If you’re new to the world of lease holding, you might be wondering what service charges are, how much are likely to be and why you need to pay them.
The majority of leaseholders must pay a service charge that is used to cover the costs of maintenance for the building in which they live. Service charges are normally used to covers costs such as repairs to shared facilities and external parts like pipes, drains and the roof. It also covers buildings insurance and administration or management fees. Your payments will usually be made to a property management firm. For a professional Block Management Agency in Gloucestershire, contact http://www.completepropertygroup.co.uk/property-block-and-estate-management/
The charges are sometimes used to pay for the services of a caretaker, gardener or cleaner for the upkeep of shared areas that everyone in the building benefits from. Your service charge will include these shared facilities even if you never use them personally. For example, paying towards the maintenance of a lift when you live on the ground floor.
Your lease will have detailed information about what service charges are included and what you are responsible for paying for. You are not obliged to pay for anything that isn’t explicitly laid out in your lease document.
Your service charges are likely to change from year to year. Your lease should tell you:
- What you must pay for and when
- How the charges will be collected
- How the charges are calculated
- In what way are the charges divided between all the leaseholders
- If there is a reserve fund
Most service charges are paid annually, but they could be more frequent. Before you pay anything, you’ll be sent a request for payment and details of your obligations and rights.
What is a reserve fund?
Often leaseholders are required to pay towards the expense of future repair work. This is known as a reserve or sinking fund. An amount is required each month or annually to accumulate this reserve fund and this is usually included in the total amount of your service charge. You only need to pay this if it is stated in your lease, but it’s a sensible way of spreading the cost of possibly expensive future repairs.
You must be consulted by the landlord if there are plans to:
- Employ a service that will cost more than £100 a year, such as on cleaning or gardening
- Undertake a repair or addition that will cost over £250
The freeholder must inform you about what work is planned, why it required and provide at least two estimates of the total cost of the work. Lease holders have the right to make comment on the proposal and sometimes suggest different contractors. In urgent repair requirements, the freeholder can go ahead before you have replied.