Buying a Flat? Beware the Service Charge Rip Off

5 Aug

Anybody who owns a flat as a leaseholder pays a service charge. Fine. The service charge is charged for the upkeep and maintenance of the building.  The management company collects the service charge on behalf of the freeholder and the monies are spent on the building to ensure it is maintained and looking good. This is all fine. In theory…

But in reality – what control do we really have over the management companies and over the spending of our hard earned money?

Yes, we get the accounts of the service charges – usually a year later after they have spent the money, and they provide a future estimate as to what the service charges will be and any works which are planned.

They send out various notices of what they are thinking or planning of doing. They send section 20s because they are planning some major works…and we get our chance to reply…but do they really have to listen?

This issue has come to the fore where a flat I own in a block in London owned by Peabody has been subject to a major works notice. Now earlier in the year they decided they would upgrade the intercom entry systems. I didn’t really think they needed upgrading – but Peabody disagreed. It was happening and I had to pay my share – which was some £300. It sounded quite steep to me – but there was little room for argument so I paid it.

The latest major works is now out of this world. They have decided that to meet current fire regulations the communal hallway of our block of 12 flats has to be painted in fire resistant paint. In principle, I agree with this.

What I don’t agree with is the price.  For painting the communal hallway for our block of 12 flats it is going to cost over £33,000. Yes that is £33,000.  And my share is £2800.

So when I saw the letter, I thought they must have made a mistake. How can it have cost me just £300 for my share of a new intercom system and yet to paint the communal hallway it is going to cost 10 times more? This is paint we’re talking about. And it is just a hallway for 12 flats. And it is a very narrow hallway. And I have no idea how it can possibly cost this much.

And so having not bought fire resistant paint before and wondering why it cost more than liquid gold I decided to do some research. I have found that I can buy fire resistant paint to the standard they need at £10 per litre. Whichever and whatever why I look at this I cannot see how it is going to cost over £33,000 to paint our hallway.

So I have tried to call Peabody who invited “observations” and I observed that given the cost of the paint and the time that it would take that the quote was ludicrous.  I was informed that they use one main contractor, that was the price, I should put my observations in writing and they would “observe” them. That’s it. That’s all they do. When they invite leaseholders to make observations they’re not going to listen. They don’t give a damn if the quote is too high – why would they – they’re not paying the bill – and anyway they get to charge their 20% “management fee” on the works so the higher the quote the more money they make.

So now I am off on a mission to see if there is anything at all I can do to make them listen. I have started rallying the neighbours for support. From talking to other people who have been in this situation before, it sounds like I am wasting time. But, I have to try.

So next time you are thinking about buying a flat beware the service charges, beware the works which are planned and beware that the management company have no incentive to get the best price.  You may own your flat and you may have a lease – but in reality you have very little rights and even less control.

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