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

It’s standard practice when buying a leasehold property for your solicitor to see the accounts, including the sinking fund, and to enquire what major works are anticipated in the foreseeable future. You then know if there’s likely to be a call for money. Not doing so is, I would say, negligent. Also of course a survey should pinpoint anything likely to need attention.

A sinking fund is also good when for when a property is sold, the funds paid into the sinking fund are not transferred back and the new owner will not suddenly have to find potentially £000s for a big repair eg lifts, windows, roof

Mokryna, there is a mass of information online, leaseholders have a lot of rights.
www.lease-advice.org/topics/

Yes there may not be a sinking fund but you should have been given a breakdown of how your fees have been spent. Not having a sinking fund is sloppy management

We took the freeholder to court, he actually employed a barrister but we, 42 owners ,won

loopyloo

Hmm .my experience is that management companies need to be watched, not just left to get on with their jobs.
Excuse my cynicism.

Definitely they do need to be watched. The original management company may have been sold, over and over, to companies in management purely for the profit

I have been involved twice, first as part of a big development when DH, as part of a small team, was instrumental in buying the freehold, when every property owner had a share. That gave us the right to manage ourselves. We ensured that we kept a ring-fenced sinking fund. The previous freeholder had emptied that fund

I would also not ever buy a leasehold managed property, unless it was self-managed by the owners

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?

I feel that the owner is doing more than necessary as it revalues their property at the leaseholders expense.
But I was the only one to speak up so I don’t have a leg to stand on.
The management have now sent this to reassure the leaseholders.

Leaseholder contributions are protected under Section 42 of the Landlord and Tenant Act 1987, which mandates that all service charge funds are held in a designated trust account. Additionally, protection up to £85,000 per account is guaranteed by the Financial Services Compensation Scheme (FSCS) for funds held by FCA-registered institutions.

Payments made to the contractor will be rigorously monitored, with all sums subject to valuation and certification by the appointed surveyor and the accounts administrator. This ensures transparency and safeguards your contributions

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.

Aveline

PoliticsNerd yes we are all owner occupiers. There are a few tenanted flats but their owners pay the management charge and contingency fund. The residents committee deal with a factoring company on the behalf of residents. Residents can vote for their representatives. In practice most people are glad that someone is looking after the building and don't want to get into the nitty gritty of building maintenance.

So is that committee is the committee for the commonhold you each have? (I'm really out of my depth with this).

I had a friend who lived in a block of flats where each flat owner had bought out their lease. It seemed incredibly complicated to run and she was an accountant, and there was also a solicitor owner which gave them a head start!

We have a very good freeholder (so far) and are in the process of having our roof replaced. The money has come from the sink fund but I'm now hoping nothing big needs doing soon as the would be able to come to us.

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.

PoliticsNerd yes we are all owner occupiers. There are a few tenanted flats but their owners pay the management charge and contingency fund. The residents committee deal with a factoring company on the behalf of residents. Residents can vote for their representatives. In practice most people are glad that someone is looking after the building and don't want to get into the nitty gritty of building maintenance.

There is no obligation to create a sinking fund unless the freeholder/head leaseholder/management company undertakes to do so in the leases of the flats. The leaseholders of the flats should be required to make periodic contributions to the sinking fund and the amount held in it will be declared in the audited annual accounts distributed to the owners of all the flats. It is very unwise to purchase a leasehold property without sinking fund provisions being set out in the lease and there being a decent amount in the fund because eventually there will be a sudden large bill to pay, as the OP has found.

Absolutely shocking, it must leave people so sick and scared .
The leaseholders will be big corporations who can well afford to pay this.
I'm sorry to say all Gov have had a chance to put this medieval way of land owning to rest, but no.

I thought a Freeholder had to create a sink fund. This is quite shocking mokryna.

The bills covering leaseholders seem to have stalled in Parliament but the really will be difficult to unravel and someone will always have to pay for the areas held in common. However, as I undrawn it, other countries manage so there must be a way.

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.

That sounds as if you all own your leases Aveline, is that right?

😊

Sorry, Barleyfields! 🤦‍♀️

I didn’t know that Barkeyfields!

The cost is always passed on to the leaseholders Squiffy.

Could the money be held in Escrow or similar until the work has been completed to a satisfactory standard?

Unless I’ve misunderstood, I thought that building works/repairs were the responsibility of the freeholder?

What karmalady says is absolutely correct. There should be a sinking fund for any well managed leasehold block, whatever the size.

Building insurance is a huge issue. Finding insurance companies willing to insure us is not straightforward. However, it's got to be done.

The management company of the block of 30 flats where my mum lives has a sink fund but it was used up with a string of works that had been put on the back burner by the previous management company. Consequently the bills for a new roof to the garage block, lift renovations and now repointing have all rolled in over the past four years. Residents are very cross about it but work has to be done and money has been paid to the management company upfront for all projects.
They are now beginning to build up the sink fund against future works.

As a side note we had to inform our insurers that work was being done and consequently the premiums were raised by a few pounds just to add insult to injury!!

The building is above a very famous coffee shop, they are the main leaseholders and although they said some work is not needed through written emails, in an audio leaseholders’ meeting yesterday, they did not raise any objections.

Moreover, the other two small leaseholders didn’t either.. I have written to them, to try to organize our own survey to no avail.
I am shocked loopyloo how they accept the situation

I have bought and sold flats in France and when these meetings are held, some are 100s of owners others are just 8, the items are talked through but yesterday it was nothing of the sort.
The property owner has decided. It was as if it was a fait accompli, no decisions were made, it had already been decided.

karmalady It is true the French flats I have lived in all had a sink fund but this English building doesn’t have one.

Aveline This is what happens in my current flat. I do have the problem of being a UK leaseholder and being told the decision has been made, whereas I have always been a freeholder in the flats I have bought in France. It is a sort of comfort to know you do the same thing in that you also pay up front before the work has started.

Allsorts

That doesnt seem right to me. Shouldn't a Management fund be there for just such instances, what happens if a few people haven't the money?. It's put me right off getting a flat especially a top floor one.

We have owned 3 leasehold flats.
It is down to your solicitor to scrutinise that lease.

Hmm .my experience is that management companies need to be watched, not just left to get on with their jobs.
Excuse my cynicism.