Do you own a flat? If you do, then the chances are that it is leasehold. In London, half the city’s entire housing stock is leasehold, and nine out of 10 new-build properties are sold in this way.
This means you will have a landlord, known as the freeholder, and will also be paying a service charge — an annual fee to cover things such as building insurance and the upkeep of communal areas. A managing agent is often employed to oversee these duties but, frustratingly, the property-management industry is unregulated, so it’s hard to know if you’re getting value for money.
I bought my leasehold flat in north-west London in 2013 and was amazed to see how high the service charge was for a poorly maintained building. It was also the complaint of my neighbours, who felt the managing agent was indifferent to our concerns.
Then, in 2015, the opportunity came up to buy our freehold, which we did. The managing agent was now reporting to us, and unsurprisingly they became more obliging.
I was pleased that the service had improved but I started to do some number-crunching. A cursory look at our service charge breakdown revealed we were still being ripped off by inflated maintenance contracts.
The reality is that managing agents rely on customer apathy. Let’s face it, you come home after a long day at work and just about have enough time to cook dinner. Do you really want to start poring over building quotes and receipts?
INSURANCE COMMISSION
The answer for most of us is no — but when you see the rewards, the incentive grows.
Our annual insurance bill in 2013 was £68,000. As soon as we acquired the freehold, we asked a broker to find us a better deal. We immediately saw a double-digit reduction in the bill and now, in 2017, we pay £38,000 — nearly half.
This is all too common: freeholders adding sky-high commission onto insurance contracts, which are then facilitated by the managing agent. This was one of many examples where I felt the property manager had failed to act in our best interests, and decided we needed change.
CHANGE AGENTS
Earlier this year I called a meeting of the residents’ committee and put forward the suggestion of changing agents. There was support for the idea but people didn’t know where to start. Nor did I, so I started to do some research. I spoke to friends, searched the internet, looked at review sites and found out who managed the blocks I thought were well maintained.
We came up with a shortlist and invited three companies to visit the block and send over a tender document. In it we asked them how they would make cost efficiencies and bring up standards, should they be awarded the contract.
One agent stood out from all the others — they made carefully considered suggestions and proposed changes we hadn’t thought of. Best of all, their annual fee was a massive £15,000 cheaper than our existing agent, meaning a tidy saving of £120 for each flat owner. We negotiated a few clauses in the contract and signed with them.
Even if you do not own the freehold to your block, all of this is still possible. It’s worth asking the freeholder first if they will change agent, but if you don’t have any luck, you can enforce your statutory right to do so, known as Right to Manage.
You must meet a set of criteria and normally have at least 50 per cent of leaseholders in the block willing to participate. With it also comes a greater share of responsibility, but for many it is a good way to have proper control over one of your most valuable assets.
You’ll always get people who want the easy life and are happy for the status quo to continue, but if you know you can get more for less, don’t settle for second-rate service. Your neighbours will thank you for it.
http://www.homesandproperty.co.uk/property-news/buying/how-to-save-a-fortune-on-leasehold-service-charges-a113946.html
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