Sinking fund on exit; how common / unusual?

antokeffort

England. Ordinary leasehold. Not retirement. Instead of paying monthly in the lease for this building, leaseholders pay their sinking fund on exit. It’s 0.5% of the market value per year. When selling the property there is a payment due to the landlord of 0.5% of the market value of the premises for each year of occupation. Ordinary service charge is £125 month.

eddddy

It's unusual for non-retirement properties. What type of freeholder/landlord is it? Is it some type of social landlord or charity?

Are you selling the property, or thinking of buying it?

This can be presented as a positive benefit to people on a lower income and/or tight budget.


For example, let's say the property's current market value is around £200k... You could describe it like this:

• "The annual service charge for the property would normally be about £2500 per year"

• " But you only have to pay £1500 a year (i.e. 12 x £125) at the moment - which is good if you are on a tight budget"

• "The other £1k is effectively deferred and paid when you sell, from the proceeds of your sale."

(But the deferred £1k will be adjusted for house-price inflation - i.e. it will be 0.5% of the market value when you sell.)


But maybe it's a negative factor for people who have spare cash. They might prefer to pay the £1k this year, rather than deferring it and allowing the amount due to increase with house-price inflation.

(But I guess they could invest the £1k - and the investment might do better or worse than house-price inflation.)




According to the lease, how is the £125 service charge per month calculated and/or described? Put another way, what stops the freeholder/landlord increasing the monthly service charge to, say, £250 per month next year?

RedFraggle

I've only seen it once on non-retirement. One block that's a dock conversion (Waterloo Road) in Liverpool 

antokeffort

RedFraggle said:

I've only seen it once on non-retirement. One block that's a dock conversion (Waterloo Road) in Liverpool 

This is also in Liverpool, non retirement. Maybe same management company perhaps.

curiouscal67

Does the lease state a maximum percentage? This is what usually happens so you're not left with an extortionate bill on exit