When properties form part of a larger development, such as part of a historic estate or a block of flats, you might imagine how complicated it might be to undertake the maintenance of common areas such as driveways or a roof.
Reasonably, each occupier of the block of flats should be expected to pay towards the maintenance of these common parts and any repairs and/or decoration that is needed from time to time. However, as flats within the building are bought and sold over time, it might be that one day, perhaps 15 years into the building’s life, there might be some significant expenses due for roof repairs or to resurface a car park.
This pressing expenditure might be urgent and expensive, but if you have just bought a flat you might, not unreasonably, feel rather aggrieved to be faced with a £3,000 bill for works to your building’s roof! This is where a sinking fund comes in.
A sinking fund is basically a savings account managed, usually, by the building’s managing agent. The sums paid into it should be calculated so as to allow for a fund to be built up over time to cover such capital costs as well as less significant annual charges for things like repairs and redecoration. This fund is usually held in an interest-bearing account.
There might also be charges for periodic maintenance such as re-painting or the cutting of lawns, etc. These charges are covered by a service charge which is usually billed annually or quarterly by the managing agent.
In addition to service charge and sinking fund, most tenants are also responsible for the payment of an annual rent known as ground rent or peppercorn rent and an insurance rent which is a pro-rata sum of the insurance premium billed each year for the entire building. This will not include contents insurance but will usually include a premium for things like public liability insurance in the event that, for example, the postman might slip and fall in a common area such as a stairwell.
Related articles:
Recent posts
Research from buy-to-let lender, Landbay, shows that UK landlords are looking at raising rents ahead of the Renters' Rights Bill which is due to come into force this year.
Data shows landlords could miss out on green mortgages due to expired energy performance certificates.
Buying a house is a big deal, and where you are planning to buy will make a difference financially. In this short blog, we look at the most affordable and most expensive areas and how much you need to be earning to buy in there.
Pros and Cons of Equity Release
15 days ago
Equity release is a type of mortgage that allows homeowners 55 and over to access money from their property's equity without having to leave their home. This is done by securing a loan against the house which is usually repaid by selling the property when the borrower passes away or has to move into long-term care.
Your House Viewing Checklist
16 days ago
It’s important to ask questions about the property you are interested in before taking that step to make an offer. A little probing can make all the difference between buying your dream house or something that requires a lot of work.
Half of over 60s predicted to benefit from accessing housing wealth through Equity Release
19 days ago
There are millions of homeowners over the age of 60 who are likely to release money from their homes to pay for their lifestyle during retirement giving those who are 'asset rich but cash poor' a way to live out their retirement the way they wish.
Average Age of the First Time Buyer in the UK
26 days ago
The average age of a first-time buyer in the UK is two years older than 10 years ago. This is understandable with managing the cost-of-living and challenges within the economy such as high interest rates making it difficult to get onto the property ladder.
Delayed Start Mortgage from Skipton
28 days ago
Skipton Building Society launches ‘Delayed Start’ mortgage meaning first time buyers won’t be required to make repayments for the first three months.
According to a survey by Skipton, first time buyers who bought their home in the last five years found that in the first three months of living there, they were spending upwards of £30,000.
More information
Trusted by
