Buying a flat - surveyor disagrees with service charge?

[hughtrimble]

Afternoon all,

Just had a survey done on a flat that's part of a large estate and whilst the details of findings haven't been released yet, the surveyor has agreed with the value of the flat (so that's good) but disagrees with the service charges. He states they will be higher, so the bank is reducing the mortgage amount by a few k.

Does this sound like the surveyor thinks the property and/or estate as a whole will need significant work in the coming years, or is it just a spot of covering his behind due to the pretty much standard service charge rises that come year on year?

 

[matthab]

You need to ask what the service charge currently is from the maintenance company. Also ask what surplus they have built up and what extra charges have had to be requested which the monthly fee hasn't covered (i.e section 20 notices). Also if you look at the accounts for the apartment block you will get a good understanding if the service charge is covering running the building (Companies house should show profit if all being well).

The surveyor may of seen some work needs doing and the service charge may not be enough to cover them.

 

[hughtrimble]

You need to ask what the service charge currently is from the maintenance company. Also ask what surplus they have built up and what extra charges have had to be requested which the monthly fee hasn't covered (i.e section 20 notices). Also if you look at the accounts for the apartment block you will get a good understanding if the service charge is covering running the building (Companies house should show profit if all being well).

The surveyor may of seen some work needs doing and the service charge may not be enough to cover them.

Thanks for this Matt, good things to chase for thank you. I think I'll have to go through the solicitor as from the outset, the freeholders of the estate have been stonewalling requests for even basic info on service charge details citing data protection..! Informing them of the fact there was nothing in the information I was seeking that was about an individual or about the current leaseholders, resulted in no response...

Thanks again

 

[matthab]

Thanks for this Matt, good things to chase for thank you. I think I'll have to go through the solicitor as from the outset, the freeholders of the estate have been stonewalling requests for even basic info on service charge details citing data protection..! Informing them of the fact there was nothing in the information I was seeking that was about an individual or about the current leaseholders, resulted in no response...

Thanks again

Not a problem, personally if your having problems with communications now think what's its like when you have issues. They are also blatantly hiding something, service charges should always be shown on the advert.

Cut your losses and go else way.

 

[tom_nieto]

Thanks for this Matt, good things to chase for thank you. I think I'll have to go through the solicitor as from the outset, the freeholders of the estate have been stonewalling requests for even basic info on service charge details citing data protection..! Informing them of the fact there was nothing in the information I was seeking that was about an individual or about the current leaseholders, resulted in no response...

Thanks again

Standard idiot response from the management company. Put in a FOI request... that'll really mess with them!

Go through your solicitor and let them deal with it. Don't even begin to proceed on this flat until you have the details of the service charge and ground rent. The vendors should be able to supply the last 6 months of charges.

 

[hughtrimble]

Not a problem, personally if your having problems with communications now think what's its like when you have issues. They are also blatantly hiding something, service charges should always be shown on the advert.

Cut your losses and go else way.

I have the service charges breakdown as provided by the vendor, which is why the issue has arisen - the surveyor/bank says the service charges are too low, hence they're saying they should be higher.

I must admit the contact from this company has actually been very good, except for the quality of responses. Responses received within the day, and passed on to others for a more relevant response (which was actually the same, just worded differently!).

 

[hughtrimble]

Standard idiot response from the management company. Put in a FOI request... that'll really mess with them!

Go through your solicitor and let them deal with it. Don't even begin to proceed on this flat until you have the details of the service charge and ground rent. The vendors should be able to supply the last 6 months of charges.

I have this info, so that's all good. It's the bank who are saying the charges are too low for the property, hence my OP asking what could be causing them to say the charges are too low.

 

[tom_nieto]

I have this info, so that's all good. It's the bank who are saying the charges are too low for the property, hence my OP asking what could be causing them to say the charges are too low.

Glad you’ve got that info at least. Have you had no feedback from the survey? Seems your solicitor has got some work to do to negotiate either a better deal on your asking price based on the survey or at least find out from the vendor why the survey has deemed the charges to be so low. The survey feedback is key here. Put pressure on the vendor to sort this out.

 

[Skillmister]

Glad you’ve got that info at least. Have you had no feedback from the survey? Seems your solicitor has got some work to do to negotiate either a better deal on your asking price based on the survey or at least find out from the vendor why the survey has deemed the charges to be so low.

Neither of those are his solicitor's job?

OP needs to speak to the surveyor and get the reason why they think the service charge is too low. Is it because the property isn't maintained up to standard day to day? Is it because they are aware of a deficit? Is it because they have identified upcoming big costs? (I just dealt with a flat purchase which had an estimated £50k+ works over the next few years which would be split between 4 owners ). Until then its all just total speculation.

 

[Quartz]

the freeholders of the estate

So you're buying a leasehold? Red flag.

have been stonewalling requests for even basic info on service charge details citing data protection..!

Walk away.

 

[fastwunz]

I would want to know the service charge and charges for any upcoming work such as redecoration, roof repairs etc

Lender guidance for surveyors from most banks say that if the service charge or ground rent is rising at too quick a rate then you as a purchaser are at risk of defaulting on your mortgage repayments and so......

Given what you have said, it all sounds VERY fishy and you should trust in your surveyors judgement. He is the professional and should be respected as such - unless you know he has it wrong of course

 

[HungryHippos]

So you're buying a leasehold? Red flag.



Walk away.

Unusual to get a flat on freehold though.

 

[Quartz]

Unusual to get a flat on freehold though.

Really?

 

[tom_nieto]

Neither of those are his solicitor's job?

OP needs to speak to the surveyor and get the reason why they think the service charge is too low. Is it because the property isn't maintained up to standard day to day? Is it because they are aware of a deficit? Is it because they have identified upcoming big costs? (I just dealt with a flat purchase which had an estimated £50k+ works over the next few years which would be split between 4 owners ). Until then its all just total speculation.

In my experience all these things have been handled by the solicitor. They’re getting paid to protect you from poor decision making and advise on these matters. Feedback from the survey is the key next important thing.

 

[matthab]

Really?

Yep, you can buy some flats where the lease is owned shared with the other apartments. Normally has little/no ground rent and lease is extended to 999 years.

 

[hughtrimble]

Glad you’ve got that info at least. Have you had no feedback from the survey? Seems your solicitor has got some work to do to negotiate either a better deal on your asking price based on the survey or at least find out from the vendor why the survey has deemed the charges to be so low. The survey feedback is key here. Put pressure on the vendor to sort this out.

Not seen the survey yet - I only know about the surveyor's issue with the service charge because of the bank reducing the mortgage amount.

 

[hughtrimble]

OP needs to speak to the surveyor and get the reason why they think the service charge is too low. Is it because the property isn't maintained up to standard day to day? Is it because they are aware of a deficit? Is it because they have identified upcoming big costs? (I just dealt with a flat purchase which had an estimated £50k+ works over the next few years which would be split between 4 owners ). Until then its all just total speculation.

Cheers for this Skillmister - shall do when I have sight of the survey, this thread is some preliminary investigating about what might have brought about the surveyor's issue with the service charge (which I only found out about because of the bank).

When you say 'dealt with' is this part of your profession? I haven't dealt with any myself, but walked away from a number of flats precisely becuase of those issues, with vendors having to sell-up becuase they couldn't afford the sudden costs imposed on them to do maintenance work - this would be avoided with a decent sinking/reserve fund, but ex local authority properties typically do not have these funds due to previous successful court challenges. Private blocks of flats typically do have sinking/reserve funds, so any upcoming major works are paid for out of that, with adjustments made to the service charge to try and rebuild the fund.

 

[hughtrimble]

So you're buying a leasehold? Red flag.



Walk away.

Flat in London - vast majority are leasehold. You can get share of freehold, but they are valued far higher (for I'd suggest, good reason, though with share of freehold you can still get difficult situations with the other owners).

 

[hughtrimble]

Yep, you can buy some flats where the lease is owned shared with the other apartments. Normally has little/no ground rent and lease is extended to 999 years.

Indeed, share of freehold. But these are understandably priced far higher and you can still encounter significant difficulties when issues arise.

Naturally I want a freehold detached house! But that isn't happening unless I move out of London.

 

[hughtrimble]

I would want to know the service charge and charges for any upcoming work such as redecoration, roof repairs etc

Lender guidance for surveyors from most banks say that if the service charge or ground rent is rising at too quick a rate then you as a purchaser are at risk of defaulting on your mortgage repayments and so......

Given what you have said, it all sounds VERY fishy and you should trust in your surveyors judgement. He is the professional and should be respected as such - unless you know he has it wrong of course

Got all this - no major works scheduled but equally no major works conducted in the last five years. Have a breakdown of the service charges.

The point you raise about service charges is a good one, and certainly an issue. But finding properties in my budget in the areas I've been looking that do not have service charges (i.e. freehold) has proven impossible. I did find some fixer-upper freehold houses, but the fixer-upper part was realy that; uninhabitable in their current state!

I have accepted that I will be paying service charges and ground rent and also that these are at risk of rising - just something I have to do to live where I want to!