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Service Charge, Insurance and Rates


canaries

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I am new to the buy to let market and need advise please on the service charge, insurance and ground rent I should be paying on average in a city centre appartment. I am currently paying around £1800 a year for sevice charge, £270 a year for ground rent, £366 a year for insurance, £100 a year to approve tenancy. IThese charges seem to be extortionate. I would appreciate any advise on this matter and what I can do about it.

Thanks

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These fees vary from town to town and obviously the quality of the build. I would ask other people in the block what they're paying. You will also be entitled to see the accounts from the management company which will detail expendidture in actual fact you'd be entitled to attend any meetings as well.

Your building insurance would be in with the service charge so i don't know what 'insurance' you are refering to and £100 to approve tenancy is this a one off I don't know what this entails.

cheers

Selkirk

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Hi

Those charges do seem high, but then again I guess you are talking about a very upmarket property? Some thoughts:

- the ground rent will be specified in the lease and unfortunately it is what it is

- the obligation to pay a fee to approve a tenancy should also be in the lease, although sometimes its a condition contained in regulations and its the power to issue the regulations which is contained in the lease. Either way, the charge must be reasonable. An automatic £100 a year sounds a bit unreasonable, but its difficult to say without knowing all the details

- contributions towards insurance are defined as service charges under the 1985 Landlord and Tenant Act, even if they are billed separately. Again, the cost must be reasonable.

- with regard to service charges generally you can request a summary of income and expenditure under section 21 of the 1985 Act. This must be provided within 1 month of your request or within 6 months of the end of the fnancial year to which it relates, whichever is the later. Once you have the summary, you can then ask to see all the paperwork on which the summary is based (invoices, etc).

Anyway, as always with this sort of problem, the two main starting points are to understand your lease and then to gather together whatever information you can, such as the section 21 statement, to give you a clear picture on where the money is going. Once you have done these things, you can start to look at what your remedies might be. Ultimately if you believe that your variable services charges are unreasonable you have the right to apply to a leasehold valuation tribunal to have them changed, but I would certainly do as Selkirk suggests and speak to other leaseholders before considering this option.

Good luck

Preston

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These fees vary from town to town and obviously the quality of the build. I would ask other people in the block what they're paying. You will also be entitled to see the accounts from the management company which will detail expendidture in actual fact you'd be entitled to attend any meetings as well.

Your building insurance would be in with the service charge so i don't know what 'insurance' you are refering to and £100 to approve tenancy is this a one off I don't know what this entails.

cheers

Selkirk

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Hi

Those charges do seem high, but then again I guess you are talking about a very upmarket property? Some thoughts:

- the ground rent will be specified in the lease and unfortunately it is what it is

- the obligation to pay a fee to approve a tenancy should also be in the lease, although sometimes its a condition contained in regulations and its the power to issue the regulations which is contained in the lease. Either way, the charge must be reasonable. An automatic £100 a year sounds a bit unreasonable, but its difficult to say without knowing all the details

- contributions towards insurance are defined as service charges under the 1985 Landlord and Tenant Act, even if they are billed separately. Again, the cost must be reasonable.

- with regard to service charges generally you can request a summary of income and expenditure under section 21 of the 1985 Act. This must be provided within 1 month of your request or within 6 months of the end of the fnancial year to which it relates, whichever is the later. Once you have the summary, you can then ask to see all the paperwork on which the summary is based (invoices, etc).

Anyway, as always with this sort of problem, the two main starting points are to understand your lease and then to gather together whatever information you can, such as the section 21 statement, to give you a clear picture on where the money is going. Once you have done these things, you can start to look at what your remedies might be. Ultimately if you believe that your variable services charges are unreasonable you have the right to apply to a leasehold valuation tribunal to have them changed, but I would certainly do as Selkirk suggests and speak to other leaseholders before considering this option.

Good luck

Preston

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Hi, supposedly is upmarket in the Birmingham City Centre, however Birmingham is oversaturated with new build properties and is rife with re-possessions. I don't have an issue with the ground rent, just require justification and clarification on the high service charges and insurance.

Bought the property off-plan 5 years ago as first investment through a great sales pitch and marketing campaign at the time, however quickly realised Birmingham City Centre wasn't the best of investments, highly over-priced, high risk with no returns.

Will carry out the investigations as you've mentioned and see where it takes me. Gut feeling that I'll need all the luck on this one.

Cheers

Canaries

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Hi

I always say you dont need to be lucky when it comes to leasehold issues, you just need to be right. If you are, the remedies for enforcing your rights are actually quite good.

As a small aside, this week I have received a refund of £454 from a management company for the 2007/08 financial year and that was against an annual service charge of only £939, more than 48% of the total. The managing agents insisted they were correct - and even had the accounts audited to "prove" it - but in fact had fundementally misunderstood what they were entitled to charge to leaseholders under the lease.

The really interesting thing is that they still havent told the other residents!

And by the way, they are a largish national management company; I'm meeting their MD and auditors later this week to see if we can agree how to put things right for the future. If anyone is having problems with a particular managing agent and wants to know if its the same one so we can compare notes, feel free to contact me outside this thread.

Good luck.

Preston

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  • 1 month later...
Hi

I always say you dont need to be lucky when it comes to leasehold issues, you just need to be right. If you are, the remedies for enforcing your rights are actually quite good.

As a small aside, this week I have received a refund of £454 from a management company for the 2007/08 financial year and that was against an annual service charge of only £939, more than 48% of the total. The managing agents insisted they were correct - and even had the accounts audited to "prove" it - but in fact had fundementally misunderstood what they were entitled to charge to leaseholders under the lease.

The really interesting thing is that they still havent told the other residents!

And by the way, they are a largish national management company; I'm meeting their MD and auditors later this week to see if we can agree how to put things right for the future. If anyone is having problems with a particular managing agent and wants to know if its the same one so we can compare notes, feel free to contact me outside this thread.

Good luck.

Preston

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