1 said:

Have to wonder how they would view service charges on leasehold flats of several thousand pounds per year, if £30 per month on a freehold house is giving them palpitations!

The OP must be exceedingly close to the bone on the affordability scale.

I doubt it. It's a "computer says no" thing. They just don't like doubling rent charges.

Olinda99

Is it true that there is no cap on the increase ie they can ask for what they want and you have to pay it ?

eddddy

Olinda99 said:

Is it true that there is no cap on the increase ie they can ask for what they want and you have to pay it ?

That's a very misleading way of presenting it.

In simple terms...

• An estate might have private roads, car parks, street lighting, sewers, sewage plants, pavements, children's play areas, green spaces, trees, fences, ornamental pools, etc.

• And a management company might be responsible for maintaining them.

• And those maintenance costs are typically divided between the freehold house owners.

So in a particular year, the more work that needs doing, the greater the overall cost - that needs to be divided between the freehold house owners.


So if in one particular year: the roads need resurfacing, the sewage plant packs-up, some play area equipment needs replacing, some trees fall over, etc - the estate charge for that year could be huge.

But the following year, if very little work needs doing, it might drop back down to a much lower level again.

Olinda99

Thanks that is a good explanation.

Although I am guessing admin etc will be added and in any case these things are normally paid for from council tax.