Leaseholder service charges
Service charges are levied by landlords to recover the costs they incur in providing services to your block and estate. The way in which the service charge is organised is set out in the lease. The charge normally covers the cost of such matters as:
- General maintenance and repairs
- Insurance of the building
- Lifts
- Lighting
- Grounds maintenance and cleaning of common areas.
- The charges may also include the costs of management by the landlord.
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 the lease. The landlord provides the services, while the leaseholders pay for them.
The lease will dictate the format of the charge. It will usually give the dates of the service charge period and how often payments are to be made. More often than not the service charge period is for a year.
The lease will usually set out the percentage or proportion of the service charge payable by the lessee, but sometimes the lease just stipulates a 'fair' or 'just' proportion. Those leases transferred to CPH from Lambeth Council stipulate that service charges must be calculated based on the rateable values of your property and the estate.
The lease will say whether advance payments are to be made and, if so, whether they are based on the previous year's cost or an estimate of the cost in the year to come, for example.
Service charges can go up or down without any limit, but the landlord can only recover those costs which are reasonable. Leaseholders have rights to challenge service charges that they feel are unreasonable at the Leasehold Valuation Tribunal.
When considering the purchase of a leasehold flat, it is important to find out, for personal budgetary purposes, what the current and future service charges are likely to be.
Cost elements included in the service charge
Here’s a breakdown of all the cost elements included in the service charge:
- Building cleaning covers the cost of cleaning the communal areas of the building and the immediate external areas.
- Disinfestation covers the cost of treating the communal areas of the building for pests such as rodents and cockroaches.
- Concierge covers costs such as works to door entry systems and future concierge type services planned as the refurbishment and new build programme develops.
- General maintenance covers the cost of any maintenance or repair work carried out to your building.
- Lifts covers the cost of servicing and repairing lifts to those buildings with lifts.
- Communal electricity covers the cost of electricity supply to your building.
- Communal TV aerial covers the cost of maintenance to any communal TV aerials on your building.
- Communal window cleaning covers the cost of cleaning any communal windows in your building.
- Heating covers the cost of heating your building. This charge relates only to those buildings with communal boilers.
- Hot water relates only to those buildings with communal boilers.
- Estate cleaning covers the cost of the cleaning contract for the estate and the buildings situated on the estate.
- Grounds maintenance covers the cost of maintaining the grounds on the estate and includes litter picking, tree surgery and general horticultural work.
- Estate general maintenance covers the cost of any repairs and maintenance work carried out to the estate, and the caretaking service.
- Estate communal electricity covers the cost of lighting the estate and any other associated costs required to provide electricity to the estate.
- Ground rent is an annual charge of £10.00 listed in your lease. Freeholders do not pay this charge.
- Your management fee relates to the costs incurred by CPH in the management of the building and the estate. Under the terms of your lease we should recharge leaseholders no less than 10% of the total service charge for the reasonable costs incurred in the management of the building and the estate and costs incurred in respect of the annual certificate of account and accounts kept and audits made for the purpose of such management.
- Buildings insurance covers the cost of the insurance of the building of which the flat forms a part. If you live in a house, the buildings insurance covers the house. CPH has an obligation under the terms of your lease to insure your property against loss or damage by fire and full comprehensive risks. The insurance cover runs from 1 October - 30 September annually.
Audited accounts – surplus or deficit
The block / estate accounts are audited each year and signed off by an independent auditor. Most 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. If the actual cost incurred was less than the estimated cost your account will be credited. If the actual cost is more than the estimated cost you will receive an invoice for the difference.
Ground rent
Ground rent is a payment made by the leaseholder to the landlord as a condition of the lease. The payment of ground rent (as with any rent) is specified by the lease and should be paid on the due date.
Advice
Further information can be found from the following sources:
Leasehold Advisory Service
31 Worship Street
London
EC2A 2DX
Tel: 020 7374 5380
Fax: 020 7374 5373
Email
The Residential Property Tribunal Service
Chartered Institute of Housing
9 White Lion Street
Islington
London N1 9XJ
Tel: 020 7837 4280
Fax: 020 7278 2705
Royal Institution of Chartered Surveyors
12 Great George Street
Parliament Square
London
SW1P 3AD
UK
Tel: 0870 333 1600
Fax: 020 7 334 3811
Housing Corporation Tel: 0845 230 7000