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    • masisu
    • By masisu 16th May 18, 10:45 AM
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    masisu
    Buying a Flat- service charge doubled in the last 4 years
    • #1
    • 16th May 18, 10:45 AM
    Buying a Flat- service charge doubled in the last 4 years 16th May 18 at 10:45 AM
    Hi and great to find you again.

    Decided I would like to buy a flat(as a house is out of budget).
    Viewed 5:
    A) 2 flats with 78/81 yrs of lease(ex council)
    B) 3 flats with +900 yrs left on lease
    I'm interested in B) as more years on lease , plus better environment , peace and quiet, as opposed to council blocks(where very few are owners and/or working).
    All the flat are small 1 bedroom.
    One "tiny" issue, as it usual is with leases..the service charge has doubled(or gone up 90%-95%) in the past 4 years..e.g from 400(in 2014) to 800(in 2018). This is 100/year - meaning in 10 years time it could be well over 1800(considering inflation too).
    There is no sinking fund in none of the flats.
    I've check on all 3 flats from point B).
    Beside the fact that it was difficult (many calls, emails and time 5-6 weeks)to obtain the information above from the management companies.
    Could you advise me as in what should I do, is it a good idea to buy something like this? Thinking of the future repairs which aren't included in the service charge.
    PS I could show some of the annual accounts for the service charges if anyone interested.
    Thank you
    Last edited by masisu; 16-05-2018 at 11:35 AM.
Page 1
    • BBH123
    • By BBH123 16th May 18, 10:54 AM
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    BBH123
    • #2
    • 16th May 18, 10:54 AM
    • #2
    • 16th May 18, 10:54 AM
    Personally I wouldn't buy a property without a share of freehold as pure leasehold means you are at the mercy of Freeholders / Managing agents for works / costs etc.
    Save 12k in 2018 challenge #14
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    • eddddy
    • By eddddy 16th May 18, 11:50 AM
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    eddddy
    • #3
    • 16th May 18, 11:50 AM
    • #3
    • 16th May 18, 11:50 AM
    .
    One "tiny" issue, as it usual is with leases..the service charge has doubled(or gone up 90%-95%) in the past 4 years..e.g from 400(in 2014) to 800(in 2018). This is 100/year - meaning in 10 years time it could be well over 1800(considering inflation too).
    Originally posted by masisu
    It doesn't really work like that.

    If you're interested in the flat, look into the service charge in more detail - to see what it's being spent on.

    For example, a major roof repair/renovation might be planned for 2018 - hence a high service charge of 800.

    But once the roof repair/renovation is done, it might last 20 years - so, hopefully, no more roof repair costs in the service charges for the next 20 years.

    Alternatively, escalating service charges might be an indication of a previously poorly maintained building that's now needing more and more work done on it.


    You can also see if things like managing agents fees and insurance premium have been significantly increased.
    • masisu
    • By masisu 16th May 18, 9:37 PM
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    masisu
    • #4
    • 16th May 18, 9:37 PM
    • #4
    • 16th May 18, 9:37 PM
    Thank you for your replies. My apologies in advance, I'm typing from my phone(hopefully isn't too messy). Forgot to mention the area - Cornwall
    Below there's some information of how they spent the money..here we go:
    2014 / 2015 / 2016
    Accountancy fees 350 / 290 / 300
    Bank charges 44.5 / - / -
    Building insurance & terror cover 1030 / 1120 / 1202
    Common parts cleaning 282 / 676 / 719
    Common parts electricity 361 / 740 / 133
    Electrical repairs 60 / 71 / -
    Fire safety 255 / 266 / 241
    Health & safety - / 175 / -
    General repairs & maintenance - / - / -
    Management fees 1389 / 1620 / 1674
    Total expenditure for the year 4179 / 4728 / 4445

    For 2018(they haven't updated me about 2017):
    Audit fees 370
    Cleaning 875
    Electricity. 600
    Fire alarm 250
    Gen maintenance 500
    Health & safety 175
    Insurance 1535
    Management fee 1765
    Terrorism insurance 50
    Water 1000
    Total budgeted 7120

    I'm yet to find out(they won't tell me)why is there a charge for water(no outside tap, although a tiny cemented yard approx 5x20 feet for 9 flats), and why the electricity and cleaning so high as well.
    PS I've got some pdf's or screen shots with the budgets and expenses, but don't know how to post them
    Last edited by masisu; 16-05-2018 at 11:26 PM. Reason: Tiny mobile
    • masisu
    • By masisu 16th May 18, 11:33 PM
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    masisu
    • #5
    • 16th May 18, 11:33 PM
    • #5
    • 16th May 18, 11:33 PM
    Forgot to mention- flats are pretty new.
    It is a converted building(either from a warehouse, or an ex builders building). It is not older than 10 years- part granite , part brick(no info about proportions given)
    • Norman Castle
    • By Norman Castle 17th May 18, 7:33 AM
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    Norman Castle
    • #6
    • 17th May 18, 7:33 AM
    • #6
    • 17th May 18, 7:33 AM
    Are the water rates paid through the service charge instead of billing individual properties?
    Don't harass a hippie. You'll get bad karma.

    Never trust a newbie with a rtb tale.
    • Tom99
    • By Tom99 17th May 18, 8:03 AM
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    Tom99
    • #7
    • 17th May 18, 8:03 AM
    • #7
    • 17th May 18, 8:03 AM
    The management fees seem very high varying from 30% to 60% of the costs
    • cybervic
    • By cybervic 17th May 18, 9:45 AM
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    cybervic
    • #8
    • 17th May 18, 9:45 AM
    • #8
    • 17th May 18, 9:45 AM
    I might be wrong, but I thought flats with 900+ years lease are usually with share of freehold? If so then you would be able to influence the budget once you owned the place.

    400/pa service charge seem quite low, probably because the flats are new and nothing much to do. Try to find out if the cleaning/electricity/water are going to be permanent items or one off on the budget list. The carpet might need a good clean, or they may decide to hire a cleaner on a regular basis. Which ever way it is, 800 doesn't sound too expansive if the whole building is well looked after.
    • masisu
    • By masisu 17th May 18, 2:36 PM
    • 20 Posts
    • 1 Thanks
    masisu
    • #9
    • 17th May 18, 2:36 PM
    • #9
    • 17th May 18, 2:36 PM
    Guys thank you so much for your help.
    I've just received an email reply from the management company...
    I have few queries regarding of how these properties are being charged for services by your management company.
    I have seen the accounts for 2015, 2016 and 2018.
    The issues with this:
    - management fees seem to vary 30%-60% of the total fees -In 4 years the service charge has doubled

    I checked the Management fee and its still around the 30% and for 2018 its 25%, the SC expenses increase is according to the cost increase in general in the UK

    - there is no garden area, therefore gardening as charge it is not justified;

    I didn!!!8217;t see in the budget any cost for gardening

    - water charge for 2018 is 1000- are the water rates paid through the service charge instead of billing individual properties?

    Yes usually when you have one meter for a few flats the water company will send to the property management one bill and they will have to charge the flats

    - electricity of 900, for 4 lighting bulbs

    You have 2 meters LL Supply and the budget was according to the bills we received I will forward to the property manager to check if we have other thinks beside the bulbs anyway for 2018 the budget is 600

    - there is no sinking fund. If there is, then it's not clearly outlined, as how much and for what period of time it has been accrued.

    The plus in the accounts is auto going to a sinking fund

    Now my questions to you kind people are:
    - gardening(I should've say cleaning) but nevertheless 800 it's alot
    - is the water bill of 1000 covering 9 flats, as it seems quite low for a yearly figure?
    - there is a budget(which I couldn't type the info about as it would've take me over an hour to post it here). 2014-2018 it has been accrued a total of 1900( 400-500 each year). Shouldn't those money return to owners, as money lose some value in time if not used?
    Thank you
    Last edited by masisu; 17-05-2018 at 2:50 PM.
    • Norman Castle
    • By Norman Castle 17th May 18, 7:25 PM
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    Norman Castle
    - electricity of 900, for 4 lighting bulbs
    I'm assuming thats a question you asked. Editing your quote with Q and A would make it clearer.

    Likely to be more than 4 bulbs for 9 flats. Communal internal and external lighting? Smoke alarms? Fire alarm? Communal aerial? I believe this would also be business rates which I believe are higher. Would be useful to know if the management company have found the best deal or even if they are actively monitoring prices. No idea how competitive business suppliers are.

    800 for cleaning depends on the area covered and what is done. Less than 100 per year per flat isn't expensive.

    The 1900 could be held against future costs but hopefully there's a cap on how much is held. This could be used to reduce future bills.
    Last edited by Norman Castle; 17-05-2018 at 7:38 PM.
    Don't harass a hippie. You'll get bad karma.

    Never trust a newbie with a rtb tale.
    • that
    • By that 17th May 18, 7:46 PM
    • 505 Posts
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    that
    Service charges and management fees can be bad and often you have no control.

    My average yearly service charge is 2600, however 4 years ago they did major works which cost 238?? - say 24000. Then had another letter of emergency boiler replacement and an unknown amount. Also yesterday got another letter regarding re-roofing and drainage tenders, fire protection, and metal work repair.

    You often have no say in what is being fixed, and in some cases like electrical communal distribution box which no longer conformed to code was replaced, rather than an extra circuit breaker.

    [Edit:] On my way home tonight met another tenant. We have a slatted wooden fence. The got so old guy to paint it on a part time basis with a brush. the cheap spray fun broke down. There is about 75m of this wood fence and it cost us 7000 to paint.

    The Agent need not choose the cheapest value company, but one that offers the best "value". Some companies are known to bill, then give cash-backs. Also the more expensive the quote, the more money the Agent earns.

    Some agents even have their own companies and hire them to do the work, so collecting profit twice.

    Councils where once better than Private Landlords. The council in NW London is fairly cost effective in works, but the one in South London just make it feel like it is a never ending money pit.

    You may want to know what I got for my 24000? No, not a BMW, but 8 double glazed windows and a door. the windows are rated for 15 years... I will start saving now for 15 years time.

    Also besides paying an agent, the agent pays professional fee to someone to do an evaluation, then consultation fees for professional advice, only then the proposed work. We are not flying a man to the moon here, just replacing what is already there but takes 3 people plus the service agent to do the job.

    Would advise to own outright, or at worse shared freehold.


    [QUOTE]Terrorism insurance 50
    Water 1000[QUOTE]
    Terrorist in Cornwall? the Coalition of Clotted cream criminals of Cornwall?

    I found this post while doing a search on 'water rates', as mine is high for a 2 bed flat 484.15 Yours is 1000??? - Really???

    I think they are taking people for a ride, but if there is an indoor swimming pool, and water fountains possibly not.
    Last edited by that; 17-05-2018 at 9:59 PM.
    • masisu
    • By masisu 17th May 18, 11:53 PM
    • 20 Posts
    • 1 Thanks
    masisu
    Thank you and my apologies for copy/paste the reply email from the management company. The Q and A edit below..

    I have few queries regarding of how these properties are being charged for services by your management company.
    I have seen the accounts for 2015, 2016 and 2018.
    The issues with this:
    Q: management fees seem to vary 30%-60% of the total fees -In 4 years the service charge has doubled

    A: I checked the Management fee and its still around the 30% and for 2018 its 25%, the SC expenses increase is according to the cost increase in general in the UK

    Q: there is no garden area, therefore gardening as charge it is not justified;

    A: I didn!!!8217;t see in the budget any cost for gardening

    Q: water charge for 2018 is 1000- are the water rates paid through the service charge instead of billing individual properties?

    A: Yes usually when you have one meter for a few flats the water company will send to the property management one bill and they will have to charge the flats

    Q: electricity of 900, for 4 lighting bulbs

    A: You have 2 meters LL Supply and the budget was according to the bills we received I will forward to the property manager to check if we have other thinks beside the bulbs anyway for 2018 the budget is 600

    Q: there is no sinking fund. If there is, then it's not clearly outlined, as how much and for what period of time it has been accrued.

    A: The plus in the accounts is auto going to a sinking fund

    The flat is in Penzance. Can't post a link(as new user)- on RightMove , Penzance , St Philip Street.


    PS: EA was bewildered as of how much info I have, and literally told me "we can't help you with anything, as you know more than we do and you've done your homework well and beyond ". But I'm not interested in a praise.
    Yes you're right guys about flats and leaseholds, and I'm trying to pick the best apple from a rotten apples basket. I can't go for a house, and rents over there are beyond a mortgage rate- nevertheless the "lets" that are more affordable don't allow kids(I've got a 7 yr old one)- I've lost count of how many properties lets I've viewed and said "no" when heard about children.
    To user "THAT" I'm really sorry for you, I really hope you get out of that situation- or at least I hope you can afford to live decently. This is exactly what I'm trying to avoid, as I am a person who settles onto something for very long time(I don't do changes often). It's either a flat or living in a motorhome for me and my boy
    Last edited by masisu; 18-05-2018 at 12:05 AM. Reason: too many thoughts
    • that
    • By that 18th May 18, 8:18 AM
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    that
    I would approach (A) and ask how much to extend the lease?

    The council are still often more socially responsible than private companies, and often offer extended payments on large bills. If there is a big bill, will you be forced to sell at a reduced price? Living in an ex-council flat, I have found that nearly all my neighbours work, and the ones that do not are retired

    The problem with bad property is that you may have problems to find another buyer, leaving you stuck with the property for ages.

    is this it?
    http://www.rightmove.co.uk/property-for-sale/property-53111115.html
    This has been sold https://www.kerbappealz.co.uk/properties/7-st-philip-street-penzance-cornwall.-tr18-2dn/
    you could have post a partial link just leave off http://www.
    Last edited by that; 18-05-2018 at 8:43 AM.
    • masisu
    • By masisu 18th May 18, 9:31 AM
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    • 1 Thanks
    masisu
    Hey THAT
    Thank you for links...
    The first link on rightmove(Miller Countrywide)it's the property I'm on about. No bathroom window on this one.
    The second link(Kerb Appealz)is about another flat in the same building that was sold before. This one has a bathroom window.
    Option A) seemed good , except my personal reasons above and extra below:
    - found 4 flats (ex council), all under 80years on lease
    - lease extending would cost 10k-12k(I've inquired)
    - they all needed some degree of renovating(they've all got mould on walls - bedrooms, bathrooms etc)- and high really I don't have the immediate extra money for it. The non council flats do not need extra work, (not in the foreseeable future), all pretty well maintained(inside the flats).


    I can't thank enough you especially and all others, for just..free advice and time to help me and others on this/other posts. You're all kind people
    Last edited by masisu; 18-05-2018 at 12:06 PM.
    • masisu
    • By masisu 19th May 18, 8:23 AM
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    masisu
    Any more opinions?
    What I'm a bit worried about is that the service charge will go up so much, that the property will become unsaleable. I'm not thinking of selling but live there for the rest of my life. Though, should I need to move for unforeseen reasons, will I be able to sell it?
    At a rate of 100 extra a year, in 7-8 years, the service charge for this flat or couple of others similar in the same area will be well over 1600/ year. While this might not sound high for ..say London or Oxford, for Penzance is.
    The management company says this
    At a ROUGH estimate, the service charge may increase to around 825 for next year. I won't know a proper figure until we finalise the budget in November.
    But they also say
    . 1) The repair may already be covered by the money we have for the redecoration work. I will check further. Please contact our contractor Axxx on 074xxxxxx for further details.

    2) The service charge usually increases according to the expenses we have had in the previous year. To give you an idea, please see below the annual cost of the service charge per year;

    2015 422.78

    2016 595.55

    2017 694.11

    2018 791.12

    The property has a December Year End, meaning the budget isn't calculated until we invoice in November. I can't tell you a figure until for 2019 until then.
    I need to move down there desperately for my little one..
    Last edited by masisu; 19-05-2018 at 8:32 AM.
    • NeilCr
    • By NeilCr 19th May 18, 10:11 AM
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    NeilCr
    Who owns the freehold?

    As indicated above do you get a share of the freehold when you buy? Or is it owned by a private company/the builder?

    If the residents own the freehold then you/they have more control of the service charges.

    Beyond that it is almost impossible to answer your question re service charges. I suppose, in the end, it is how marketable the flat/flats are. I had a flat in London where the service charges were much higher than this but it was in a superb position transport wise for Docklands and was easy to sell. My mate bought it but the estate agent themselves would have done as a buy to let.

    You do say a flat is what you can afford so there may well be others in the same position later on. I don't know what the property market is like in Penzance.

    And it depends on the freeholder. Some freeholders are fine - others push the management company to increase the service charges a lot.

    You might get some sense from talking to other residents to see how they feel about the way the block is run.
    • masisu
    • By masisu 19th May 18, 2:11 PM
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    masisu
    Hey NeilCR

    Thank you for your post.
    I have inquired and it's the management company that owns the freehold.
    Market seems alright in Penzance regarding houses(from what I've seen in the past 18 months). They get bought and sold fairly well, might be because they are being bought as holiday homes - therefore no strings attached(leasehold).
    One bedroom flats don't particularly move well, unless something "quirky" about them e.g flat in a old historical building with huge communal grounds(even with under 60-70 years left on lease), or retirees flats.
    The 2 bedrooms get sold pretty fast(in less than 2 months).
    Thank you for the positive outlook
    so there may well be others in the same position later on
    I guess the 1 bedrooms aren't popular as many families(if not all) with lots of children over here- favourite hobby
    Last edited by masisu; 19-05-2018 at 2:18 PM.
    • NeilCr
    • By NeilCr 19th May 18, 5:00 PM
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    NeilCr
    Sorry.

    Just not sure what you mean by management company owning the freehold

    Who is the management company? Is it comprised of residents or is it run by the freeholder who may be the original builder. You need to understand who owns the freehold of the land the block is built on.
    • masisu
    • By masisu 19th May 18, 8:14 PM
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    masisu
    NeilCR the management company owns the freehold, at least that's what Miller countrywide told me about when called them today. It doesn't sound right?
    This management company is a London based property management co, with telephone number and it's called: Moreland Estate Management.
    I hope this helps
    • NeilCr
    • By NeilCr 19th May 18, 9:45 PM
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    NeilCr
    Then I am a bit confused

    http://www.morelandestate.co.uk

    These guys manage estates on behalf of the freeholders by the look of them
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