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  • Buy-to-Let

    Who pays service charge?



    I am considering buying a BTL apartment. Just working out the yield. To me it only seems fair for tenants to pay the monthly service charge, just like they pay for council tax, utilities etc.

    However, someone suggested to me yesterday that this was the landlord's responsibility.

    Your thoughts would be appreciated.

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    This should be included in the rent. everyone does it this way.

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    Nick,

    The landlord pays this I'm afraid.

    Obviously, you factor this into your rent, but be careful to check what the market rates are.

    Service charges can make flats completely unviable, which is why you're far better off buying a 2-bed house if possible.

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    Service charges cover repairs, maintenance, building insurance etc., hence they are usually the responsibility of the LL. They do not usually cover utilities (except of communal areas) or council tax, which as you say are usually the responsibility of the tenant.

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    I own one flat and would not buy another. Why share your profits with an estate management company?

    The service charges on newer developments and those with lifts seem to be particularly punitive.

    You have to be really careful that the existing service charges are reasonable and check that there's a good chance they won't escalate in the future.A two bed house personally sounds like a much better proposition - yes more maintenance and increased involvement  but also the benefit of being in more control of your investment.

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    Yes landlord pays 

    Factor the service  charge into your whole investment not just the rent achieved 

    The tenant doesn't recognise your overheads or whether its a leasehold or freehold

    So it you put this  levy on the rent ensure your competitors dont leave you in the cold 

    I used to buy flats because the purchase price was lower than the freehold equivalent  in the same block 

    I took the service charge into account over the term of the mortgage

    Example:

    2 bed freehold 100K 

    2 bed flat           85K

    Service charge  £20 pcm = £240 pa

    So i would break even only after  62 years if I bought a house 

    So a flat was better than a house in many ways . I delayed the up front cost

    It was in effect incorporated into the service charge

    By saving 15K by buying a flat I could also buy another one at 85% LTV 

    I used that saved 15K as a deposit

    What I was doing in effect was `borrowing` an extra 15K and paying it off over 62 years

    So look at the whole investment and dont get too bogged down in the detail of who pays what

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    Jonathan Clarke. http://www.buytoletmk.com


    Blimey JC, service charge £240 PA?

    Plenty of flats round here with SC more than 10 x that!

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    Ouch that must hurt!

    My lowest is £16.96 pa  - but thats a garage so doesn't really count

    My highest is £826 pa

    Several ex council ones though around the 200 - 300 pa  mark

    The ones in blocks with  communal areas to maintain  maybe 700 - 800 pa

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    Jonathan Clarke. http://www.buytoletmk.com

    LL always pays Service Charge - unless you can hike rent high enough - ie on top of local market rent - which is unlikely

    S/C is for maintenance of the fabric of the building/grounds

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    This is why flats are such useless investments.

    I rue the day I bought 4 flats rather than 4 terrace houses.

    I would never buy a council flat.

    Just look at the poor sods who are having to pay for cladding works after the Grenfell fire while remaining council tenants pay nothing.

    The amount I've spent on service charges could have built a loft extension in each house!

    For investors  private flats outside of London are rubbish investments.

    Far better a house as the rents are roughly the same once you have stripped out service charges.

    Though I've noticed house rental costs are very near a flat cost so the flat owner is making less than the house owning LL when you factor in ever increasing service charges and ground rents.

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