As a leaseholder, one of your key financial responsibilities is paying the service charge. This charge contributes to the maintenance, repair, and management of the building and communal areas that you share with other leaseholders. Understanding what’s included in your service charge is crucial to ensure you’re getting value for money and to avoid any surprises.
Here’s a breakdown of what’s typically included in the service charge for your leasehold property:
- Building Maintenance & Repairs
A large portion of your service charge is likely to cover routine building maintenance and repairs. This includes the upkeep of communal areas and the structure of the building, ensuring that everything is kept in good condition.
What’s included:
- Repairs to the roof, walls, and foundations
- Maintenance of the buildings external structure (e.g., windows, doors, etc.)
- General repairs for any communal areas, such as shared staircases, hallways, or entrances.
Why it’s important:
Keeping the building in good repair helps maintain property values and ensures safety for all tenants. Regular maintenance also reduces the risk of major, costly repairs in the future.
- Cleaning and Gardening
If your property includes communal areas like gardens, shared pathways, or hallways, the service charge typically covers the cost of cleaning and gardening services.
What’s included:
- Cleaning of shared spaces, such as corridors, communal stairwells, and entrances.
- Gardening services, such as lawn mowing, hedge trimming, and tending to any shared green spaces.
Why it’s important:
These services help keep the building aesthetically pleasing and liveable, which in turn improves the overall quality of life for residents and can also positively impact property values.
- Building Insurance
While you, as a leaseholder, are responsible for contents insurance, the freeholder will typically arrange and pay for buildings insurance. This is to cover the cost of repairs if the property sustains any damage, such as fire, flooding, or vandalism.
What’s included:
- Buildings insurance for the entire property structure, including common areas and individual flats.
- Public liability insurance to cover any accidents or injuries that occur in the communal spaces of the building.
Why it’s important:
Buildings insurance is essential for protecting your investment in the property and ensuring the building remains protected against unforeseen events. Without it, you may face huge out-of-pocket costs if anything goes wrong.
- Management Fees
Part of your service charge may go towards paying the management company that looks after the property. The management company’s job is to ensure everything runs smoothly and that all communal areas are properly maintained.
What’s included:
- Fees for the property management company that oversees the maintenance of the building and deals with any issues that arise.
- Legal and administrative fees associated with managing the property.
Why it’s important:
A good management company ensures that the building is well-maintained, tenant concerns are addressed quickly, and everything is handled professionally and efficiently. The management company also helps ensure that the building complies with health and safety regulations.
- Utilities for Communal Areas
Your service charge may cover the cost of utilities in the communal areas of the building. These are the essential services required to keep shared spaces functional and comfortable.
What’s included:
- Electricity and gas for lighting in shared hallways, stairwells, and corridors.
- Water supply for communal areas (e.g., shared taps or washing facilities).
- Sewerage and waste collection for common areas.
Why it’s important:
These utilities help ensure that the communal areas are functional and comfortable for all residents. Without them, shared spaces would be dark, cold, and potentially unusable.
- Reserve Fund / Sinking Fund
Some service charges include contributions to a reserve fund or sinking fund, which is a pool of money set aside for major repairs or upgrades in the future. This helps avoid unexpected costs when significant work (such as a new roof or lift replacement) is required.
What’s included:
- Contributions to a reserve fund for future major works or replacements.
- This fund is often managed by the freeholder or property management company and can only be used for specific purposes as outlined in the lease agreement.
Why it’s important:
A reserve fund ensures that the property can be maintained without needing to suddenly raise additional funds from leaseholders. It provides a financial cushion for large, essential repairs.
- Legal and Compliance Costs
There are always legal requirements associated with owning or managing a property. The service charge may cover the costs of legal and compliance services to ensure the building is up to code and that all leaseholders are following the terms of the lease.
What’s included:
- Legal fees related to ensuring the property complies with local regulations and lease agreements.
- Health and safety compliance (e.g., fire safety checks, electrical inspections, etc.).
Why it’s important:
Ensuring your property complies with the law is essential to protecting both your safety and your investment. Regular inspections also help avoid any potential fines or penalties for non-compliance.
- Additional Costs
In some cases, the service charge may also include other costs that are specific to the building or development. These could be for anything from security services to pest control, or shared internet access.
What’s included:
- Security services such as CCTV monitoring, security guards, or gated entry.
- Pest control and other maintenance services that ensure the building remains comfortable and safe.
- Additional amenities, such as gym memberships, concierge services, or shared Wi-Fi.
Why it’s important:
Additional amenities can greatly enhance the living experience for residents and increase the appeal of the property, making it easier to retain tenants and increase property values.
Conclusion
The service charge for your leasehold property plays an essential role in ensuring that the property is well-maintained and continues to function efficiently. While the exact services covered may vary depending on the building and lease, understanding what’s included will help you budget accordingly and ensure that you are getting good value for your money.
At Oakfield we recommend that before buying a leasehold property, you always ask for a breakdown of the service charge and review your lease agreement to clarify any terms. It’s important to know what’s covered and whether any additional costs may arise during your tenure. Its also good to know who the managing agent is looking after the building as you want to be sure that you are in safe hands should any issues come up with the building.
If you have any questions about your service charge or need help managing your leasehold property, our friendly team would be happy to help so please don’t hesitate to get in touch, check out our contact details here.