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Vico

London share of freehold with big service charges

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Hi all,

I've been looking to buy a share of freehold since I didn't really like the idea of a leasehold (I heard too many horror stories of expensive rising service charge) and freehold properties are expensive for me.

I actually begin to understand that "share of freehold" is a pure marketing term design to attract more potential buyers. I thought that having a share in the freehold will entitle me a bit more power about the decisions made to keep the building safe and tidy (= no unjustified expensive service charges).

Anyway I have found a share of freehold 1 bedroom flat in London for roughly 470k (there are 10 flats in the building, which is not a new building). I asked the EA about the service charges before putting my offer: he told me 1200£/year. I thought at that time it was okay, so put my offer, which has been accepted. And now, after receiving the solicitor's documents about the official lease contract along with the historic service charges payments, here is what I've found about the service charges (careful to divide everything by 10, which is what the owner paid to the management company); approximately:

2014: 26000£

2015: 22000£

2016: 23000£

2017: 20000£

and here is the breakdown for 2017:

1200£ for cleaning

600£ for electricity in the communal areas

250£ for bin hire

3000£ for general repairs (!, and this seems to be a pretty stable number since 2014)

480£ for fire alarm maintenance (I guess the batteries they bought were made out of gold)

650£ for general accountancy

360£ for combined H&S and FRA

2700£ for management fees

80£ for bank charges

10000£ for the general reserve ( I guess the sinking fund)

So the total is around 20000£ and so the contribution of the owner to this is 2000£ (way bigger than what the EA told me by email).

Do these number seem reasonable to you or shall I avoid buying this house at all cost ?

I also really wonder why the shareholders don't change of management company.

Thank you !

PS: there is no concierge, no fancy swimming pool, no gym etc, just a bunch of flats. Last but not least, the management company has an awful reputation on Internet with some people saying it should be avoided at all costs.

 

 

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I'm sure others will be able to contribute more but what I can see is a (probably average) £1,000 PA maintenance bill plus the £1,000 contributions to the sink fund. I'd be asking how much is in the sink fund currently and what big works are scheduled in the next 5 to 10 years.

 

Bankside

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I had this problem.

It turned out the management company, whose shareholders were the leaseholders, delayed replacing the ancient centralised heating and hot water system for decades and then needed to raise £4m quickly.  The building management company being owned by the people who live in the flats doesn't necessarily mean that the management company will be well run.

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I’d walk away. 

Share of freehold gives you more power than purely bring a leaseholder, but if you have got a ‘difficult’ management company in place it seems difficult to get rid of them.

i don’t think that some of the charges are that bad, accountancy is too high, as are the other ones you mention, the rest ok.

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Thank you very much for your help guys.

I indeed walked away, and I'm now considering to buy a 100% freehold house !

Now hoping a market crash 🤞

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  • 295 Brexit, House prices and Summer 2020

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      • down 5% +
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