Leasehold flats & maintenance charges - ?
Discussion
I have only ever bought freehold houses before, so am completely in the dark. I'm now flat hunting and was hoping someone could clarify what questions I should be asking with regards to leasehold properties and maintenance charges.
The flat I'm viewing tomorrow has a maintenance charge of £2000 p/a. I'm told this is quite high, how would I know what I am getting for my money, and what it would cover the cost of? What if the maintenance company is rubbish and work needs doing? They have my money but how does one hold them to account, are there agreements in place for this sort of thing?
Regarding leases, I guess I would look for the longest lease possible, but what is considered long?
And finally (!) are there hidden gremlins I need to be aware of with regards to share of freehold properties? Am I potentially beholden to the goodwill of the other freeholders and what happens in the event of any disputes?
Is all of this clarified during the conveyancing process? I feel forewarned is forearmed!
If anyone could shed any light that would be much appreciated
The flat I'm viewing tomorrow has a maintenance charge of £2000 p/a. I'm told this is quite high, how would I know what I am getting for my money, and what it would cover the cost of? What if the maintenance company is rubbish and work needs doing? They have my money but how does one hold them to account, are there agreements in place for this sort of thing?
Regarding leases, I guess I would look for the longest lease possible, but what is considered long?
And finally (!) are there hidden gremlins I need to be aware of with regards to share of freehold properties? Am I potentially beholden to the goodwill of the other freeholders and what happens in the event of any disputes?
Is all of this clarified during the conveyancing process? I feel forewarned is forearmed!
If anyone could shed any light that would be much appreciated
OK - lots to consider here.
I have a place back in London is a small block where I pay just over GBP 2,000 per year, which is high for a small 2 bed flat and no amenities other than a full-time (but not 24 hour) porter and maintenance of a small patch of communal garden - but we are adding to reserves for future maintenance (aka "sinking fund") at a healthy rate.
It's difficult to compare maintenance charges as a lot depends on how much of the maintenance charge is going into a sinking fund to cover future major works, and depends a lot on the age of the block and when significant works were last done and the current level of that sinking fund.
Also in my experience charges tend to higher proportionately for smaller developments, lower in larger developments, and obviously higher in developments with more amenities - gyms, pools, large communal gardens etc.
So, in summary, don't just compare on the level of the maintenance charge but get the accounts of the management company and see what reserves exist, look at the condition and age of the building and the common parts and factor that in to how you think about the asking price and level of maintenance charge.
Regarding having a share of the freehold, my experience has been that it is a good thing, particularly if you want to get involved and have some influence over what happens in your development. There's often a need for someone to take on directorship of the freehold company and thereby you can have influence. May be worth seeing if the vendor can provide you with copies of minutes from AGMs etc to give you an idea of whether the board seems to be working or full of petty-minded busy-bodies.
I have a place back in London is a small block where I pay just over GBP 2,000 per year, which is high for a small 2 bed flat and no amenities other than a full-time (but not 24 hour) porter and maintenance of a small patch of communal garden - but we are adding to reserves for future maintenance (aka "sinking fund") at a healthy rate.
It's difficult to compare maintenance charges as a lot depends on how much of the maintenance charge is going into a sinking fund to cover future major works, and depends a lot on the age of the block and when significant works were last done and the current level of that sinking fund.
Also in my experience charges tend to higher proportionately for smaller developments, lower in larger developments, and obviously higher in developments with more amenities - gyms, pools, large communal gardens etc.
So, in summary, don't just compare on the level of the maintenance charge but get the accounts of the management company and see what reserves exist, look at the condition and age of the building and the common parts and factor that in to how you think about the asking price and level of maintenance charge.
Regarding having a share of the freehold, my experience has been that it is a good thing, particularly if you want to get involved and have some influence over what happens in your development. There's often a need for someone to take on directorship of the freehold company and thereby you can have influence. May be worth seeing if the vendor can provide you with copies of minutes from AGMs etc to give you an idea of whether the board seems to be working or full of petty-minded busy-bodies.
How did the building look to you? Gardens well kept, exterior of the building in a good state of repair, communal areas clean and tidy?
Have a chat with some of the other owner/residents. This will throw up any obvious issues.
You can ask to see the management company books - check the the management company is soluble, confirm how much money they have in reserve (sink account), what the situation is like with regards to service charge arrears, minutes of previous meetings and how the service charge has risen historically. Your solicitor will do a lot of this for you if you go ahead with the purchase.
In term of a lease, I would be looking for 75 years plus. However, I'm no expert on these but I'm sure someone will be along in a moment to advise.
Good luck.
pp
Have a chat with some of the other owner/residents. This will throw up any obvious issues.
You can ask to see the management company books - check the the management company is soluble, confirm how much money they have in reserve (sink account), what the situation is like with regards to service charge arrears, minutes of previous meetings and how the service charge has risen historically. Your solicitor will do a lot of this for you if you go ahead with the purchase.
In term of a lease, I would be looking for 75 years plus. However, I'm no expert on these but I'm sure someone will be along in a moment to advise.
Good luck.
pp
Apart from the Management Accounts, I would also want to find out how strong, supportive the other Leaseholders/Directors were in the operating of the Management Company were. There is both enough adice and information on Google to both inform and forewarn the OP, on how a badly or dishonest Management Company can incur large debts for the Leaseholders.
I also happen to be a Leaseholder/Director of a Management Company, being one of four other leaseholder, with a Property Management Company administration the accounts, day to day repairsand remedial works. Each leaseholders annual management charges is £1500, with most going in administration charges and general maintenance.
These links will offer both advice and information on what can go wrong through bad management and the lack of involvement from leaseholders.
http://www.thetruthaboutsolitaire.co.uk/2009/04/16...
http://www.lease-advice.org/
http://www.rpts.gov.uk/
I also happen to be a Leaseholder/Director of a Management Company, being one of four other leaseholder, with a Property Management Company administration the accounts, day to day repairsand remedial works. Each leaseholders annual management charges is £1500, with most going in administration charges and general maintenance.
These links will offer both advice and information on what can go wrong through bad management and the lack of involvement from leaseholders.
http://www.thetruthaboutsolitaire.co.uk/2009/04/16...
http://www.lease-advice.org/
http://www.rpts.gov.uk/
The location will play a big part in the maintenance fees. London would be higher, as it would if were a posh area with porter etc. In Kent where I live it generally is about £750-850 a year for maintenance. Don't forget that you will also have a ground rent fee aswell, although your estimates may alreay include this. Around here it's roughly £250 a year.
What do you get for you money? Well that is very much down to the company. We get the grass cut, windows cleaned and communal areas cleaned weekly. It should also include buildings insurance so you will just need to get contents insurance for yourself. Mine has also paid for maintenance to the road, although that has now just been taken over by the highways agency.
The company that do ours are absolutely useless. They charge twice yearly and you know when the bill is coming because all of a sudden repairs are done.
I would want 75 years lease as a minimum, mine came with 125 years from new.
What do you get for you money? Well that is very much down to the company. We get the grass cut, windows cleaned and communal areas cleaned weekly. It should also include buildings insurance so you will just need to get contents insurance for yourself. Mine has also paid for maintenance to the road, although that has now just been taken over by the highways agency.
The company that do ours are absolutely useless. They charge twice yearly and you know when the bill is coming because all of a sudden repairs are done.
I would want 75 years lease as a minimum, mine came with 125 years from new.
My place is leasehold and i pay £50 a month, this covers grounds maintenance, buildings insurance, maintenance of the external part of the building inc windows. It can be good, i had the cavity wall insulation done a couple of years back for an extra £30, we have also just had new bin stores and front gardens landscaped for free.
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