Leasehold, flat new roof £32,000, have to pay in advance

A sinking fund is not a legal necessity, but it makes sense to spread the cost of future large bills relatively painlessly for the residents. It can mean, of course, that a resident pays into the fund over the time they are there and the money is not needed during that time - in which case it should enhance the value of the property on sale.

The principle is also used by local authorities, who, unlike most organisations (companies, for example) have no requirement to charge Depreciation on their fixed assets (buildings, machinery etc) and therefore don't, with the result that when an asset needs major repair or replacement there is no money to pay for it. This happened two years ago with our local Town Council who own the Town Hall. The central heating system failed (it was a thousand years old) and as yet they haven't found the money to replace it, so users of the hall (of which there are many, on a regular basis) sit in their coats and scarves with a couple of electric heaters that barely take the chill off. Of course in the "good old days" the council simply applied to central government for the money - and got it! Surprise, surprise, that doesn't happen any more.

Of course, the amount in the sinking fund may still fall short of the actual cost of the roof replacement but at least it would help.

PoliticsNerd

Like others, I thought there had to be a sink/sinking fund, so I looked it up. They say every day's a school day and I found that, in UK law, there is no general requirement for all freeholders to create a sinking fund (also known as a reserve fund) for their properties. However, as I expect many are aware, establishing a sinking fund can be common practice especially in residential blocks of flats, where it is used to cover future maintenance and repair costs.

Leaseholds are a minefield - that is definitely the case - and sadly, the work in Parliament seems to have slowed, quite possibly because of that very complexity.

I viewed a flat as an investment a few years ago. Fortunately I had a lovely solicitor who read the lease in detail, not all solicitors do. It all depends on how much you’re paying them.
Re the flat I was going to buy. My dear solicitor said dont touch it for the very reason the op is having.
Another ploy lease holders can use ( it’s in the lease) is that you must insure through them.
My partner became an expert on reading leases after these 2 incidents 😉

The last roof repair needed for a flat my son lives in was over £1 million! That was 10+ years ago. The factoring company was brilliant and got a huge grant as it was a historic building. Flat owners paid in proportion based on the size of their flats. The buildings insurance also paid 6 months hotel bills for my son while the work was being done.

Be careful too many cowboys out there it’s a lot of money for a roof. It’s not that long I had mine done half the cost I’m freehold so different terms . Hope everything goes well

Oldcareassistant. one of 48 we all paid about £1000 each

MrsMatt. Is that £32k each? How many flats are there

Half the building is leased to Costa and other half are for leaseholders of which I am one. 32 X 8 = 256,000 which is a cheaper roof but fewer leaseholders to carry the cost

RVK1CR
Thank you

shoppinggirl. shafted by the management
I wish you could give the names of the directors to find out if they have set up the company I am having to deal with.

Aveline

In our block we pay upfront for the the same reasons your management fund gives you. My DH is chairman of the residents committee in charge of organising work currently needing done. It's not a scam. They just have to have the money to hand to pay the contractors. We really don't want to delay the work if the contractors walk off the site if they're concerned at non payment.

The Freeholder should have a Sinking Fund in place. I would write to my MP

The Leasehold Advice Centre will offer advice for free, it is on the net, just search. There is also a free call from a solicitor available.

If it's like my mother's apartment they don't get to choose who does the work there told who they are getting cowboys like the last company

I know this is not helpful but £32,000 sounds like the total for the roof. Why should you pay for it all. That is rediculous.

I think I would get a second opinion if you can.

We inherited a retirement property when my MIL died. The leaseholders applied to the Court for a Right to Manage and several companies came to talk to the leaseholders putting forward their proposals. After researching the different proposals, the committee members chose who they thought would be the best. The chosen company worked well initially. Then they began to drag their heels when things needed fixing or planned re-decoration didn't happen, making various excuses, for instance, they were trying to get the most competitive quote etc. . The committee members weren't pushy enough and let things drift. After 18 months, they broke the news that the 46 leaseholders had been shafted by the management company they had appointed had stolen the service charge funds which amounted to thousands of pounds, and liquidated their company. We found out that they'd done the same to a lot of other sites they were "managing". We couldn't sue them as they were in liquidation. I could never truly trust a management company again after such a bad experience.

My mother is going through the same as you at this very moment the roof was done ten years ago and needs replacing again and the company that did it has gone bust.there are 55 flats in there building of which ten are rented out by the management company they are not required to pay but there rents will go up next year. the owners have not got enough in there fund so are having to make up the difference a few of them can not afford it and are ill with worry it's not right at this point in there lives they are having another meeting this afternoon I will let you know how they get on

When I was a director of our buildings freehold management company we had this. The roof failed unexpectedly after regular inspections. We did all the legals correctly with quotes etc One person refused to pay and delayed things, the builder couldn't accommodate the change in time scale at the same price so we had to get new quotes and an independent surveyor in to manage it, doubling the cost. You have to pay upfront in case people decide to default. It's a nightmare and we also had to get an outside management company in as this one person, a Director who owned one of the flats, was so obstructive and rude to anyone suggesting she had to pay her share according to the lease that nobody could deal with her - we'd have saved thousands of she'd cooperated as prices of materials rose and the condition of the roof got worse. I guess much depends on whether you own a share of freehold or have a landlord you think is trying to line their pockets. The cash should be paid from your funds in stages by whoever manages it.

They all have to pay but getting money from some is blood from a stone. They will be liable for the cost if ever they sell, which would be the cost plus interest which is calculated at base rate plus a % over and above. It is compound so could add up to a significant amount at the end.

The selling solicitor will send a letter to the management secretary and will ask if any money is owed. This amount will then come out of property selling price as well as various fees, before the seller receives anything

Yes it does come back one day but there are people who will never move and will not care a jot about the other leaseholders

Is that £32k each? How many flats are there? That seems a lot of money for one roof. Check your leasehold documents with a fine tooth comb to see what it says. How do they expect someone, let alone several people to hand over £32k at the drop of a hat? Have the 'management' got the quotes for the residents to look at? How many quotes did they get? Sorry for all the questions I worked in construction for many years and it doesn't sound right to ask for that amount of money without a breakdown of costs.

Are all the flat owners paying as that sounds rather excessive. The flat I lived in Exeter which was one of 48 we all paid about £1000 each to replace ours. You should be paying a maintenance charge each year which most management companies would ensure had a sinking fund for emergencies. Also no flat owners can be allowed to refuse because they don't live under the roof. I paid when asked and I was on the middle floor. Ask your management company if everyone is paying else it becomes very unfair.

I would not pay the sum in advance, your solicitor is the best bet to help you.

A solicitor can help by telling you exactly what your legal position is. It's not cheap but, when we had huge problems with a tradesman a couple of years ago, we gladly spent £250 to find out where we stood from someone who knows about this stuff. It didn't help us with the tradesman (we'd signed our money away without reading the small print - PLEASE, everyone, DO read the stuff in tiny font at the bottom) but at least we knew what we couldn't do, as well as what we could. Leasehold contracts are apparently riddled with small print now - that doesn't help you now, of course, but I really would recommend finding a solicitor, preferably one who deals in conveyancing, renting, etc.

Thanks karmalady, that is really useful. Clarification over this is hard to find.

PN each household paid around £2000 in 2007 as a share of the freehold and each then had a legal share certificate. The share certificate went into the house legal pack and was very attractive to any potential property buyer

We managed ourselves for three years ie employed whoever we wanted, did whatever repairs that the residents needed. Then we contracted out to a management company to do the donkey work of organisation, while we the freeholders, held the reins. That process is still working.

We were no longer leaseholders but we were freeholders, in having that share

As I've said mokryna I feel out of my depth with this although I have been taking note of what is (or isn't) being discussed in government.

I think what you are doing is very similar to my friend, where everyone had bought their lease. I think much the same would happen here and very few would run the commonhold areas, services, etc., themselves.

I wonder if the problem with changing the law is the cost of buying out the leases?

In France there is no leasehold, it is only England and Wales who have this feudal system.
I live in a small block of 6 flats. We are unusual in that we don’t employ a ‘syndicate’ to deal with the paper work and employment, like Aveline but deal with it ourselves.
However, as I said this is rare and of course impossible for larger blocks of flats and commercial premises.

The factoring company employ our resident care taker for us as well as arranging our buildings insurances, gardening and maintenance. It's a big job and would be impossible to expect volunteer residents to do it. Apart from anything else, all blocks of flats and residential developments here use factoring companies.

PoliticsNerd

Aveline

There's no leaseholder problem here. It's in Scotland. It's just a building with individually owned flats. We elect a committee to deal with the factoring company we've appointed to organise maintenance.

You did have leasehold, didn't you though Aveline? I thought you did but it had been changed?

How odd to get a Factoring Company to organise your Maintenance!

The interest (over and above your maintenance costs) is calculated daily and must be quite a sum to have to pay.

There was I thinking you had come up with a solution England could use Aveline

PoliticsNerd no. We never had a leasehold. Doesn't happen up here.