Reasonable repairs fund value for block of flats?

[OxDoc]

Hello, I'm a leaseholder in a block of 15 flats. The service charges we've been paying have been exceeding the freeholder's expenses by around £4,000/yr and this has been put into a major repairs fund, which is now worth around £30,000. Whilst I favour having a moderate reserve fund to ensure that urgent repairs can be carried out, I'm wondering why it needs to keep growing at this point, tying up leaseholders' funds. I've asked the freeholder several times if he has a plan for how large the reserve fund will be allowed to grow before the service charge is reduced or whether he foresees particular large repairs in future, and he just gives vague responses about there being a possibility of an expensive repair one day and doesn't seem to want to consider reducing the charge.

So I was wondering what are your opinions about how large a major repairs reserve could reasonably be for a block of this size? How much would the largest repair job that is needed one day be likely to cost (e.g. a roof replacement)? For some context, the block is only 17 years old I think, 3 stories high and the roof area covers about 5 flats (which I thought might be relevant since replacing the roof one day will be a major expense). Actual maintenance costs have been ~£3-4,000/yr. The lease doesn't seem to say anything about paying into a repairs/reserve/sinking fund, so I think I may be able to legally challenge the charge if it came to it, but would want to feel sure that the freeholder is actually being unreasonable.

[Richlist]

Your sinking fund of £30K is not unreasonable.......it's less than £2K per flat.  I have flats in a development of 90 properties in total & our reserve fund has at times been as high as 50K. This may seem large but external decoration every 4 years can be £25K and we just had roofing repairs of  £15K +.

What the freeholders &  leaseholders rights & obligations are will be detailed in your lease, read it carefully. Every lease is different so it's difficult to advise.

I've had situations, when purchasing leasehold property of the seller wanting me to pay more than the asking price due to the high reserve fund held for that development. I always refused but often wondered if others ever agreed. It's not unusual in a sharply rising market where the seller has contributed over the years to the reserve fund but it's the buyer who will likely get the benefit from it.

[OxDoc]

Thanks for your reply. Do you have a feeling for at what point the fund value would start to seem unreasonable?

[Richlist]

I have no idea other than my own opinion.

I think I'd feel ok if the sinking fund equated to £5K per flat but even that doesn't sound over the top for a long term maintenance plan.

Perhaps another way to look at it would be ......17 flats, total value say £3 million, reserve fund £85000 = 2.8%. Again doesn't sound extreme to me.

Any leasehold property with a large reserve fund might attract a top price and/or be easier to sell.

I think there is a leasehold advisory service. If you are sure there is nothing contained in your lease then contact them. A web search should provide contact details.

[OxDoc]

OK thanks, it's useful to know what others think is reasonable even if it's hard to be precise. I don't feel a need to take it further if there's nothing wrong.

[Eve]

On 4/1/2021 at 8:54 AM, OxDoc said:

Hello, I'm a leaseholder in a block of 15 flats. The service charges we've been paying have been exceeding the freeholder's expenses by around £4,000/yr and this has been put into a major repairs fund, which is now worth around £30,000. Whilst I favour having a moderate reserve fund to ensure that urgent repairs can be carried out, I'm wondering why it needs to keep growing at this point, tying up leaseholders' funds. I've asked the freeholder several times if he has a plan for how large the reserve fund will be allowed to grow before the service charge is reduced or whether he foresees particular large repairs in future, and he just gives vague responses about there being a possibility of an expensive repair one day and doesn't seem to want to consider reducing the charge.

So I was wondering what are your opinions about how large a major repairs reserve could reasonably be for a block of this size? How much would the largest repair job that is needed one day be likely to cost (e.g. a roof replacement)? For some context, the block is only 17 years old I think, 3 stories high and the roof area covers about 5 flats (which I thought might be relevant since replacing the roof one day will be a major expense). Actual maintenance costs have been ~£3-4,000/yr. The lease doesn't seem to say anything about paying into a repairs/reserve/sinking fund, so I think I may be able to legally challenge the charge if it came to it, but would want to feel sure that the freeholder is actually being unreasonable.

The Lease is KING so read it.....if the lease does not require you to pay into a reserve and sinking fund then quote that clause back to the freeholder/mangeing agent. Also under L&T Acts in particular section 19 (1)any payment asked for in advance needs to be reasonable.

 

The lease will tell you when decorating works require doing normally every 3/ 5 years - have they done this? The reserve fund is not for emergencies it is for specific items of expenditure which will be in your lease..read the lease

[leonardgeryol]

I’m not an expert in this domain, but I know how much a constrictor’s services might cost, and that’s a lot. They can easily require more than £20K for roofing work or external renovation. This stuff is expensive nowadays, and keeping the fund is smart.
Just hiring a professional roof company would cost you a lot, and I’m not talking about construction material expenses. Everything costs a lot nowadays, and your freeholder would probably have to increase the service charge. There’s a similar issue in my house, too, and we still cannot decide what to do, even though our fund is more than £40K.