Revealed – the great leasehold service charge rip-off

by Property118.com News Team

9:53 AM, 12th June 2012
About 8 years ago

Revealed – the great leasehold service charge rip-off

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Revealed – the great leasehold service charge rip-off

Revealed - the great leasehold service charge rip-offIt’s likely that if you own a leasehold buy to let property that you have been a victim of the great service charge scam.

Much publicity goes to fly-by-night letting agents whose businesses close leaving landlords and tenants out-of-pocket – but few dare to whisper the rip-off perpetrated by managing agents.

Service charges for leasehold homes – especially apartments – are probably one of the most expensive costs for landlords. For many, they swallow any rental profits on the gap between what comes in from the tenant and what goes out to cover the mortgage and other bills.

The problem is property owners cannot visit a comparison site to find the cheapest service charges – they have to pay what the landlord or agent demands unless they can prove the cost is unreasonable.

The amount paid is generally worked out on the floor area of the apartment as a percentage of the floor area of the block, including communal areas.

So, if a 2,000 square foot apartment is in a 20,000 square feet block, the owner pays 10% of the total cost of repairs.

That doesn’t seem unreasonable until the managing agent puts out the repair to a maintenance company they own or is run by a crony.

Some industry insiders reckon leasehold property owners are paying up to £400 a year too much each on service charges – a staggering £700 million a year in total.

Many leaseholders tackle the problem in one of three ways – if the leasehold property is a house, the leaseholder can buy the freehold and take control of the property.

Flat owners cannot buy their freehold, but they can get together with their neighbours to buy the freehold of their block or form their own management company.

In effect, both options offer the same solution – the flat owners have control of the maintenance of the block and how much the work costs.



Comments

13:17 PM, 12th June 2012
About 8 years ago

At least the management for my wife’s flat is done by a management company that all of the leaseholders are shareholders in.

However there is a charge for “permission to rent” and to record the details of each new tenant. Both of these seem to be set by some of the large freehold management companies at a level that akes them a nice profit. Given the freeholder does no work apart from collection grand rent I can see how these charges can be justified.

Cal Mellin

17:55 PM, 12th June 2012
About 8 years ago

I have a leasehold flat in a beautiful grade 2 listed building in Brighton but cannot buy my freehold because the majority of the flats are owned by a relative of the company running the mtce/service company and therefore cannot get a majority vote!

18:01 PM, 12th June 2012
About 8 years ago

Hi all go to google and type in leasehold property nightmare a very interesting story.
Mitch Leicester

20:01 PM, 12th June 2012
About 8 years ago

i have this very problem with various management companies that i deal with, im clearly being ripped off which i know and it makes me incredibly angry, but it is quite difficult for the leaseholders to gain control of the management the whole process is rather confusing and its often very difficult for the leaseholders to all get together and agree to do something about it. so the management companies continue to get away with it purley because leaseholders dont really know or understand how to actually get rid of the management company. I would love to name and shame a certain management company in Reading berkshire but i would probably end up in court.

11:41 AM, 13th June 2012
About 8 years ago

These issues make me very unlikely to buy a flat unless the yield is very good, I don’t like costs that are not under my control.

17:47 PM, 13th June 2012
About 8 years ago

COMMENT EDITED BY MODERATOR

Why end up in court for naming rip off management companies and freeholders?

Do a google search for David Glass, PMMS Ltd and E&M Ltd, plenty of interesting articles about them are posted on other people websites.

Government does not protect leaseholders!

John
acooldude@gmail.com

10:54 AM, 16th June 2012
About 8 years ago

Yes indeed - we are also being ripped off by unscrupulous managing agents. In our case they want to charge exhorbitant grounds maintenance charges when we have no grasssed areas. they charge for window cleaning but do not do it and the list goes on. When we complain they ignore our correspondence! Of course we do not want to complain publically as this will lower the marketable viability of the block when we come to sell. All our flats are in Buckinghamshire.It does need regulating

terry sullivan

13:39 PM, 16th June 2012
About 8 years ago

i think these charges are illegal--unfair contract legislation may apply--but need govt to sort

8:00 AM, 17th June 2012
About 8 years ago

I've lease hold apartment in Cardiff. Other apartments in the block are rented out. Don't know how to get hold of other apartment owners to discus the issue with management company.

2:24 AM, 18th June 2012
About 8 years ago

I think it is £1.20 a pop with LR to find the address for the owner of each property.
Perhaps worth it to be able to communicate with all of them.
The only chance you have of taking over.
I think you all have to agree thoughI don't really know.
I am sure there is some sort of advisory body that deals with these issues, can't think of it at the moment,...anybody else?

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