Residential service charge _ is there a published index?

_Andrew_

If I wanted to gauge/benchmark the reasonableness of a service charge, is there a UK index that gives typical charges as a function of location and development size?

E.g. 2 bed flat in a 15-storey residential tower in London. 

Brie

for a posh bit of London or the worst bit?  for a place that has a garden, parking, lots of communal areas or not?  

really I think it's a how long is a piece of string question so no one price is going to be typical.  

saying that if you look on estate agent sites (rather than rightmove) you might find what is currently on the market and the service charges for those properties.  

SarahB16

Not that I'm aware of as there are far too many variables, e.g. location, rooftop swimming pool (or not), gym, concierge, etc.  It really does depend on what the service charges cover (and we all know there are some less than reputable management companies out there too).  Is this for a new build or not? 

You could pay privately and ask a valuer for their opinion of the service charges though as they will provide an opinion (but typically as part of a wider valuation for a lender who is funding the development).    

user1977

Is this related to your previous thread?

eddddy

_Andrew_ said:

If I wanted to gauge/benchmark the reasonableness of a service charge, is there a UK index that gives typical charges as a function of location and development size?

E.g. 2 bed flat in a 15-storey residential tower in London. 

Do you mean "reasonableness" in the legal sense - i.e. when the Landlord and Tenant Act 1995 Section 19 says...

• Relevant costs shall be taken into account in determining the amount of a service charge payable for a period only to the extent that they are reasonably incurred

If so, it sounds like you're looking in the wrong direction. Maybe it's easiest to explain with an example...

• Let's say the freeholder pays a gardener £1000 to cut the grass every week for a year, and 15% of the £1000 is added to your service charge bill

To ensure that's reasonable, you should check:

• Does your lease say that your lease says that the freeholder is responsible for ,maintaining the garden (and cutting the grass)?
• Does your lease say that you are responsible for 15% of maintenance and repair costs?
• Is it reasonable to cut the grass every week, or is it more reasonable to cut it every fortnight?
• Is £1000 a year a reasonable fee for cutting the grass - or would other gardeners have provided the same service for less money?

Or are you talking about the reasonableness of Management Fee that your management company adds to the Service Charge?

_Andrew_

user1977 said:

Is this related to your previous thread?

No, it's unrelated.

_Andrew_

eddddy said:

_Andrew_ said:

If I wanted to gauge/benchmark the reasonableness of a service charge, is there a UK index that gives typical charges as a function of location and development size?

E.g. 2 bed flat in a 15-storey residential tower in London. 

Do you mean "reasonableness" in the legal sense - i.e. when the Landlord and Tenant Act 1995 Section 19 says...

• Relevant costs shall be taken into account in determining the amount of a service charge payable for a period only to the extent that they are reasonably incurred

If so, it sounds like you're looking in the wrong direction. Maybe it's easiest to explain with an example...

• Let's say the freeholder pays a gardener £1000 to cut the grass every week for a year, and 15% of the £1000 is added to your service charge bill

To ensure that's reasonable, you should check:

• Does your lease say that your lease says that the freeholder is responsible for ,maintaining the garden (and cutting the grass)?
• Does your lease say that you are responsible for 15% of maintenance and repair costs?
• Is it reasonable to cut the grass every week, or is it more reasonable to cut it every fortnight?
• Is £1000 a year a reasonable fee for cutting the grass - or would other gardeners have provided the same service for less money?

Or are you talking about the reasonableness of Management Fee that your management company adds to the Service Charge?

Good point.

No, I was thinking of it more as a value question on an overall level of Service Charge

The basis of the question related to buying and selling.
In terms of the latter, the comment some Estate Agents make is our service charge is too high compared to other developments, which anecdotally doesn't seem to be the case, so it appears to be about trying to get the asking price lowered.

I was hoping for some industry index that would benchmark typical properties.

eddddy

_Andrew_ said:

Good point.

No, I was thinking of it more as a value question on an overall level of Service Charge

The basis of the question related to buying and selling.
In terms of the latter, the comment some Estate Agents make is our service charge is too high compared to other developments, which anecdotally doesn't seem to be the case, so it appears to be about trying to get the asking price lowered.

I was hoping for some industry index that would benchmark typical properties.

In that case, put yourself in the position of your prospective buyer.

If they're looking at your property, which other properties will they be looking at as well? i.e. Similar location, similar price, similar accommodation, etc

If this is feedback from your estate agent, ask them about other properties on their books. Or check Rightmove - some agents state service charges in their listings.

_Andrew_ said:

E.g. 2 bed flat in a 15-storey residential tower in London. 

But are prospective buyers actually thinking to themselves: "I want to buy a 2 bed flat in a 15 storey block"?

Or (using some made-up numbers) are they thinking...

"I've got a £300k budget (or whatever), and my choices are things like...

• A 2 bed flat in a 15 storey block, with a service charge of £3000 per year
• A 2 bed flat in a purpose build 3 storey block, with a service charge of £1200 per year
• A 2 bed flat in a converted 2 storey house, with a service charge of £800 per year"

_Andrew_ said:

In terms of the latter, the comment some Estate Agents make is our service charge is too high compared to other developments, which anecdotally doesn't seem to be the case, so it appears to be about trying to get the asking price lowered.

If the flat isn't selling, typically it's because the asking price is too high for the current market.

It doesn't really matter whether it's because the service charge is high, or some other reason.

Whatever "excuses" the estate agent might be giving, I'd guess the bottom line is that you need to reduce the price in order to sell - or do you see it differently?


(You might win a some debating points by proving to the estate agent that the service charge isn't high, but I doubt winning those debating points would help to find a buyer for your flat.)

danco

As I posted in another thread, what is the situation when the flat ultimately has to be sold. There seem to be two standard models. One charges the actual cost of services provided but the owner retains the full selling price. The other has a low service charge, much lower than the costs of services, but the freeholder gets a significant amount of the sale price.

There are arguments as to which is better, but one certainly needs to know which it is.

eddddy

danco said:

The other has a low service charge, much lower than the costs of services, but the freeholder gets a significant amount of the sale price.

That's often called an "Exit Fee" or "deferred service charge" or "deferred management fee".  It applies almost exclusively to retirement properties (and perhaps occasionally to social housing). 

It would be extremely unusual to have that on any other type of leasehold property.

MyRealNameToo

_Andrew_ said:

If I wanted to gauge/benchmark the reasonableness of a service charge, is there a UK index that gives typical charges as a function of location and development size?

E.g. 2 bed flat in a 15-storey residential tower in London. 

Far too many variables... some service charges pretty much only covers basic administration and insurance, others can be running a pool, gym, 10 lifts, carpark, cinema large grounds, concierge services and other things. 

Some deal with problems as they arise, some build a sinking fund for known future works. 

Some people will love the extra features of the development and be happy to pay the money to contrinbute to their upkeep and running. Others want their small kingdom and have no interest in having access to a pool or sauna and so won't want to pay the fees to run/maintain them or fix them when they break.