Service Charges Explained
What is a service charge?
When living in a leasehold and (where appropriate) freehold property each year a service charge is payable. This money is then put to work covering the day-to-day running costs of your block/development. Service charges cover areas such as maintenance and repairs, buildings insurance and landscaping of ‘communal areas’ (to find a specific list that yours covers please refer to your service charge budget or the terms of your lease/transfer document).
When you pay you service charge money every year we keep it in a separate client bank account specific to your block/development and at the end of the year we send you accounts outlining what the service charge money has been used for.
Why do I have to pay my service charge?
When purchasing a leasehold (or freehold) property you (or your predecessor/s) entered into a contract and payment of the service charge was a condition of that contract that was signed.
Why is my service charge more/less than my neighbours?
Your service charge may be higher or lower when compared to a neighbour but this does not mean that it is wrong. The amount payable is dependent on a number of factors including but not limited to the size of the property. You should always refer to your lease or transfer document to establish what proportion of any service charge is payable by you.
How do I know what the service charge is being spent on?
Every year accounts will be prepared showing expenditure for the block/development that you are a leaseholder in.
What is a reserve fund?
A reserve fund (also known as a contingency fund) is a sum of money set aside to pay for any unexpected expenditure such as major repairs. In the annual budget it’s set out how much money is going to be collected to be put in the reserve fund for that year, the total amount of money in the reserve fund is then outlined in the annual accounts.
All reserve fund money is held in the same way we hold your service charge money in a specific client bank account for your block/development. Reserve funds are always kept safe in their specific client bank account and can only be used for the purposes of your development and any interest generated is paid into this account.
- Please note having a reserve fund is a good idea for any development providing your lease sets out whether we can collect money for a reserve fund at your block/development. If your lease/transfer document does not permit having a reserve/contingency fund we will adhere to these conditions.