Service Charge Estimates For 2014

[robfoster1980]

Hi,

I have just received a breakdown of the service charges for next year, on my leasehold flat, and a request for payment for a quarter of these costs in advance, in addition to the ground rent for the first half of 2014.

I have no issue with the ground rent request and this is stated as becoming payable in advance in the lease. There is however no mention of the additional costs being payable in advance although it does state that the insurance should be paid on the 25th Dec/24th June after it has been paid.

I have some serious concerns regarding the service charge breakdown and notice to pay in advance. The breakdown is as follows, mine being 1 of 4 flats in a victorian conversion, costs for whole building. -
Electricity - £170 (for 3 lights...)
Decorations - £500 (i will query what exactly they plan to decorate)
Gardening - £180 (There is one hedge that is the freeholders responsibility)
Building Insurance - £1,487 (seems very high, when running the numbers online?)
Repairs & Manintenance - £1,000 (i will query what exactly they plan to decorate)
Sundry Expenses - £119 (eh?)
Health & Safety - £200 (eh?)
Block Management Fees £1,344 (Again possibly quite high, is there not a standard amount roughly per unit?)

Could anyone advise if these costs are obviously unreasonable, particularly add ons like 'health & safety'? I will be requesting further details of some items and a copy of the insurance premium, could i also request proof that they have obtained 3 quotes?

Lastly in my personal breakdown i have been charged 26% of the total charge while my lease clearly states one equal quarter. Does this make their request invalid and is it up to me to correct them. Can i simply state that as the lease does not allow for payment in advance that i will pay the sums for repairs/redecs once they have been completed and an accurate figure obtained?

I assume I cannot be charged a fee for any of these requests!

Many Thanks for your help

Rob

[ram]

Could anyone advise if these costs are obviously unreasonable

The OVERALL costs as a total would seem low.

Expect the outgoings for a victorian building and grounds to a total of £ 6000 absolute minimum per year.
You are paying about £ 1250 for year 2014, but don't forget, repairs come when needed, drive, roof, walls, sewers, exterior painting, interior painting, so to have to pay £ 3000 each in year 2015 is not uncommon if repairs to that amount are seen to be needed.

Electricity - £170 (for 3 lights...)
if on all night or are 500 watt lights, then maybe, but if just on off interior lights and movement actuated 500 watt exterior lights, then £ 80 should be enough.

Decorations - £500
£ 500 is nothing. it's £ 500 to get out of bed and hang some wallpaper.

Gardening - £180 (There is one hedge that is the freeholders responsibility)
ALL the building and walls and garden etc is the freeholders responsibility. He gets those costs back from the leaseholders. And how many times a year is it cut, and it will be say, £ 40 minimum per visit.

Building Insurance - £1,487
Only about £ 150 high.

Repairs & Manintenance - £1,000
£ 1000 is nothing - for repairs and maintenence. Be thankfull that's all it is next year.
( Need a new roof eventualy, at £ 25000 ! -- so you see, £ 1000 again is nothing.

Sundry Expenses - £119
Should be in with the management fee.

Health & Safety - £200
There will be a need for a fire and safety investigation every few years.
These can be done by a "Responsible person" - to keep the costs down.
Or it's just a yearly walk round the premises and common interior parts to ensure there are no hazzards.

Block Management Fees £1,344
on the high side £ 336 each per year, should be more like £ 150 each.

Some info for you above, but the maintenence costs ( reparirs, ) are VERY low.
Can I come live there, and reduce my outgoings by £ 2000 per year ?

R.a.M.

[leaseholdanswers]

If the demand includes insurance then you explain that as it is not demanded in accordance with the lease, it is not due.

If you cannot locate the clause ask the person billing you where in the lease it allows for these costs to be estimative and billed in advance and on the dates that they have.

Explain with a copy of your lease that your share is 25% not 26% and subject to the above, recalculate it and re-bill.

On the costs under section 19 of the landlord and tenant Act 1985, costs must be fair and reasonable and your enquiry is to establish what steps they have taken to ensure this.

Electricity seems a lot but ask them to assure you that meter readings are being taken at least twice a year so that they are not estimated what the current rate per kwh is and when it was last retendered nb these are not residential rates for you and I.

Gardening everything is the freeholders responsibility but most or all costs are recoverable, State why you think its not.

Running it online is irrelevant as its unlikely that you have the correct declared value, nowt to do with market value, nor the claims history of the block. As in electricity ask them when it was last tendered and what the declared value is and when that was last valued.

H & S any common parts and exterior are subject to a risk assessment as they are used by others and are a workplace/non domestic premises, as well as a fire risk assessment.

Repairs £1000/£1500 look most basic calls outs will top £100 and you only need one drain blockage or blocked gutter, or the excess of an insurance claim, and half the budget is blown.

As there are no standard blocks there are no standard fees- it depends on local rates and the range of duties performed. Frankly the cost and resources to just have building on file, from computer and admin and compliance time space staff premises and overheads, few are going to get out of bed for less than £1000 per annum. It business terms its peanuts.

If you all think that you can do it better and for lower costs then exercise the right to manage.

[andydd]

I assume the costs are a total, and you are expected to pay 25% ?

As mentioned, they seem quite cheap, my FH charges more for insurance for a small two flat building (I aim to challenge this eventually).

Remember that service charges are thyere to recoup costs the FH has spent, if the insurance is £1487 then that is what can be recovered, you have the option of applying to an LVT who may or may not conclude it should be reduced, LVT's are notoriously inconsistent on this issue and upper/high court prescedents are less than helpful but would tend to favour the FH.

Unless you live in a five star property with unbelievable perfect management then the amount seems a bit high and you could argue sundry expenses should be included. (£150-£200 would be more of a norm).

The FH is under no obligation to obtain three quotes for insurance, although if you challenged the cost a court/tribunal might want to see that they made some effort to 'test the market'.

What do other LH's think ?.

[Carine]

With regards to the building insurance, I can guarantee you that you are getting short changed.

After taking over the right to manage our block, we have finally had the possibility to shop around for insurance (a 4 storey structure with 12 x 1 bedroom flats). Insurance used to be nearly £6000, it went down to under £4000 last year. I've just obtained a quote for £1300 - a £2700 saving!

If you have a managing agent or it is organised by your freeholder directly, they simply pay the renewal premium without querying it. They don't really care as you're the one paying it.
As Ram said £200 sounds reasonable. Do argue your case with insurance. Brokers take up to 60% commission, the whole industry is a scam!

Good luck and keep us posted!

[paulamis]

As a few have mentioned, it could be worse.

You could have to pay for accountancy, cleaning, monthly drain inspections and weekly fire alarm tests. And should they do any decoration or repairs, the figures here would not even touch the specification, admin and project management fees.

Check your lease for a clause letting them take a reserve too.

You can challenge any contractual arrangement that costs over £100 per flat per annum.

Mine is 2K pa for a ~80K flat.

[leaseholdanswers]

well no you can challenge any contract and cost. £100relates to contract of +12 months and the obligation to consult

[paulamis]

If you get a bad MA, the contracts can be for 11 months if they even bother, otherwise it can be an ad-hoc arrangement.

I would love there to be a RICs/ARMA rule to stop that but I can't find it.

[leaseholdanswers]

If you get a bad MA, the contracts can be for 11 months if they even bother, otherwise it can be an ad-hoc arrangement.

I would love there to be a RICs/ARMA rule to stop that but I can't find it.

No the contract can be for 12 months. It is only an LTA if more than 12 months. There is no need to make it 12 months less one day or 11 months. Most are 12 months with notice thereafter on 3 months, otherwise there is an arguemnt to say that it is an LTA and some have had success with that argument. If a contract says for an initial period of 12 months it is an LTA.

More complex that it appears. If it has to be retendered and reappointed every 12 months it would be ruinous to continiuity of service and put your charges up.No agent would afford the upheaval and would increase their fees when tendering.