Flats have a service charge to cover looking after the building.
This cost varies based on several factors. And it could increase each year.
If yours gets high, it may even cause an issue when trying to sell it.
Here are tips about how to sell flats with high service charges.
What is an average service charge?
A typical service charge price is £1,500 per year.
You’d expect it to fall below this if you live in a small building without many flats.
But in a large building, with dozens of flats, over £2,000 per year is typical.
Anything over £2,000 per year is considered a ‘high’ service charge.
Many buyers will avoid properties with service charges over £3,000 per year.
What causes a flat to have a high service charge?
1.Size of building
Larger buildings usually cost more to maintain.
This is because more communal areas, such as hallways and staircases exist. Buildings like this will often have a lift as well.
Foundations perhaps need to be inspected more regularly. And the roof could be larger, and thus have a higher likelihood of damage.
2.Insurance
If your building is considered an insurance risk, it can increase prices. Perhaps there’s a long history of flooding in your area.
Or the construction materials are considered less durable and fire resistant.
Insurance prices increase and your service charge will increase to compensate for this.
3.Local professional costs
Your whereabouts in the UK will impact service charge prices.
For instance, if local handymen and gardeners have higher rates, your service charge will be higher.
This is often seen in the south-east of England, especially London, where prices are at their highest.
Meanwhile, local professionals tend to charge less in rural parts of Wales or Scotland. So, service charges here will be lower.
4.Freeholder is keen to make a profit
Unfortunately, not all freeholders are caring and conscientious. Some of them are keen to make money.
And this means that a higher service charge may not always translate into an improved level of service.
5.Low supply and high demand
Freeholders usually feel that they can set a higher service charge if demand for properties is high, and supply is low.
In this scenario, buyers tend to be less picky. And a high service charge is thus unlikely to be a dealbreaker. They may capitalise on this.
Are flats with high service charges harder to sell?
It depends. In almost all cases, potential buyers will view it negatively.
However, if the property price is decreased to compensate, they may not mind so much.
Buyers will also be open-minded if the property is well-looked-after. They could consider the higher fee worthwhile.
And it’s worth remembering that the service charge can change each year.
So, just because it’s been high in the past 12 months, that doesn’t mean it will always stay that way. A one-off massive project may have made it much higher than usual.
How to Sell Flat with High Service Charge
Compensate on price
Service charge is paid annually, so it’s a significant fee for the buyer.
But they’ll often be willing to compromise if you reduce the asking price.
Buyers will be more open to your house if it is considered a great deal compared to similar properties nearby.
Give details about what’s covered
A buyer will be nervous about high service charges. So, they’ll want clarity over what’s included for this price.
You should get this information before you list your flat on the market.
This ensures that your buyer doesn’t feel ‘in the dark’ and can weigh up the pros and cons.
Especially since some fees are not always visible. Examples include restoring the foundations, planting new trees, or repairing a roof.
Wait until it’s a seller’s market
Timing is always important when selling your flat. And this especially applies with a high service charge.
Buyers are more willing to compromise if there’s a low supply of properties and high demand. This is because they don’t have other options to turn to.
If you don’t want to reduce the asking price, you may need to wait until market conditions are right before looking for a buyer.
Focus on excellent maintenance
Some buyers won’t mind paying a higher service charge if the building is well-looked-after.
You should focus on this in all your marketing efforts, and when your estate agent hosts viewings.
Make sure the building looks tidy on viewing day, too.
Give evidence if it’s consistent for the area
You should provide evidence if your high service charge is consistent with the location.
It’ll show your buyer they can’t get better prices elsewhere. This will strengthen your position in price negotiations.
Get a written note from your freeholder if it’s a one-off
When you’ve got a great relationship with your freeholder, you can ask them to help you.
This could involve writing a note to potential buyers to explain the circumstances around the service charge.
Perhaps they intend to reduce it next year. Or maybe the past year is due to a one-off exceptional cost.
Maybe it’s simply a letter stating their intention to look after the building to a very high standard and perhaps negotiate on ground rent.
Many freeholders might show no interest in writing something like this.
But often, they’re also interested in you successfully selling your flat. So, it’s worth asking, just in case.
Can I negotiate service charge before selling my flat?
You can’t really negotiate with your freeholder about service charge, as the price is the same for everyone in the building.
This means that if they reduce it for you, they’ll also need to do it for everyone else.
Ask your freeholder whether the service charge will decrease next year. Written confirmation of this may be useful.
You could also discuss ways to decrease it. Examples include taking on cleaning responsibilities with your co-residents.
Circumstances like this are rare, though.
Can I get rid of the service charge before selling my flat?
While you live in a leasehold property, and have signed a lease agreement, you must follow the lease terms.
The only alternative is to group with other people in the building to buy a ‘share of freehold’.
This involves buying the freehold or converting a leasehold to a freehold. You could then drop the price down significantly.
But even then, you’ll usually need a service charge for building maintenance, whether you like it or not.