Housing Associaion "sinking funds" upper limit?

[Ann]

My Mum lives in a bungalow in a part-owned (70%) housing scheme for the elderly. She has lived there since it was built in 1989 and she is now 87. She pays a hefty "service charge" every month to the association for ground maintenance, boiler servicing etc. If the bungalow has to be sold, apparently we have to pay money back into a "sinking fund" which states 1% back (of the original purchase price) for EVERY YEAR she has lived there - 22 years to date and (touch wood) she is still very spritely, so if, say, she lives for another 8 years or more, surely we wouldn't have to pay back 30% ?!!! That seems so unfair. She has lived there the longest by far ........ By law, is there an upper limit for these sinking funds or can they charge what they like? Any advice would be most welcome please.

[bednobs]

i would imagine (but don't know for sure) that it is legal - after all she must have known when she bought it. However i do remember seeing an article on the one show or watchdog or somewhere like that about this. Although that's not all that helpful of course seeing as i don't know which programme or what they said!

Sorry/

[Ann]

Is it Barmaid who knows all the legal issues?

[Ann]

She probably was just told it was for every year but didn't take much notice (or think she would be there for nearly 25 years)

[boxtops]

There must be an Agreement document somewhere in your mum's papers - it would all be there, see if you can find it, or ask the housing association for a copy.

[ladybirder]

If I remember correctly, I believe barmaid is a barrister but I'm sure I'll be corrected if I'm wrong.

[Ann]

Thanks Ladybird - I thought she was too - maybe I'll leave a FAO for her as she doesn't seem to be on here tonight. Do I just leave a FAO on Chatterbank with a link to this question?

[ladybirder]

I believe the ed frowns on FAO threads. She'll probably look in the Law section when she's around. Leave it a few days.

[buildersmate]

The purpose of a sinking fund is to enable the site to renew capital assets when they eventually wear out - rather than the whole cost to be built into one year's maintenance charge. For example, servicing a boiler is part of maintenance, but no matter how good the servicing regime, in the end a boiler has to be replaced as a capital renewal.
It is reasonably common for a proportion of an annual MAINTENANCE charge to be paid into the sinking fund each year (and held by the site management company) but clearly your site did not make this a requirement.
The other way to think about it is that she has had the benefit of the use of the assets for 22 years yet never had to renew anything yet, and other residents who have already sold up have presumably had to pay this - so there is nothing inherently unfair about it.
Unsurprisingly there is no 'law' about this - it is a contractual matter and unless you could show that the contract is unfair then it is just something that has existed in the contract since 1989.

[themas]

As usual, bm sets this out very well. I would just add that this is 1% of the original purchase price - not the present day sale price, which will be much higher. Presumably your mother (or you, if she stays there until she dies) will retain all the rest of the sale price & the 1% pa will be a much smaller % of that than the 22% - 30% you mention.

Another point is that some of these schemes have a contractual obligation to pay back a fixed % of the actual sale price each time a property is sold. Your arrangement could well be preferable to that.