Freehold with Service Charge

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    Freehold with Service Charge

    I've had an offer accepted on a relatively new 4 bed property, however I've found out that it has a service charge for the parking area, seems to be about £300 per year at the moment. I'd keep away for some of the really unfair Estate rent charges which are used to make sure the service charge is paid, they name the service company in the transfer deed, this arrangement seem really nasty and it's near impossible to remove them, plus if you are over 40 days late they can force a repro, mortgage companies are picking up on it now making lending an issue.

    The reason I'm still considering this property is that it will cashflow at over £700 pm, needs very little maintenance, well designed with massive windows and just a place to be in, it's £20k less than anything equivalent which is true freehold. Currently the residents run the limited company which hires the service company, they have recently kicked out the previous service company and taken on a much better one, they also have the option to self manage but no one could that much time, the residents have 4 directors who make the decisions, the the residents are members of the residents company. The downside is that it's not really a true freehold and will have an impact on resale and these type of properties are getting a lot of bad press, it could be the next leasehold problem, also what happens when the clearly committed directors move.

    Does anyone have experience of owning a freehold with a service charge? With the residents controlling the company an acceptable solution, ideally the council should adopt everything but it's more common they don't these days- Walk away from it or continue?

    #2
    You should get your MP involved to spot the scam.

    https://www.moneywise.co.uk/property...ck-small-print

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      #3
      This setup doesn't sound much different to where my mother lives. This is an estate of 30 houses built on the site of a country house that burnt down in the 60's. There are grounds to maintain, so each owner buys a share in the management company, and has to pay around £400 pa in maintenance. Obviously there are some disagreements regarding how the money is spent, but it seems to have been okay for the last 50 years.

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        #4
        Thanks for the info, I have read lots of articles but there seems to be lots of models to apply the service charge, if I was buying it as a residential then I would back out and look for a true freehold. As this is an investment and the potential earning from it makes the decision slightly different, the service charge cost would be fully tax deductible, now the residents have control it might not be too bad, it’s in there interest to keep an eye on costs. I have to find out who actually owns the common car park area’s, if the land was transferred to the management company and we all own a share of that company then not too bad, if however the land is still owned by the developer and it’s leased to the management company at a cost then what’s stops then increase the costs or selling the land to a third party. Anyone have a similar setup?

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