Why do Chartered Building Surveyors need to prepare a Major Works Plan for your building?
— 6 Oct 2020 12:33:29 by Nick Mills
When you own or are buying a leasehold flat, you want to have full knowledge of the future costs of owning that flat. You don’t want to enter into a financial commitment without having full transparency of what you will be liable for in the future.
Every building containing long leasehold flats should have a Service Charge Budget prepared annually by the managing agent or those looking after the building. This document will list the regular annual expenditure necessary to run the property on a daily basis and may include items such as buildings insurance, management fees, sums set aside for minor repairs, accountancy fees, commonway electricity etc. This provides leaseholders with some security, knowing that costs are reviewed at least annually and service charges are to remain fairly constant. In our experience, the total expenditure shown in these budgets should increase at a rate of around 2-3% every year.
For these budgets to be completely accurate, they must also include the costs of large future projects. Without a proper Major Works Plan being professionally prepared, flat owners and those buying flats will be unaware of future financial responsibilities.
The terms of residential long leases will usually include a requirement for the freeholder or management company to redecorate the external parts of the building regularly, often every four years. Leaseholders will be expected to pay the cost of these works, either through the use of Reserve or Sinking Funds where monies have been collected over a period of time and set aside, or through additional payments.
Each lease will have different terms on how funds can be collected and how leaseholders can be charged. Ultimately, leaseholders will pay 100% of the cost of the works plus associated professional fees. These are often referred to as ‘Major Works’ and the cost of these cyclical works are over and above the annual regular service charge expenditure.
Under Section 20 of the Landlord & Tenant Act 1987 (as amended), leaseholders will be properly consulted about the works and will be given the opportunity to provide observations on the scope and need for the works. They will also be able to nominate suitable contractors. However, without knowing in advance that these works are necessary and without some guidance on likely costs, it can come as quite a shock and can result in financial difficulty for many flat owners.
When a Major Works Plan has been prepared and is being regularly updated, there should be no shocks.
What should a Major Works Plan include?
The surveyors and managing agents need to look carefully at the lease to determine those works which leaseholders are responsible to contribute towards. They also need to see whether the lease specifies that certain projects need to regularly scheduled. Typically, a Major Works Plan might include:
- Redecoration and repair works to external elevations (depending upon the size and nature of the building, funding abilities and lease terms, works to particular elevations could be scheduled for different years)
- Main roof overhaul
- Flat roof replacement
- Refurbishment or replacement of passenger lifts
- Garden and boundary improvements
- Tree surgery works
- Common hallway redecoration or recarpeting
- Replacement of doorbells or entryphone systems
- Fire precaution works
- Asbestos removal or encapsulation works
- Etc...
What time period should the Major Works Plan cover?
Five years is a good period of time to be considered.
Longer than five years will mean that some works projects are repeated within the plan but it is difficult to estimate accurate costings so far in the future.
Buyers of flats can also be discouraged from buying when costs over a ten-year period look much scarier than a five-year period.
The Chartered Building Surveyors at Overill Associates have been working closely with our Property Managers to have Major Works Plans completed on buildings under our management.
Do speak to your Property Manager for confirmation that a Major Works Plan is in place or has been instructed for your building. Alternatively, to obtain a quote from the surveyors directly, contact Sally Brooks on 01273 716887 or [email protected]
