[Finance] Leasehold flat service charges

[boik]

Thought I'd consult the wise on here while everyone is still on a high.

We helped our daughter buy a studio flat about 7 years ago. The service charge was £40 per month and went up to £60 just after she moved in. She casually mentioned yesterday that it has now gone up to £260 per month, or about 30% of her mortgage payment.

I have never been involved in leasehold before but that rise seems truly excessive. All I can see that she is getting for that is grass cutting and the lighting in communal areas.

Does anyone have any experience to compare with? Is that the going rate? Is there any legislation to limit rises or any method to appeal?

As always, any advice/comparisons gratefully received. UTA!

 

[LamieRobertson]

Were there any special works in the past year…or planned ones that may suggest the rise is temporary?
….my grass cutting charges aren’t that high!

 

[Springal]

Have they said why ? Are they expecting any big works coming up perhaps?

Depending on how big the block is see if they can get enough support to do the management themselves as these management companies are rubbish and charge huge fees for simple tasks.

When I had a flat I was blessed that it was run by a committee and was very reasonable and accountable

 

[deletebeepbeepbeep]

For a small block of flats I think going rate is £100pm/£1200/year but widely varies based on amenities, i.e. any lifts, pools, on site security etc etc and then short term variations or one off costs to undertake repairs.

 

[The Optimist]

The rise is incredible, but the original charge of £40 seems very low. I live in a 17 storey new build tower and our service charge is about £200 per month (I forget the exact split of service charge to rent - it's shared ownership so part rent part mortgage). The costs include lift maintenance, pest control, concierge, fire risk assessments and associated works, buildings insurance, landscaping, heating and lighting of communal areas, etc. I could probably find an annual summary.

 

[spongy]

We are having the same issues.

We bought our flat a year ago with a £350.p.a maintenance charge.

After 2 months we and a letter from them saying it was increasing to £650 which is mental.

We've tried to contact the management company but "apparently" they were compromised by a massive online cyber ransom attack.

So they are "uncontactable" whilst they rebuild their entire IT presence.

That was 10 months ago and this is still rumbling on.

Seriously not happy with them.

But I'm talking about Clarion here so I'm not entirely suprised.

 

[LamieRobertson]

Have they said why ? Are they expecting any big works coming up perhaps?

Depending on how big the block is see if they can get enough support to do the management themselves as these management companies are rubbish and charge huge fees for simple tasks.

When I had a flat I was blessed that it was run by a committee and was very reasonable and accountable

My experience has been that the ones who invoke their right to manage and appoint their choice of MA have happier residents as they have a bit more control …it does though rely upon a few people willing to take on the burden of responsibility and as we all know some people are never happy no matter what

 

[Springal]

My experience has been that the ones who invoke their right to manage and appoint their choice of MA have happier residents as they have a bit more control …it does though rely upon a few people willing to take on the burden of responsibility and as we all know some people are never happy no matter what

Yep. I was lucky as it was 40 flats, in 6-9 flat blocks, mostly owned by the reidents who lived there but when I moved out they were struggling to get ‘new blood’ involved, most who ran it were in their 60s - 70s

 

[PeterT]

You should get a set of accounts annually to be able to see where the money has been spent. Sometimes the extra costs are for future works that are drawn from the funds already charged, and building up such a fund is not uncommon as long as the future spend is reasonable and details of it are visible.

I have rented out properties in Brighton and Hove, I would say anything around £1,500 annually for a 2 bed flat is about par, but as others have said it depends greatly on the amenities and whether it includes lifts etc. and it can vary accordingly. £40 seems very low, maybe the £260 includes some catch up as well.

 

[Herr Tubthumper]

The wife has a lot of experience with this recently. In short, there might be reasons for the increase, as others have suggested. You should ask for the accounts and an explanation for all costs. You can then check these, see if you are being charged market rates and also see who is doing the work and how it’s being assigned.

The Frau has a Brighton flat she rents out and the freehold was recently sold to a company who installed a management company which we discovered was connected to them. Their management fee increased a fair bit, but these are hard to challenge even though the manager was appalling. We then investigated other things like a surveyor who turned out was known to them/friend who’s fee was blah-blah plus 15% of work recommended. He therefore had a vested interest in driving up the work. We found many other examples like this. The company was run from a small house in Essex. Suffice to say we binned they were binned off under Right To Manage.

If anyone needs a decent solicitor to handle rogue property people go to DeanWilson. If you want decent management go to Ellmans.

 

[The Antikythera Mechanism]

The management company should provide a breakdown of how the service charge is calculated. I have two flats that I rent out (not in Brighton) and the SC is £1.5k each per year ( went up £10/week on last year) but I get a full listing of all costs. 25% is a reserve fund, 25% insurances and 12.5% management fee,

 

[Lyndhurst 14]

This does seem a very big hike which should have a reason behind it as service charges should stay at a similar amount with any allowance for inflation and maybe a premium for attracting more scarce tradespeople who may be needed like plumbers etc. It may be that an anticipated major maintenance / renewal item has come up like a roof renewal - but there should also be a sinking or reserve fund established by the management company to cover these events.

Unfortunately leaseholders are at the whims of the management company appointed by the main freeholder. Buying out the freehold where possible always seems the best option, as you can then hire or fire management companies based on their performance.

 

[Rookie]

The leasehold advisory service is your friend here. Free government service which (surprisingly) is really helpful

 

[Herr Tubthumper]

This does seem a very big hike which should have a reason behind it as service charges should stay at a similar amount with any allowance for inflation and maybe a premium for attracting more scarce tradespeople who may be needed like plumbers etc. It may be that an anticipated major maintenance / renewal item has come up like a roof renewal - but there should also be a sinking or reserve fund established by the management company to cover these events.

Unfortunately leaseholders are at the whims of the management company appointed by the main freeholder. Buying out the freehold where possible always seems the best option, as you can then hire or fire management companies based on their performance.

Alternative and cheaper option is to invoke RTM.

 

[boik]

Thanks guys. Shes going to try and dig out the accounts. She seems to remember something about fire doors, but I've not seen any changes to the doors since she's been there. I'll make a note of the leasehold advisory service which sounds like it might be useful.

She might be looking to sell later this year and we were wondering if the seemingly high charges might put of prospective buyers.

I do love NSC, there's always sensible people who know lots of useful stuff.

 

[Zeberdi]

As always, any advice/comparisons gratefully received. UTA!

Consider buying a share of the Freehold. Get together with other leaseholders in the building in a meeting to discuss options. ( A freeholder has to by law offer qualifying leaseholders first refusal if he is thinking of selling.)

It’s been a long time since I bought a freehold of a flat - 1990 - but I did it because the maintenance fees were getting frankly outrageous- got together with other leaseholders and made an offer - best thing we ever did. We had to set up a limited holding company at the time but now you can do it as a ‘collective enfranchisement’ which simplifies the whole process. You may have to renew some leases first but this can be done at the same time a solicitor transfers the freehold title.

Collective Enfranchisement - Getting Started - The Leasehold Advisory Service

Outlining the qualification criteria and procedure in relation to collective enfranchisement (buying the freehold) of a residential leasehold building (flats)

www.lease-advice.org

It not only allowed us to get essential maintenance done (which the freeholders repeatedly failed to do but reduced our maintenance bills from over £1500 each per year to £550 with an agreement to ‘save’ from that for large projects

 

[Brian Fantana]

I've had a similar issue with a flat I own in Woking. The reason for the MASSIVE rise in fees last year was all down to an enormous associated jump in buildings insurance for the development as a result of it having similar cladding to what was in use on Grenfell Tower. Depending on the age and height of the development, something like that might be to blame. In my case, total service charge/ground rent went from c£1200/year to nearly £4000 when comparing 2021 with 2022.

 

[BNthree]

The Frau has a Brighton flat she rents out and the freehold was recently sold to a company who installed a management company which we discovered was connected to them. Their management fee increased a fair bit, but these are hard to challenge even though the manager was appalling. We then investigated other things like a surveyor who turned out was known to them/friend who’s fee was blah-blah plus 15% of work recommended. He therefore had a vested interest in driving up the work. We found many other examples like this. The company was run from a small house in Essex. Suffice to say we binned they were binned off under Right To Manage.

That's just the usual practice isn't it? When I last had leasehold the management company "awarded" the cleaning, maintenance, etc, etc contracts to their own sister firms. All completely legal and as long as the cost was less the £1000 no need to consult with the tenants (at the time at least). It's all a racket.

 

[Tom Hark Preston Park]

That's just the usual practice isn't it? When I last had leasehold the management company "awarded" the cleaning, maintenance, etc, etc contracts to their own sister firms. All completely legal and as long as the cost was less the £1000 no need to consult with the tenants (at the time at least). It's all a racket.

This. It's legalised extortion

 

[Herr Tubthumper]

That's just the usual practice isn't it? When I last had leasehold the management company "awarded" the cleaning, maintenance, etc, etc contracts to their own sister firms. All completely legal and as long as the cost was less the £1000 no need to consult with the tenants (at the time at least). It's all a racket.

Possibly. And to be fair the issue wasn’t so much him or his initial charge, more the fact he was on a 15% kick-back of the costs of any work he suggested. There’s a huge conflict of interest there. There was another case of someone on 10% as well. The management company also charged a standard fee for their management….but then very quickly started adding to this with items which they claimed were outside the scope of the standard fee. They were smart and operated within the law, but they were at the very edge of the law.

We dug a lot further and their MO is to buy cheap freeholds at auction from anywhere in the country, impose their own management, and see how long they can get away with it.

Yes, it’s a racket.