Why do I pay a service charge on my flat?


The leasehold sector is often misunderstood with little information provided to new owners purchasing a property under this type of tenure. Whilst it is the duty of your solicitor to explain what you are buying into, it’s often that important information is not relayed back and during ownership it can become apparent what legal and statutory obligations you are responsible for. This can be quite daunting for somebody who has purchased a property and is faced with uncertainty on where they stand with certain legal responsibilities. So we’ve teamed up with residential block managing agent, Dempster Management Services Limited to provide insight into the leasehold sector.

The Freeholder owns the land and building in which the property sits and a lease is granted on each dwelling – usually a flat. Furthermore, there may be a third party written into the lease known as a resident’s management company. The company is formed by the owners of the apartments and they are all members of that company. Thereafter, directors are appointed by the members whom are often owners themselves.

Whether the lease has a management company or not, one party to the lease must maintain the common parts and arrange the building’s insurance; hence the creation of a leasehold. In order for these areas to be maintained, as an owner, you will be legally bound under the terms of your lease to pay a service charge.  The service charge is variable, meaning it can change by either increasing or decreasing.

One of their responsibilities is to set the service charge budget; the budget is then agreed by the Freeholder or the directors of the Management Company which is then payable by the owners of the flats. Owners are often concerned about the level of service charge and it’s important that there is transparency from the party collecting the service charge to explain how your money is being spent.

It is recommended to review the budget and a copy of the annual service charge accounts to ensure that your development has sufficient funds to carry out day to day expenditure and have an adequate reserve fund for major works/cyclical works such as internal painting and roof replacement. It is not unheard of that owners are faced with a large bill for a major piece of expenditure and it is therefore important to review the finances of your development to ensure you are not faced with an unwanted bill.

Whilst it may seem that you simply have to pay the amount demanded, there are certain statutes or pieces of legislation to protect you. Service charges are only recoverable to extent the that they are reasonable, and this can boil down to interpretation on what is felt reasonable. Furthermore, you do have a statutory right to inspect any invoices so that you are able to ensure your development is not being overcharged or to ascertain whether works are being carried out unnecessarily.

If you have any concerns about the service charges for your flat or are looking for some advice on any lease matters, get in touch with Dempster Management Services for a chat without any obligation: – 01663 751 199 or info@dempstermanagement.com


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