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Miss Led

The Service Charge Swindle

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I was just about to exchange contracts on a flat when I noticed that the service charge and ground rent that had been quoted previously for a year on the website and brochure was now only for 6 months.

When viewing the property, I had queried the service charge as it had seemed a little low but the estate agent checked with the vendor and it was confirmed. I made an offer and have only now discovered, 3 months down the line and about to sign the contract, that this charge will now be double what I was expecting.

I have spoken to the EA and he was surprised as I was - he has sent me the initial documents from the seller where they had written down the service charge and ground rent per annum, but was infact only for 6 months - surely they knew that?!

I'm not too sure what to do now as I feel I have been misled, but still want the property. Should I ask for money off the agreed selling price to cover these extra costs? Did the seller do this on purpose to make the flat look more attractive??

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I was just about to exchange contracts on a flat when I noticed that the service charge and ground rent that had been quoted previously for a year on the website and brochure was now only for 6 months.

When viewing the property, I had queried the service charge as it had seemed a little low but the estate agent checked with the vendor and it was confirmed. I made an offer and have only now discovered, 3 months down the line and about to sign the contract, that this charge will now be double what I was expecting.

I have spoken to the EA and he was surprised as I was - he has sent me the initial documents from the seller where they had written down the service charge and ground rent per annum, but was infact only for 6 months - surely they knew that?!

I'm not too sure what to do now as I feel I have been misled, but still want the property. Should I ask for money off the agreed selling price to cover these extra costs? Did the seller do this on purpose to make the flat look more attractive??

Because it was their mistake, I definetly think it's reasonable to ask for 1 or 2 years of the service charge knocked off the service price.

You may have to be prepared to walk though.

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is the seller the builder of the flats or a private individual?

does the seller have a VI in the flats (apart from ownership)?

if its the builder, i would hold them to the printed figure for your stay there. if its in the brochure you have good grounds for this.

if its a private seller i would ask for a discount on the agreed price to cover a reasonable period (2-3 years max) of "reduced" service charges

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Dear Miss Led,

When we were looking at flats the service charge was quoted in 6 months in some cases or annual in others. This was because the home-owner sometimes paid the service charge in 6 monthly chunks. It may have been a genuine error. Your solicitor should have the information on how frequently the service charge is paid.

It was taken into consideration when I applied for a mortgage. The bank always asked what the annual service charges were and calculated this, when they determined how much they would lend me. The amount they would give depended on my outgoings and service charges were always included.

You probably did a calculation of your own to see what you could afford to pay back. In London flats the service charges in new builds can be exorbitant. The difference between a 6 monthly or annual figure would be huge.

Someone made an error. You need to take this error into consideration and determine if it is big enough to influence the bank over the mortgage or your own ability to pay

I presume that your solicitor found the service charge discrepancy? They may be able to help would out who made the error.

If so, then you may need to consider if the purchase is worthwhile now. I don't think it would be unfair to ask for a deduction. The vendor may refuse. Bear in mind what you would lose if you pulled out. There may be a case to answer in the small claims court to get some of that money back if you do decide to pull out or cannot reach an agreement.

Edited by Flopsy

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By all means ask and see if you can get a discount off the maintenance charges. Nothing ventured nothing gained.

However what they are this year is by no means a guarantee of what they will be next year. When we were in leasehold a while ago - they went up and up each year. We were in a large block with lift(s) and communal gym and other stuff that we did not want - yet had to agree by way of lease to contribute towards maintenance and upkeep of.

Whilst I do not want to sound a harbinger of doom - there is probably a get out for the estate agent in that they dont guarantee any of the information in their particulars - in that it is down to the solicitor - especially with regard to the lease, ground rent, maintenance etc to check out these items for you.

I am not an EA nor am I affilited to one in any way. I am just someone who has been there before and been on receiving end of such scant information myself, and the (usual) consequences of it.

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Thanks to those who have taken the time to reply so far.

The seller is a private individual and will have nothing to do with the building once they leave.

It was actually me who noticed the discrepancy in the contract and when I queried this with my solicitor, the response was to just 'accept it'. I just feel that I shouldn't be the one to feel stressed about this - it should be the vendor as it was their mistake and I should be within my rights to perhaps ask for more off the asking price.

I would really appreciate any other thoughts on this!

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Thanks to those who have taken the time to reply so far.

The seller is a private individual and will have nothing to do with the building once they leave.

It was actually me who noticed the discrepancy in the contract and when I queried this with my solicitor, the response was to just 'accept it'. I just feel that I shouldn't be the one to feel stressed about this - it should be the vendor as it was their mistake and I should be within my rights to perhaps ask for more off the asking price.

I would really appreciate any other thoughts on this!

I hate it when the professional representing you tells you that you should just live with it as its not important. It damn well is, an extortionate SC can have a material effect on the value of a property.

There are some flats in my target area with charges of over 2500 pa that are completely un-sellable in the current market.

Whether it matters depends upon what the charges are, and indeed whether the advanced charge is actually enough to run the property. It no good buying a property on the basis of an advanced charge of 200 pounds per half year if there's a balancing charge of 1000 at year end.

What you need to do (and what your solicitor should have helped you do) is to look at the three previous year's audited accounts and see how much is actually spent on the block YoY, what you pay up front could be irrelevant.

For a block with no special features, a good service charge is under 600 pounds. 1000 is top end of acceptable (IMHO), over that is too much.

Lifts, gym, concierge, constant hot water can all add considerably to the figures and only you can decide what that feature is worth to you (you should get some indication from the accounts how much these things are costing).

There may also be payments into a reserve fund. You shouldn't discount this, if the block has a flat roof the person in residence when it needs replacing could find themselves with a 5 grand bill. Saving the money up over the lifetime of the roof is so much fairer.

The above is for purpose built flats. Conversions rarely have a properly run management company.

Tim

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Thought i should let those of you who replied know that i asked and got a fair amount off the asking price as a result of this SC error to compensate me for extra that i will now have to pay. Thanks for your advice!

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Thought i should let those of you who replied know that i asked and got a fair amount off the asking price as a result of this SC error to compensate me for extra that i will now have to pay. Thanks for your advice!

That'll make a fine tale of Gazundering if your vendor should happen to have the ear of the meeja ;)

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  • 312 Brexit, House prices and Summer 2020

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