Services charges on an over 55's flat

Thomas_Holding

A friend is buying on these - how can they be sure that the service charges won't go increase a lot in 10-20 years?

oldernonethewiser

They can't.

Unless there is something specifically written into their contract when they buy.

SiliconChip

I don't know about future charges but the chances are they're enormous now, a friend of a friend is selling their retirement flat (asking price £130K) and their service charge is over £4K plus another £1K ground rent.

user1977

Unless there is something specifically written into their contract when they buy.

Which there won't be. The service charge fairy isn't going to make up the difference between what the residents want to pay and what the development actually costs to run.

oldernonethewiser

https://forums.moneysavingexpert.com/discussion/comment/81986724#Comment_81986724

Indeed. Bit of an odd question if the OP's friend is hoping for a reassuring answer.

daveyjp

No guarantee on future increases, but the property should be much much cheaper than an open market flat to offset the costs of potential increases.

Some things to consider:

How old will the property be in 10-20 years?

Any major items of expenditure - lifts, communal heating systems, windows, flat roofs, rewire, security systems, communal areas and facilities - anticipated or planned?
How much is in the sinking fund?

Does sinking fund balance appear healthy enough to pay for any future expensive costs?

Does service charge payment cover sinking fund, or is a percentage of the selling price paid when it is next sold to cover sinking fund payments?

There are other aspects of limited market properties your friend should research.

Albermarle

https://forums.moneysavingexpert.com/discussion/6666932/services-charges-on-an-over-55s-flat

What you can be reasonably sure of, is that if they ever want to sell it then it will not sell easily.

There are some exceptions to this, but also a lot of horror stories about retirement flats being offered for half of the original sale price and still not selling.

GDB2222

I keep getting invited to lunchtime presentations for a local over 55 development that is just being built. The presentations include a free lunch from a celebrity chef plus a concert. It’s just part of the simply massive marketing effort that is going into selling the flats at a premium price.

When these come on the market after the original buyers die there’s going to be a massive drop in value.

Thomas_Holding

https://forums.moneysavingexpert.com/discussion/comment/81986723#Comment_81986723

Actually it is only £1200 pa

Thomas_Holding

https://forums.moneysavingexpert.com/discussion/comment/81986779#Comment_81986779

Thanks for that.

Thomas_Holding

I think I should have rephrased my question.

How can they be sure that any increases in services charges will be justified - and not just as way for the freeholder to get extra money.

I own a freehold house and of course I don't know what costs might come in future - but I do have two advantage IMHO over a leaseholder

i) I decide if the work is neccessary - I can let my carpets go to pieces if I like (I won't)

ii) I can shop around and as I pay the bill am incentivised to do so.