23 March 2015
Falling Values Can Lead To Increased Service Charges
It is a matter of genuine debate as to whether an exit fee on the sale of a retirement flat which is transferred to a development contingency fund is good or bad?. In one sense it can disguise the true service charge costs, in another sense it can make monthly outgoings more affordable.
If a flat is owned for 5 years and sold for £150,000, at 1% £1,500 should be credited to the development contingency fund. Therefore £300 per year has been taken off the service charge.
However a retirement flat in the North West is currently being offered for sale at £29,000(this is not a typo!). That means a sale will only generate £290 towards the contingency fund. As such service charges would have to increase to offset the drop in value.