News July 16, 2019
     

Is your block management going to hinder your future sale?

As several large luxury blocks of Birmingham flats approach their twentieth year we are noticing increasing disparities between building service charges across the City. The block management fees are charged quarterly or half yearly to cover the daily running costs of the building. These include the lift maintenance, the lighting & cleaning of the common parts, the concierge costs and then importantly the provision for future costs. The latter cost builds the Sinking Fund & these in some cases seem to have been completely overlooked as managing agents and their clients, often investors, strove for maximising their returns by ensuring the block running costs were as low as possible. Service charges you need to remember are paid for by the landlord & not the tenant.   Twenty years on the blocks are beyond the building warranties offered by the developers and in many cases are showing signs of wear & tear plus water ingress. The post Grenfell fallout too has led to unforeseen cladding changes or fire watch provisions, in some cases.

These annual running costs are starting to be noticed by prospective buyers and are effecting the pace of individual sales in some cases, especially where there is uncertainty in the timing of the additional levies now being loaded into service charges. Larger funds are provisioned for the capital & refurbishing works now sought or planned in the immediate years ahead . Apartment blocks are not dissimilar to private dwellings in so far that annual additional expenditure needs to be provisioned for. This includes  exterior decoration, window repair or replacement & boiler costs. However if those works aren’t done the bigger the costs will be when the jobs are actually tackled. These costs being above the annual running costs have to be split in blocks back to the flat owners.

 

In many apartment blocks there are now active resident associations working closely with their managing agents. This has to be encouraged further especially where there are buildings with higher than average proportions of  investor landlords. Absentee owners must become more involved with the running of their blocks both to retain the values in their investments but also to keep a check on the overall management of their buildings. Good management agents welcome these groups because their recommendations and future planning can be seen as positive planning without themselves being seen as profiteering ogres!

 

For all apartment buyers the question of Sinking Fund provision needs to become as important a question as how many bedrooms or bathrooms the apartment has. Whilst it is sometimes alarming to see hundreds of thousands of pounds being held by the managing agents it has also to be seen as a comfort blanket when inherent construction faults become apparent or other major works need doing such that the further provision of service charge funds isn’t sought.

 

For those interested in setting up resident association write to your managing agent in the first instance. There is good coverage online of the steps you need to take. https://arma.org.uk/downloader/tqt/Forming_A_Residents_Association.pdf

 

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