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Service charge explained
We believe you should enjoy your home, safe in the knowledge the money you spend on maintenance and the upkeep of your property is being well spent. So here’s a handy guide to weighing up your fees. Service charges and management fees fund the costs of maintaining the development in good order and to a standard you expect.
Here are the answers to common questions you may have on your Service charge:
What is the Service charge?
Each year, you pay us a service charge. This money goes towards the day-to-day running costs of your development and is used to cover items such as buildings insurance, maintenance, repairs, gardening and communal facilities, as well as for any staff that might work at the development. You can see a specific list of the items that your service charge covers in the annual budget or estimate that we send you. We keep your service charge money in a separate bank account, just for your development, and at the end of the year we send you an account of what we have spent.
When is the Service charge paid?
This depends on your lease or transfer in England or Wales, or your Deed of Conditions in Scotland.
You may be required to pay your Service charge once a year, twice a year (usually every six months) or occasionally in monthly instalments. If you aren’t sure when you should pay your Service charge:
-If you live in an independent retirement living development please get in touch with your Development Manager for details
-If you live or own a property in a general residential development, please get in touch with your Customer Services team.
What is the Service charge based on?
The Service charge is based on an estimate or budget we prepare each year of all the running costs relating to the communal areas of your development. These could include a number of elements. Some of the most common are:
-Landscape maintenance – such as cutting the grass, maintaining communal gardens, watering and sweeping
-Lighting, heating and cleaning of communal internal areas
-Window cleaning – specific to each development, but would typically include all external windows as well as internal windows in communal areas
-Fire equipment maintenance
-Other electrical and mechanical equipment maintenance – specific to each development, but this could include items such as water pumps, electrically powered entry or security gates, communal heating boilers etc
-General repairs and maintenance
-Salaries of any onsite staff that are employed specifically to work for the development
-Buildings insurance – in the case of apartments, full buildings insurance is required under the terms of the lease to cover the risks relevant to the development. Standard insurance risks might include fire, explosion, lightning, aircraft, terrorism, storm or flood, sprinkler leakage, subsidence or landside etc
-Bank Charges and Audit fees.
I own a Freehold house, why am I paying a service charge?
The vast majority of Freehold houses in England and Wales are serviced directly by a local council. The council is usually responsible for looking after items such as road and pavement renewal, street lighting and signage.
Some Freehold houses though are built on land which is part of a larger private development. Perhaps there is a mixture of houses and a block (or blocks) of flats on shared grounds. Or it’s behind gates or has a private access roadway. The costs associated with the upkeep of these areas isn’t the responsibility of the local council as it’s on private land – it’s the responsibility of those people who are entitled to use it and this is done through collecting Estate Service Charges to pay for the maintenance or services required.
Residents of Freehold houses won’t contribute towards the costs of maintaining any block(s) of flats that might be part of the development. But all residents (whether leaseholders in any flats or owners of freehold houses) living on this type of development will contribute towards the costs for Estate Service Charges.
These costs might include: costs for maintaining the roads, pavements and paths; energy and maintenance costs for street or bollard lighting; or maintenance and replanting costs for landscaped areas. In the majority of cases, the estate service charge helps to pay towards the maintenance of all parts of the estate. All residents pay towards the costs in general, even if the works that are carried out are in another part of the property to which you live. For instance you might live in ‘A’ Road but the works are completed in ‘B’ Close. In this case residents of ‘A’ Road still help contribute towards the works in ‘B’ Close – but equally the opposite will apply. It’s our experience that this evens out across a maintenance year so it represents a fair and equitable way to apportion costs.
The precise way that you contribute towards estate service charges is set out in a ‘Covenant’ in your ‘Transfer Document’ – the legal paperwork for the purchase your freehold property. In the majority of cases the estate service charges are divided up into equal portions and payable by everyone living on the estate.
There are more complex arrangements – if you’re not sure how it works on your development you can check the service charge accounts we send you at the end of each year or otherwise please speak to your Property Manager.