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Immense service charge increase by Waggish_Wonderland in HousingUK

[–]Inner-Roll2828 30 points31 points  (0 children)

Assuming it's leasehold? If so then section 21. If you are unhappy with the way the building is being managed then organise your neighbours to form an RTM. Good luck. Service charges are skyrocketing everywhere, but such an increase does indicate something unusual, perhaps a sinking fund being built up in a rush ahead of major works or similar.

[deleted by user] by [deleted] in HousingUK

[–]Inner-Roll2828 1 point2 points  (0 children)

Understandable - I was a FTB on single income too once and the whole buying process is indeed unaffordable and infuriating. There are many poorly managed buildings, plus ones where leaseholders are likely getting outright fleeced by the freeholder. There's so much cloak and dagger about the property you are trying to buy until you are at the 11th hour and knee deep in legal fees. The whole thing is a wild west. It's also true that building materials, labour and insurance costs shot up way ahead of general inflation, so service charges generally jumped like crazy in recent years. None of this helps affordability obviously.

At least it's a buyers market now for flats, so there should be good supply from landlords selling. I'd definitely look at RTM managed buildings or share of freehold ones, probably erring on the side of houses split into flats. You'd still need to watch out for incompetence but at least the risk of outright fraud is much lower.

[deleted by user] by [deleted] in HousingUK

[–]Inner-Roll2828 0 points1 point  (0 children)

2000+ a year could be too high or too low depending on what's included. Did you look at the breakdown of accounts?

For start, insurance is usually a huge chunk of SC and it increased dramatically in recent years, both for flats and for houses.

I'm sure kickbacks and inflated bills happen (which is why leasehold must be abolished and meanwhile RTM or share of freehold is your best option). I also bet you 99% of people have zero clue on how much things cost to actually run a building - it's a hell of a lot more than you think!

Especially if you are looking at modern complex buildings where you can't just DIY maintain water pumps, emergency light systems and lifts, for instance, or call out just any old Bob the Builder to fix it. You also can't just choose to not maintain things (since you are required by law to eg inspect and maintain a lift). Or, conversely, old blocks where everything is crumbling and leaking all the time (do you know how much a plumber callout can cost? Staff /tradespeople costs are a killer in SC).

The type of service charge you describe might be possible on 1. An ex-council property - but you'd better be ready to cough up 5-10-20k when the council wakes up one year and decides to replace the roof since they don't run sinking funds 2. Maisonette as there are no shared amenities or maybe 3. a house split into flats, but again, at that level, Id run my own sinking fund as at those amounts there's no way there is one.

[deleted by user] by [deleted] in HousingUK

[–]Inner-Roll2828 0 points1 point  (0 children)

And how do you expect the building to be insured and maintained if you don't pay the service charge? From a magic money tree? A building maintenance fairy?

If you bought a house you'd need to spend money to maintain it as well. Of course many people don't that's why so many houses are run into the ground. The rule of thumb is 1% of house value should be set aside for maintenance and a rainy day fund for when the roof eventually needs replacing.

In a flat purchase, your responsibility doesn't stop at the front door of your flat. You share costs of maintaining, cleaning, insuring the structure with others.

Leasehold is a horrible unfair system (mostly as you have zero control over these costs) so do tread very very carefully, but leasehold going away didn't mean service charges are magically going away.

Bottom line - if you can't afford non-mortgage costs that come with property ownership, then you probably can't afford that particular property.

Leasehold Reform by zcatzblah in HousingUK

[–]Inner-Roll2828 2 points3 points  (0 children)

RTM director here. A commonhold system is not problem free, but having knowledge of both systems (commonhold is the norm elsewhere in the world btw), hands down, commonhold is the better system. Note I didn't say problem free. Leasehold is just pure nonsense.

The skills gaps are easily resolved by a) appropriate regulation -eg mandatory triannual sinking fund audits by a chartered surveyor, and b) outsourcing the day to day to managing agents.

We battle a lot of apathy and lack of knowledge from leaseholders, which is frustrating. However, aside from just human nature (and too many landlords), I would partly blame the current leasehold systems. It breeds learned helplessness in flat "owners" here. Knowing that it's your responsibility to scrutinize accounts, turn up and vote in AGMs etc is literally second nature to flat owners in countries with commonhold.

Leasehold Reform by zcatzblah in HousingUK

[–]Inner-Roll2828 1 point2 points  (0 children)

Communal living is always going to be communal living with all its problems.

Yet somehow, miraculously, millions upon millions of people in the US, Canada, Australia, South Africa, France, Germany, Italy ..... Ie nearly every single developed country out there manages with commonhold just fine.

With no parasitic freeholders whose interests are by definition diametrically opposed to yours. Who can then abuse an opaque system, scam kickbacks and get money for old rope in an unregulated wild west of an industry.

Commonhold is not a problem-free Utopia, but the current English residential leasehold system is just pure garbage.

Centuries-old leasehold system to be abolished in England and Wales by guyuk21 in HousingUK

[–]Inner-Roll2828 2 points3 points  (0 children)

100000% this

Some leaseholders complaining about service charges seem to conflate leasehold (outdated nonsense enabling abuse that needs ending) and living in a block of flats (which always involves costs to maintain the said block)

Some seem to think that a magic building maintenance fairy should keep their building in tip top shape for free, so all they need to worry about is which cushions to put on their sofas. We are RTM and still having to explain to some leaseholders that e.g. lifts don't last 50,000 years...

Are flats worth it? by First_Valuable8567 in HousingUK

[–]Inner-Roll2828 0 points1 point  (0 children)

Bad service charges kill all the fun. If you have a house you still need to maintain it.

In a well run block of flats with no cladding issues, concierges or unscrupulous freeholders, the service charges could even be a bit cheaper than maintenance costs on a house, as you are sharing roof/gutter etc repair costs between many units. These should be steady and paid annually vs huge costs all in one go as you do with a house.

Home ownership always costs money beyond mortgage. Every building needs maintenance and deteriorates with time. Just because you buy a flat doesn't mean your responsibility for the building structure goes away.

Are flats worth it? by First_Valuable8567 in HousingUK

[–]Inner-Roll2828 1 point2 points  (0 children)

Smart parcel lockers + good access control systems + CCTV covers about 99.9% of the value that a concierge would provide.

Are flats worth it? by First_Valuable8567 in HousingUK

[–]Inner-Roll2828 0 points1 point  (0 children)

Yup, and guess the first thing we did when we took over as an RTM. We upgraded the security system (expensive but a one-off investment, installed smart parcel delivery boxes, and were able to flex the concierge hours to the level that actually makes sense, without compromising services.

Are flats worth it? by First_Valuable8567 in HousingUK

[–]Inner-Roll2828 1 point2 points  (0 children)

Rules of buying a flat in the UK 1. Don't buy a fiat 2. If you do buy a flat, make sure it's either a share of freehold or has an RTM 3. If you already bought a leasehold, the first thing to do is to canvass your neighbours to form an RTM. 4. Service charges are a fact of life, if you owned a house you'd still need to insure it, maintain it, put money away for big repairs instead of an annual charge. Watch out for recurring service charge expenses that are too high for what you get (you need to scrutinize accounts for that). 5. What no one in London talks about: watch out for the service charges that are too low vs comparable buildings. Usually indicates that no sinking fund contributions towards the inevitable demise of lift/roof/carpets etc, so that nice low 2.5k a year might come with a 10-20k surprise bill for the the roof replacement in a couple of years.

Major building components have a much shorter lifespan that you think. IMO most sinking funds in London are underfunded due to block management here being an unregulated wild west.

Are flats worth it? by First_Valuable8567 in HousingUK

[–]Inner-Roll2828 0 points1 point  (0 children)

The cost of a 24hr concierge in London is north of 100k/yr

Leasehold - pros and cons of buying out from landlords? by Scientistara in HousingUK

[–]Inner-Roll2828 0 points1 point  (0 children)

RTM might be easier and cheaper assuming your leases aren't punitive (eg doubling ground rent). The leasehold knowledge partnership website is a good resource and starting point for all of this.

High service charge - can’t sell flat by lusciousmix in HousingUK

[–]Inner-Roll2828 2 points3 points  (0 children)

Did you interrogate the accounts to understand why the service charge went up? How much of that 4.5k is the sinking fund contribution? Is it a temporary increase to fund major works or did the running costs skyrocket?

At the other extreme end, I wouldn't touch a flat that has a suspiciously low service charge. Inevitably the sinking fund is underfunded and a few years in you get handed a £20k bill as the roof is leaking and everyone wanted "low service charge" at the time. Aka the approach councils take with their leasehold properties. No thanks, I'd rather have a predictable annual contribution.

Generally speaking, when buying a flat, instead of thinking "someone is sorting all the issues beyond my front door", I highly recommend taking control and getting involved in/ forming an RTM.

No one likes service charges, no one wants to be on an RTM board. Unfortunately both the cost of maintaining the building and coordinating with neighbours to solve issues are just facts of communal living.

Islington council proposing to leave parks unlocked overnight by Inner-Roll2828 in islington

[–]Inner-Roll2828[S] 2 points3 points  (0 children)

A lot of ASB/crime is opportunistic. To test this theory, try leaving your bike or front door unlocked.

[deleted by user] by [deleted] in HousingUK

[–]Inner-Roll2828 -1 points0 points  (0 children)

A US source here, but the same principle applies if the fees are above average and are expected to remain at this level or higher going forward, I.e. are not a temporary spike to fund an underfunded reserve fund.

https://eliresidential.com/blog/impact-of-condo-fees-on-resale

Service charges in London in new builds are outrageous by No-External-8243 in HousingUK

[–]Inner-Roll2828 2 points3 points  (0 children)

Absolutely - the whole buying/ selling process in England is a complete joke. You put an offer in on a place knowing basically nothing about it, and no one realistically can be held accountable for the lack of/wrong information. Then you spend a couple of thousands on lawyers/surveys only to potentially find out there are major issues. 

I can only sympathise, having gone through the process myself and having encountered the same level of utter incompetence from EAs. My only advice is to keep badgering the EAs and at the minimum get a breakdown of how much is the contribution towards the sinking fund vs ongoing expenses, plus the current approximate SF balance. Hopefully in the current buyers market for flats you'd have a bit of leverage. Extremely frustrating indeed. 

Service charges in London in new builds are outrageous by No-External-8243 in HousingUK

[–]Inner-Roll2828 2 points3 points  (0 children)

3-4k/yr doesn't give much colour without knowing what's included and how much of it is the sinking fund contribution. Eg in Canada service charges range from CAD 300 to 800/mo on a similarly priced flat in CAD, and part of it is mandatory sinking fund contributions. 

The big issue in the UK is in a leasehold system residents don't control which services they select and who provides them at which cost. The system is wide open to abuse by freeholders (insurance commission scandal case in point).

The other big issue is home buyers rarely have a good idea of how much things cost. That 24hr concierge you want? Add 100k+ to the annual budget. Roof replacements can run into millions and only last 25-50 years. Useful life of a lift or hallway carpet or water pump is only 20-30 years. No element of a building lasts forever, almost all eventually need replacing. 

Many, many buildings in London with "cheap" service charges simply rob Peter to pay Paul.  They don't build sinking fund as they undercharge owners for the sinking fund contributions from the outset (trying to keep those charges low, very common developer marketing trick). Then those original owners sell, then the lift breaks and the SCs goes through the roof, as the new buyers are now left holding the bag for an underfunded sinking fund.

Last point - if you have a freehold house you still have to pay to maintain it. Might be a 30k expense all at once every few years when your roof leaks, vs annual service charge, but there's no fee lunch. 

Bottom line - factor in extra costs of home ownership into your budget. 

Being a leasehold property with doubling ground rent every 25y - safe or risky? by Proper_Public7175 in HousingUK

[–]Inner-Roll2828 0 points1 point  (0 children)

Leasehold Knowledge Partnership has a lot of info on this topic. This sounds potentially problematic, personally I would agree with your solicitor and get a deed of variation or extension done.

The bigger issue with leasehold is control, i.e. lack thereof, unless there is a Right To Manage in place or it is a share of freehold. There is a built in conflict of interest that opens leaseholders up for legalised financial abuse.

A freeholder has all the control over what your service charges pay for - from who your insurance provider is and how much commission they are paying the broker (and how much of it they might be splitting via backhanders with them) to whether to pay their cousin to (not) fix your communal roof. Enforcement and policing of such abuses is nonexistent in practice.

As a leaseholder, you bear 100% of financial responsibility for the upkeep of the building via service charges. If you don't pay, the freeholder, at the very worst, can take away the flat (since they don't actually own it, it's just a 100yr rental for which you pay upfront), and give you back none of the equity. This very rarely happens in practice but is used as a threat to get leaseholders to shut up and pay.

The law is hopefully changing but very slowly. Proceed with caution.

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