Question 1

What is my annual service charge, and how is it calculated?

Accepted Answer

Your annual service charge is determined by the management agent and typically includes costs for maintenance, repairs, insurance, and general upkeep of the common areas in the building. It is calculated based on your flat's proportionate share of these total expenses, which is often outlined in the terms of your lease agreement; sometimes a fixed percentage, at other times a fair proportion (usually the square footage of the flat). The exact amount can vary yearly depending on the actual costs incurred and any anticipated major works. Typically the charges are demanded in advance, although some older leases may stipulate collection at the end of an accounting year.

Question 2

Are there any anticipated increases in service charges or significant upcoming expenses?

Accepted Answer

There might be anticipated increases in service charges if there are planned major works, increased maintenance costs, or inflation-related adjustments. Significant upcoming expenses could include major repairs, refurbishments, or upgrades to common areas, such as roof repairs, lift refurbishments, or repairs to communal facilities. It's best to review the latest budget and accompanying documentation for specific details on any expected changes.

Question 3

How is service charge money held?

Accepted Answer

The Landlord and Tenant Act 1987 s42 stipulates that service charge money must be held in trust. This is a special bank account that separates the service charge money from the funds of that of the managing agent or landlord.

Question 4

Can my reserve fund contribution be refunded?

Accepted Answer

No, reserve fund contributions typically cannot be refunded as they are designated for future major repairs and maintenance to ensure the building remains in good condition. These funds are meant to cover anticipated costs and are usually non-refundable, even if you sell your flat. They help avoid large one-time charges for major works.

Question 5

What do the different schedules in a service charge budget mean?

Accepted Answer

Schedules within a service charge budget are typically used to allocate expenses to particular areas of an estate. This breakdown helps ensure that costs are fairly distributed among the various areas and that leaseholders only pay for what they have access to. For example, leaseholders within a flat that has access to a car park, may have to contribute to the upkeep of the car park, but leaseholders within a flat on the same estate who do not have access to the car park would not contribute to the upkeep.

Frequently Asked Questions