Service charges – a basic guide

Services charges will be a common occurrence for those living in a flat, as they play a part in how the building is taken care of and maintained. Service charges are considered the only measurable and manageable way to cover the buildings maintenance costs. If you live in a converted house, odds are you won’t need to pay monthly service charges, but in some cases you may be asked to pay such charges either quarterly, half-yearly or annually,

Unlike ground rent,  the purpose of service charges is to cover general repairs, regular cleaning and employment of certain building staff. In some instances service charges may cover building insurance, but this isn’t always the case and you may need to enquire with freeholder to see this is applicable to you. Service charges are usually non-negotiable and you will be required to pay them whether you utilise the building services or not.

How much is your service charge?

Information regarding the amount you will pay in service charges should have been detailed to you prior to moving in. However, if you are unsure of what you are paying for check your lease or speak with your freeholder. Either should be able to clarify the following:

– The services you pay for

– When service charges are due

– How the service charges are collected

– How service charges are calculated and divided

– Whether or not there is a reserve or sinking fund in place

Your lease will more than likely have a sweeping-up clause, this will be a term that covers general services that aren’t mentioned or broken down in the lease agreement. Not all lease agreements will have this clause and if yours doesn’t then you can’t be held accountable for any services that aren’t strictly disclosed.

Service charge costs can vary for year to year, this is especially true if your charges are listed as “variable” in your lease.

Additional costs

Before charging you additional fees, your freeholder is legally required to inform you beforehand – this is all the more relevant when they are going to be carrying out expensive work. The following is what would qualify as expensive:

– Work that costs more than £250 per flat

– Services (general repairs, gardening or cleaning) that cost £100 or more per flat

You don’t need to automatically accept a freeholder’s word for any repairs that are set to take place – they should provide you with copies of two or more estimates that they have taken out for the work in question. Also, one of the quotes should be obtained from an independent contractor that has no connection to the freeholder.

The only instance in which a freeloader can go ahead with a repair without your consent is if it is deemed urgent. If you feel you haven’t been consulted properly or in due time, then it may be worth seeking legal advice as you may not have to be held accountable for the work.

Challenging service charges

If you feel that the services you’re receiving are unsatisfactory or overpriced, you should write to the freeholder to set out your concerns. In such instances they may lower the rate you pay going forward or compensate you in some way. If the freeholder is unreasonable and refuses to improve the quality or excessive price of maintenance services, you can take the dispute to the Leasehold Valuation Tribunal (the LVT) – which will decide if your complaints are valid and hold the freeholder accountable if so.

Responding to poor service

In very rare cases, dishonest and unscrupulous freeholders have even been known to charge for services that do not exist, haven’t taken place or have been performed poorly. A fine example of this is that a leaseholder may claim to be paying for a building cleaner, without actually doing so. If you are having this sort of problem, taking the situation to a LVT may be the best option. In some instances they may deem the freeholder’s performance to be unsatisfactory and appoint someone else to manage the building. Obviously the freeholder will still own the building but their responsibilities will be greatly diminished.

Excessive service charges

As a leaseholder you are entitled to a written breakdown of all charges you are required to pay, from which you should be able to judge how reasonable those charges are. Remember, your freeholder is perfectly within their legal rights to add a management charge to any bill, however it cannot be a charge to draw profit. When billed you should inspect all associated documents and take copies of them for future reference. It is considered a criminal offence if a freeholder withholds such information from you and the local council would be within their rights to prosecute them for doing so.

Are service charges mandatory?

Whether your building services are good or bad, you are required to pay them no matter what. If you choose not to pay the service charge imposed by your freeholder, they can take you to court over the matter and an eviction notice may even be served. However, for the freeholder to get a court order they must follow a special process known as forfeiture proceedings.

Reserve or sinking fund

As a precautionary measure some leaseholders pay repairs costs into a separate fund on top of their ordinary service charges. These funds are called “sinking funds” or “reserve funds” and act as a contingency should a large repair bill come in. In order for this fund to be effective it needs to be paid into regularly over an extended period of time. Remember, if you sell your home before a payout is required it is doubtful that you will see any of your money back. Payment into such a fund is only necessary if it is stated in your lease. If you feel the time is right to set one up, speak to an experienced leasehold solicitor to get information on how to do so.

Thinking of Challenging Service Charges? Contact us today

Whether you are a freeholder or the owner of a leasehold flat, our team have the expertise you need to help you challenge a service charge or to recover service charge arrears; so

  • Call our team today on 01722 422300, or
  • Fill out the email contact form below

Comments or questions are welcome.

* indicates required field