Q. As the owner of a Freehold house I am seriously considering selling up and buying an apartment within one of those gated complexes with all the facilities like a 24 concierge service and gym etc. Whilst I’m almost sure this is what I’d really like to do I have had a few warnings against getting involved with Service Charge demands and how expensive they can be, can you explain what pitfalls if any I will need to watch out for?
A. Freehold is without doubt the most financially beneficial way of owning property if you want to keep your monthly costs down to a minimum given once you have made the purchase you own the property lock, stock and barrel. Leasehold property is held in a totally different way; given you own the actual apartment but not the ground it stands upon. This is owned by the Freeholder who generally uses a company known as a managing agent to run and look after the development on their behalf. The managing agents are responsible for the day to day smooth running of residential developments as well as the long term maintenance and up keep too. Communal gardens, gyms and pools require constant upkeep and maintenance, and services such as 24 hour concierge do not come cheap. Generally the more services on offer the greater the charge. Many buyers that chose this way of living and purchase a leasehold are happy to pay expensive service charges as they feel they benefit from all the rewards a fancy development brings. The annual charges can easily be confirmed right at the onset when you first enquire after a property so you know exactly what you are looking at before you even view. Do consider that they vary hugely between developments and as a general rule of thumb the more services provided the more expensive they are. Swimming pools require a fair amount of regular maintenance and can often push the charges up. And do be cautious of older developments as often things like roofs and lift replacements could be on the agenda. A well run development will have a sinking fund in place – ( a pot of money that gets set aside on a monthly basis to cover any large projects) but even with a sinking fund Leaseholders are sometimes asked to contribute an extra lump when large works are required. Overall this type of living can be an extremely pleasant experience, just make sure you do your homework to prevent any surprise charges cropping up later.