The service charge budget for the block of flats you live in can cover a number of costs. Here’s a rundown of what these block of flats service charges can include.
What is a service charge?
Service charges are payments by the leaseholder to the landlord (freeholder) for all the services the landlord provides.
These can include maintenance and repairs, insurance of the building and, in some cases, provision of central heating, lifts, porterage, estate staff, lighting, and cleaning of common areas.
The charges can include the costs of management, either by the landlord or by a professional managing agent or property manager. There may also be provision in the lease for the costs of essential fire safety works such as fire doors to be included in service charges.
Can service charges for blocks of flats increase?
Service charges can vary from year to year. They can go up and down without any limit, other than that they are reasonable. Leaseholders have rights to challenge service charges that they feel are unreasonable at the First-tier Tribunal (Property Chamber).
Details of what can and cannot be charged by the landlord, and the proportion of the charge to be paid by the individual leaseholder, will be set out in your lease. The landlord arranges provision of the services but isn’t likely to make a financial contribution unless they live in one of the flats. Many modern leases allow for the landlord to collect service charges in advance, repaying any surplus or collecting any shortfall at the end of the year.
Every leaseholder in your block should make themselves aware of what the current and future charges are likely to be. It’s also worth finding out if there is a reserve fund for the ‘unexpected’ and what plans there are for major works, so you don’t get big bills that you have not budgeted for. Service charges can fall into three categories:
- Reserve funds – for long-term expenditure, for example roof replacement.
- Cyclical expenses – for more regular expenses like external and communal area decoration.
- Annual charges for day-to-day expenses – for example, cleaning, gardening, insurance, salaries, and other items that are payable each year.
There may also ground rent to pay. Check the Leasehold Advisory Service website and advice guides for a detailed explanation of service charges.
Blocks of Flats Insurance from Gallagher
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The sole purpose of this article is to provide guidance on the issues covered. This article is not intended to give legal advice, and, accordingly, it should not be relied upon. It should not be regarded as a comprehensive statement of the law and/or market practice in this area. We make no claims as to the completeness or accuracy of the information contained herein or in the links which were live at the date of publication. You should not act upon (or should refrain from acting upon) information in this publication without first seeking specific legal and/or specialist advice. Arthur J. Gallagher Insurance Brokers Limited accepts no liability for any inaccuracy, omission or mistake in this publication, nor will we be responsible for any loss which may be suffered as a result of any person relying on the information contained herein.