Whether you like it or not, service charges come part and parcel with leasehold apartment living. They play an important role in determining how the building you live in is maintained, whether that is cleaning, repairs or anything in-between. Service charges are generally considered to be the most practical way to pay for these things. Those who live in converted houses generally won’t need to pay a monthly service charge and are more likely to pay such on an annual, half-year or quarter-year basis.
Service charges are pretty self-explanatory when it comes to their purpose – with cleaning, repairs and building upkeep usually all being covered by them. In rare cases service charges will also cover building insurance, but that will only be included at the discretion of the freeholder.
Costs and types of payment
When it comes to what exactly your service charge is, its price, and what it covers, such information can be found in your lease agreement. However, if can’t recall what exactly it is you’re paying for, and you can’t find or understand your lease, get in touch with your freeholder in order to gain clarification. In most instances your lease agreement will detail the following information regarding service charges:
– Payment dates
– Payment options
– Information on how charges are calculated
– Information on possible sinking or reserve funds
Most modern leases feature a sweeping-up clause; it is a term that is used to cover all services that aren’t detailed. Not every lease has a sweeping-up clause – with those who lease is without one only being held accountable to pay for the services listed and nothing else. The actual amount that you have to pay on service charges for your property can vary from year to year, especially if your service charges are listed as “variable” in your lease. If you bought your home via the government’s “right to buy” scheme, it should be noted that your charges might be calculated differently. In such instances you will probably pay a fixed rate (including inflation), which would have been established over the first five years of your property ownership.
Extra service charges
When large and expensive repairs are required for upkeep, the freeholder may issue additional charges to their tenants. If you deem the extra charges unnecessary, the freeholder must discuss them with you prior to work commencing. It is especially important that you are consulted before the following types of work takes place:
– Work that is billed at more than £250 per apartment.
– Services (including cleaning, gardening and repairs) that are charged at £100 or more per apartment.
A freeholder’s word alone isn’t enough to force you to agree to any repairs that he or she may be proposing. They should provide you with copies of two or estimates they have obtained for the repair, with one being from an independent contractor who has no connection to the freeholder.
Only in an emergency can a freeholder approve a repair without your consent. When you believe that you are being charged for a repair that is either unnecessary or questionable it is advised that you seek legal advice. If it is proven that the freeholder moved forward with repairs without informing you, you may not have to be held accountable for the charges involved.
Questioning service charges
Service charges are not always a cut and dry agreement and you are well within your rights to challenge them. If you believe that you are receiving some level of sub-standard service, then write to your freeholder explaining your concerns. In instances where the freeholder agrees, you may receive reimbursement in some form or even possibly a reduced rate going forward.
If the freeholder doesn’t agree with your objections and the service charge dispute escalates, you can choose to take things to a Leasehold Valuation Tribunal (LVT). The purpose of a LVT is to resolve any issues between a freeholder and leaseholder and is usually used after a communication breakdown between the two has occurred.
Addressing poor service
There have been rare instances in which freeholders have even falsely claimed for services that were not necessary, or even carried out, in order to charge leaseholders more. This may take the form of money for repairs that don’t need doing – if you think this may have happened to you there is action you can take. A LVT will be able to resolve the issue by proving the freeholders actions to be unjustified and thus taking action against him or her. It isn’t unknown in such circumstances for a LVT to take the building management rights away from the freeholder entirely – ordering the freeholder to hire a building manager to handle all freeholder/leaseholder communication going forward.
As a leaseholder it is your legal entitlement to see a written breakdown of all charges that the freeholder asks you to pay. The written document will allow you to see whether or not what you are being charged is fair. Bear in mind that you can expect to see a management charge on your list of costs, however a freeholder cannot use this as a means to generate profit.
Always take copies of any documents you receive from your freeholder, as they may be needed again for future reference. It is Illegal for a freeholder to withhold documents concerning your lease from you, if he or she is doing this they should be reported to the local council. From there, the freeholder may be fined or possibly prosecuted.
Do I have to pay my service charge?
Service charges are mandatory, whether you agree with them or not they will be a requirement within your lease. If you opt not to pay service charges the freeholder is within their rights to pursue legal action and may even serve you with an eviction notice. In order for you to be served with such a notice, they would need to follow a very specific set of procedures- this is commonly known as forfeiture proceedings and it is illegal for you to be evicted without the freeholder taking this course of action properly.
Sometimes leaseholders will prepare themselves for eventual repair costs by paying into a reserve/sinking fund. This acts as a contingency should a large repair bill come along. However, in order for this method to be effective it will require payment over a long period of time. It also worth remembering that payment into a reserve/sinking fund is only required if it is specifically provided for in your lease – and remember if you choose to sell your flat, you may not be able to get back what you paid into such a reserve fund.
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