Buying a flat/maisonette with a short lease

Sirlaughalot

What would be the most expensive repair the freeholder would have to cater for, which would have to be passed on to the leaseholders by way of increased service charges?

user1977

Sirlaughalot said:

What would be the most expensive repair the freeholder would have to cater for, which would have to be passed on to the leaseholders by way of increased service charges?

There's not really a financial limit, if that's what you mean. Though disastrous events which need complete rebuilding are likely to be covered by insurance.

It is worth bearing in mind for a short lease though - you might not mind "investing" in e.g. a new roof if your lease will last the lifetime of the roof, but it makes less financial sense if you've only got 10 years left.

Sirlaughalot

user1977 said:

Sirlaughalot said:

What would be the most expensive repair the freeholder would have to cater for, which would have to be passed on to the leaseholders by way of increased service charges?

There's not really a financial limit, if that's what you mean. Though disastrous events which need complete rebuilding are likely to be covered by insurance.

It is worth bearing in mind for a short lease though - you might not mind "investing" in e.g. a new roof if your lease will last the lifetime of the roof, but it makes less financial sense if you've only got 10 years left.

Thanks a lot,
I was thinking the roof would be one of the major costs. Would the freeholder ask for the whole sum from the leaseholders on completion of the work or spread it over the lease term?

eddddy

Sirlaughalot said:

Thanks a lot,

I was thinking the roof would be one of the major costs. Would the freeholder ask for the whole sum from the leaseholders on completion of the work or spread it over the lease term?

Private freeholders would almost certainty want all the money in advance of hiring the roofer/builder to do the work.

Otherwise, the roofer/builder would do the work and submit an invoice and the freeholder would have no money to pay for it.

But some council freeholders can be more flexible - they might agree to a payment plan. i.e. £x per month.


And some better organised freeholders might create a sink fund (if the lease allows it). e.g. They anticipate that the roof will need replacing in 5 years time - so they collect, say, £750 a year from each leaseholder for the next 5 years - so they already have some/all of the roof replacement cost when the time comes.

 

Sirlaughalot

eddddy said:

Sirlaughalot said:

Thanks a lot,

I was thinking the roof would be one of the major costs. Would the freeholder ask for the whole sum from the leaseholders on completion of the work or spread it over the lease term?

Private freeholders would almost certainty want all the money in advance of hiring the roofer/builder to do the work.

Otherwise, the roofer/builder would do the work and submit an invoice and the freeholder would have no money to pay for it.

But some council freeholders can be more flexible - they might agree to a payment plan. i.e. £x per month.


And some better organised freeholders might create a sink fund (if the lease allows it). e.g. They anticipate that the roof will need replacing in 5 years time - so they collect, say, £750 a year from each leaseholder for the next 5 years - so they already have some/all of the roof replacement cost when the time comes.

 

That`s very informative, thanks. What happens if a leaseholder can't afford it?

RAS

That isn't an option. The leaseholder has to afford whatever repairs are needed. And would be wise to have their own sinking fund into which they save a good bit of money. 

eddddy

Sirlaughalot said:

eddddy said:

Sirlaughalot said:

Thanks a lot,

I was thinking the roof would be one of the major costs. Would the freeholder ask for the whole sum from the leaseholders on completion of the work or spread it over the lease term?

Private freeholders would almost certainty want all the money in advance of hiring the roofer/builder to do the work.

Otherwise, the roofer/builder would do the work and submit an invoice and the freeholder would have no money to pay for it.

But some council freeholders can be more flexible - they might agree to a payment plan. i.e. £x per month.


And some better organised freeholders might create a sink fund (if the lease allows it). e.g. They anticipate that the roof will need replacing in 5 years time - so they collect, say, £750 a year from each leaseholder for the next 5 years - so they already have some/all of the roof replacement cost when the time comes.

 

That`s very informative, thanks. What happens if a leaseholder can't afford it?

The freeholder could start legal action to recover the debt.

Ultimately, if the debt remains unpaid, the freeholder could forfeit the lease - i.e. the freeholder could repossess the property, without paying any compensation.

e.g. The leaseholder could lose, say, a £250k flat, because they haven't paid a £5k service charge. The leaseholder would lose the whole £250k - they wouldn't get anything back.

Sirlaughalot

RAS said:

That isn't an option. The leaseholder has to afford whatever repairs are needed. And would be wise to have their own sinking fund into which they save a good bit of money. 

Could anyone advise on a sinking fund for a leasehold flat valued at approximately £100,000 as a starting point?

RAS

Do you know if the current management company collect towards a sinking fund? If so, how much is in it? 

But the amount you should save to protect you from financial shock/unaffordable repairs isn't based on the value of the flat, it's based on the cost of the most expensive repair you think is reasonable. That's a function of what type of owner, size of the building and how many flats.

The potential cost of major repairs on a large LA building with lifts is not the same as the cost of a converted 2/3 story building with 6-12 flats, or even a site with several blocks of that size.