What are Service Charges?
Having googled the term ‘What are Service Charges’ there is pages and pages of what they are and ‘Shelter’ have seemed to of explained it best, well better than me, so see below:
“Service charges are fees that most leaseholders pay to cover their share of the cost of maintaining the building they live in.
Service charges usually cover the costs of:
- repairs to shared areas and the outside of the building, such as roof, external pipes, drains
- buildings insurance
- freeholders’ administration or management charges
They can also be used to pay for shared services such as a caretaker, cleaners and the maintenance of shared areas.
You usually have to pay a share of everything even if you don’t use some of the services. For example, if you live on the ground floor and never use the lift, you probably still have to pay something towards its maintenance”.
How your charges apportioned?
The lease is your bible when it comes to your service charges and determine how the charges apportioned. Typically they are either equally split amongst all units or by percentage which is generally based on the square foot of each property.
Understanding what your lease says about SC
The lease is boring, let’s be honest. But when it comes to knowing if your service charge bill is accurate in terms of what your being charges and how, it’s the only place worth reviewing. Check your lease to ensure the bill complies with ‘how you are charged’ and ‘what you are charged’.
Planning for works in the future
An element of what you pay is towards a ‘Reserve/Sinking fund’. This is pay for works in the future like redecorating the communal areas or replacing part of a lift, of even the lift itself.
This is often badly calculated and insufficient provision is made in the budget and not enough money is saved for future works.
Life Cycle of product and plant
The lift will only last 25 years before it needs replacing, some say, but the point is everything, both products such as (roof products), Plant/Machinery (lift) has a an expected life cycle of how long it is designed to last. It’s important you know how long assets on your development will last, and have an understanding, as this will help you understand the reserve find contribution, and if its reasonable.
PPM
In the service charge world, it is known as Planned Preventative Maintenance and reports are produced by building surveyors in order to assess the development and the potential costs fir major works in 5-10-20 years’ time. This allows the managing agent to budget the reserve fund, rather than simply plucking the number out of the sky.
Communication in writing
If you dispute you your service charges you said put it in writing to your managing agent. This should detail what you are disputing and why. If you don’t get a satisfactory response, you should make a complaint. However I would always try and speak to the property manager and seek clarity on the points you dispute as you may find further clarity will clear many things up for you.
Complaints procedure
Always formally make your complaint in writing if you not satisfied after contacting the property manager. This simply formalises your complaint and means that the agent have to investigate your complaint and respond within a certain time frame.
First Tier Tribunal (FTT)
Ultimately, you are entitled to make an application to the FTT if you believe the charges are unreasonable. However, word of caution, if you decide to make this application, the FTT will expect you to be able to prove/demonstrate that the charges are ‘Unreasonable’ not because ‘you think’ they are excessive. Many Leaseholders lose their cases as they are widely unprepared for the tribunal and don’t have enough supporting evidence to prove charges are ‘unreasonable’. So if you think the cleaning contract is too expensive, (hourly rate is £15 per hour) get some quotes. If they are all under £10p/h you may have a case. Where as if they are all between £10-£15 it won’t prove they are excessive.
So, the bug bear of many, Service charges are a necessary evil, and provide a valuable management to safeguard your asset!
Well depends which way you look at.
