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Service charges
Your at-a-glance guide to service charges Leaseholders living in residential blocks are under an obligation to pay an annual service charge to their landlord to cover the cost of providing services and maintaining the common parts of the building they occupy, writes Lesley Davies. Residents commit to pay a proportion of these running costs, which will vary depending on your lease terms and the level of service and maintenance provided.
The lease will probably also contain a ‘sweeping clause’. This is designed to cover any services not specified in the lease. If the lease doesn’t have one of these, residents are only legally obliged to pay for the services that are listed.
entitled to add a reasonable management fee to the charge but should not make a profit. If the lease doesn’t provide enough information about service charges for residents to determine whether or not they are paying a fair rate, they are entitled to a breakdown of costs to check whether they are acceptable. Landlords are legally obliged to allow residents to inspect and take copies of accounts, receipts and other relevant documents. If this information isn’t forthcoming or leaseholders feel they have been unfairly treated, they should take professional advice from a chartered surveyor who specialises in residential leasehold property, or from a housing lawyer.
HOW MUCH IS THE RIGHT AMOUNT?
WHAT IS A SINKING FUND?
The amount leaseholders pay in service charges can vary from year to year and will undoubtedly rise with inflation. Landlords are
Leaseholders only have to contribute to a sinking or reserve fund if this is stated in the lease. However, having one in place
UÊ Ü >ÌÊÃiÀÛ ViÃÊ ÕÃÌÊLiÊ«> `Ê for and when; UÊ ÜÊÃiÀÛ ViÊV >À}iÃÊ>ÀiÊ apportioned between residents; UÊ Ì iÊÜ>ÞÊ ÊÜ V ÊÌ iÞÊ>ÀiÊ calculated; UÊ ÜÊÌ iÊ > ` À`ÊÜ ÊV iVÌÊ the charges; and UÊ Ü iÌ iÀÊ ÀÊ ÌÊÌ iÀiÊ ÃÊ>Ê sinking fund in place.
WHAT DOES THE SERVICE CHARGE COVER? Service charges differ from lease to lease, depending on the size and quality of the building in question. A typical service charge might cover any or all of the following:
UÊ i iÀ> ÊÀi«> ÀÃÊ> `Ê maintenance UÊ i> }Ê vÊV Õ > Ê>Ài>ÃÊ and windows UÊ ÝÌiÀ > Ê > Ìi > ViÊÃÕV Ê as grass-cutting and gardening UÊ ,i`iV À>Ì ÊvÕ ` UÊ vÌÊ > Ìi > ViÊ> `Ê insurance (even if you live on the ground floor) UÊ ÀiÊ µÕ « i ÌÊ > Ìi > Vi UÊ Õ ` }ÃÉ«À «iÀÌÞÊ Ü iÀÃÊ insurance - although this may be paid separately UÊ > Ê> `Ê>VV Õ Ì> VÞÊ charges UÊ > >}i i ÌÊviià UÊ - }Ê ÀÊÀiÃiÀÛiÊvÕ `Ê Details of what is in included in the service charge are included in the lease. This will give details of:
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