Understanding service charges

Image: magazine.trendsales.no

By Sarah Rushbrook

Owners of leasehold flats in the United Kingdom are legally obliged to pay service charges to cover their share of the costs for the maintenance and repair of all external and internal communal areas of their block of flats.

Sarah Rushbrook, Founding Director of Rushbrook & Rathbone, a leading property management agency based in the UK, is concerned that many potential first time flat owners don't actually understand how the service charge is made up and what it actually covers. She urges them to find out before they make a purchase, particularly as charges can differ hugely between blocks.

Sarah says: "Although the market is currently seeing a lack of new developments being built due to problems with financing, there has still been a high level of interest for new flats as well as re-sale properties given that they are the perfect purchase for first time buyers, buy to let investors and for anyone wanting to downsize.

"For first time buyers it is their initial step onto the property ladder and for downsizers it could well be their first experience of communal living having previously owned family homes. With this in mind, it has meant we have seen a number of buyers who have actually never come across service charges before and therefore don't realise what they are made up of and what it is they are paying for.

"Every residential block of flats must be managed and depending who is providing the management service can have a big impact on the amount owners are charged. This is why I urge new owners to find out who the managing agent is before they go ahead with a purchase so they not only know they are receiving a good service in terms of a set appropriate service charge level but also that they can see what quality of care the building is going to get.

"Occupants of a flat want to ensure that their communal areas are looked after to a high standard and any issues are dealt with efficiently, something a professional managing agent should provide."

An additionally warning that Sarah wants to convey to owners is one that comes with buying a new build property.

She says: "An estimated service charge is set before any costs are incurred so buyers must be prepared for a possible increase in year two onwards once the actual costs are known. When looking at flats to buy compare the facilities and standard of the blocks and the service charges. Be aware that a lower service charge on a new build block is likely to catch up with the higher service charge on an older block in year two."

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