Expert Blog – Understanding Service Charges

Service Charges are payable by the Leaseholder to cover the cost of services for maintaining and running of the building and communal areas.

These will include costs towards items such as Cleaning, Gardening, Porterage, Mechanical Plant (such as Lifts), Fire Safety Equipment, Insurances, Managing Agent Fee, General Repairs and Maintenance.

Details of what may be charged and the proportion of the charge per individual leaseholder is set out within the terms of the lease.  The lease will also outline whether the charge should be collected in advance or in arrears along with due dates.

Where the lease allows, a budget will be produced projecting the anticipated expenditure for an upcoming financial period. This will include fixed contracted costs such as communal cleaning, along with provisions for variable costs such as communal electricity or reactive maintenance.

At the end of each financial period, service charge accounts will be prepared to either certify or audit any expenditure for the period concerned.  The requirement for a certificate or audit will be outlined within the lease.   If at this point that there is any variation between the annual service charge budget and actual expenditure, lessees will either receive a balancing credit in the case of a surplus, or a demand in the event of a deficit.  Again, the handling of any balancing amount will be determined by the terms of the lease.

Other charges you may be required to make a contribution towards in accordance with your lease.

Reserve / Sinking Fund

The reserve/sinking fund is a provision for future cyclical works such as redecoration or for the specific replacement of mechanical equipment such as a lift.

Building Insurance

Depending on the terms of the lease, building  insurance  may be payable via the Service Charge. Alternatively , this may be arranged by the Freeholder and billed directly to the Lessees as a separate charge.

Ground Rent
Ground Rent is the amount paid by a lessee to the freeholder (or superior leaseholder) as determined by the lease.  Ground rent is usually a fixed annual payment and will be collected either by the freeholder directly or through a designated 3rd party agency, which may be Crabtree on behalf of your Resident Management Company.

In many leases the fixed amount increases at regular intervals as specified within its terms.

2018-06-07T12:50:31+00:00 April 30th, 2015|Block Management, Property Management|