Contingency Fund Query

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    Contingency Fund Query

    Have been letting a flat for nearly 30 years. Many years ago we owners bought the leasehold of the block. We’ve been through many managing agents over that time and have been with the present ones for several years now. The service charge has remained fairly constant for a few years, but this January it leapt up to double the previous amount. Agent says this is for a contingency fund for roof works which are scheduled for 2030. She couldn’t explain why this hadn’t been factored in before or why we hadn’t been given some warning about the increased cost going forward. What with these fees, letting agent etc etc etc, my rental is no longer a viable option for me. Can the managing agent do this?

    why do you need roof works? I assume its a flat roof? as for the agent. if you all 'own' the freehold having bought it some years ago, then you all have a say in how the service and repair charges are arrived at.

    planning for roof work 12 years in advance seems sensible, though are they adding a charge for administrating etc. will the money be 'safe'?

    if you have been letting the flat for 30 years surely the mortgage is so low (due to purchase price) that you could sell for a healthy profit if you need to?


      Thanks for this. I’ll speak to the other owners and contact the agent armed with these questions.

      I am definitely considering the option of selling (bearing in mind capital gains tax implications). I guess it sounds selfish, but if I do sell I’m not really going to be bothered about roof works in 12 years time, but a huge service charge may put off prospective buyers especially in a market where buy-to-let is increasingly unattractive?


        Yes, the freeholder via the managing agent can do this and I presume (since the freehold is owned collectively by the leaseholders) that the managing agent obtained sign-off for the forecast service charge budget from the leaseholders whom are Directors at your development? This is all the authority that the managing agent needs to set and apply a forecast service charge budget ....

        You ask why the contingency was not higher in previous years to reflect the roof works that are due in 12 years time. Well, perhaps that is due to the fact that the building was surveyed recently - at which point the necessity for the roof works became obvious. Had the freeholder via the managing agent charged you a higher contingency element in previous years, you would have been within your rights to challenge the cost - which your freeholder via the managing agent would have had to defend. This would not have been easy to do without an audit trail highlighting the necessity (e.g.) a conditions survey.

        Yes, some buyers might be put off by the size of the service charge demand. Others might be encouraged by the fact that your freeholder via the managing agent is taking active strides to keep the building in a good state of repair.


          It won't be a flat roof, as those don't have a life of much more than 12 years,so should come into a 12 year budget immediately.

          I think you should be glad that they are thinking twelve years ahead. I think you can be almost certain that no new builds include payments for overhauling the roof in 60 years, and many may only look five years ahead.


            A contingency or sinking fund is not payable if the lease doesnt allow it, although its sensible if the LHs & FHs agree to it and there is a bit expense coming up.
            Advice given is based on my experience representing myself as a leaseholder both in the County Court and at Leasehold Valuation Tribunals.

            I do not accept any liability to you in relation to the advice given.

            It is always recommended you seek further advice from a solicitor or legal expert.

            Always read your lease first, it is the legally binding contract between leaseholder and freeholder.


              Thanks everybody for these responses - really helpful. Glad I joined landlordzone this morning!


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