Revealed – the great leasehold service charge rip-off

by Property118.com News Team

9:53 AM, 12th June 2012
About 9 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

Mark Alexander

8:03 AM, 18th June 2012
About 9 years ago

Try:-
Name: Roger Hardwick
Title: Head of Enfranchisement
Email: rogerhardwick@brethertons.co.uk
Phone: 01295 661453
Fax: 01295 277648
Post: Strathmore House Waterperry Court Middleton Road BANBURY OX16 4QD

15:01 PM, 8th July 2012
About 9 years ago

For the people who are worried about naming and shaming their managing agents, visit blagger.com. Our agent is regularly named and shamed on this site, it's great (and the least they deserve)

Mark Alexander

19:01 PM, 8th July 2012
About 9 years ago

Silly question perhaps but if they are so bad why are they still your agent?

17:50 PM, 25th July 2012
About 9 years ago

I too have a query on this area - My husband and I own a leasehold property with a difference, it has it own front door, a small 3 foot garden area to the front and a garage which is accessed via the only commonly shared area for the property - it is commonly referred to as a Coach House (on a Barratts estate). We pay 2x six monthly maintenance charges c£450 each and 2x ground rent. In the past we have not taken out building insurance but have contents insurance for a marginal amount to cover carpets etc
Up until recently we were under the impression that we were covered for by the leasehold for building insurance, however, our tenants had some mishaps in the bathroom recently and it caused damage to our walls and flooring - my husband undertook the remedial actions but I thought we should have claimed on the insurance as the ceiling of the shared walkway was damaged so I called the property management company (Peverel) and was told that we would only be covered for any shared areas - ie if our property was in a block of flats and the damage was in the hallway we would be covered but as this wasn't the case we were not covered; this was a shock and got us thinking then what are we covered for and why are we paying so much towards maintenance when it did not even cover getting our grass in the front mowed as part of the maintenance.
Can anyone advise on how we can go about ascertaining where we stand and how to go about it - I am very concerned because if there was an acidental fire or the likes in our property does this mean we will not be able to claim off the leasehold insurance?? Help !!!

Mark Alexander

23:10 PM, 25th July 2012
About 9 years ago

I'd suggest you get together with the other leaseholders to form a group with a view to buying the freehold interest in the properties yourselves. You can also challenge the management fees. Both will require legal advice which may not be economical for you as an individual though. Therefore, meeting with the other leaseholders makes sense if you can agree to split the costs. If you need a specialist solicitor to help I know a very good one, just let me know,

Lauren Wadey MIRPM, AssocRICS, CIHM

10:06 AM, 21st June 2013
About 8 years ago

I know I am a little late on the uptake here but the initial thread came to my attention and as a REPUTABLE managing agent I felt compelled to reply.

@Satish- please do take Paul Barretts advise and get the land registry docs with the other leasehold details. Get in touch if you need any help doing so.

@Cnicholls and @Retep - have you considered the Appointment of a manager under Section 22/ 24 of L & T act 1987? You only need 1+ leaseholders to instigate this action but there are certain conditions (reasonableness might be most appropriate here. that apply so check out the link below. http://www.lease-advice.org/publications/documents/document.asp?item=18
in short you get the LVT to appoint an agent of their/your choice. a good alternative where there is not enough support for a RTM.

@mitchlevy - I googled leasehold property nightmare and there are loads of them now, which one were you referring too?

@bob2001 - do you still use blagger.com, I just checked it out, its quite basis but if popularly used i will promote.

As for the article itself, Mark Alexander I think a response would make an excellent first google blog? what do you think?

Mark Alexander

13:19 PM, 21st June 2013
About 8 years ago

@Lauren, great idea, I look forward to reading it. See >>> http://www.property118.com/suggest-an-article-or-discussion-sharing-best-practice/

Rob

13:39 PM, 21st June 2013
About 8 years ago

@bill I have property in reading and have multiple problems with a management company I deal with, I wonder if its the same one? Can you give a clue?

Chris Amis

0:24 AM, 29th June 2013
About 8 years ago

Many suggest self-management in various guises - Note that flats over shops have limitations to make it much harder.

The suggestion to use LVT to remove a manger S.24 is risky and not cheap if you loose, they can only go on the regulations and it is quite easy for an agent to say, write a 364 day contract to sidestep them.

Ann Jones

15:16 PM, 11th March 2014
About 7 years ago

I own a leasehold flat which is on the ground floor of a converted Victorian terrace. The managing agents have sent me an invoice for 50% of the £30k bill for external works and redecorations. What powers do they have if I do not agree this level of works are required.

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