Service Charge Budgets Explained…
17th Dec 2020
Around this time of year, many of you will be receiving service charge notices. For the uninitiated, we’ve assembled a helpful guide for you to understand these charges and how they affect you.
Firstly, we set a budget for your scheme each financial year, because we do not know in advance the exact amount it will cost us to provide services or repairs. Blocsphere estimates the cost of service charge for the coming financial year by looking at previous costs and changes to the services provided to residents. Also included are the changes in cost of contacts provided by the suppliers of services to Blocsphere and expected changes in VAT and inflation over the coming year.
What is a service charge?
Your service charges are calculated on an annual basis depending on the terms of your lease. These specify:
- what you pay for
- what percentage of the overall cost you pay
- the date the budget is set (financial year)
- payment terms (monthly, quarterly, bi-annual or annual)
What sets Blocsphere apart from other Managing Agents is that the team at Blocsphere read through each lease thoroughly and check what can be charged as service charge or not. Every lease is different, and some things may be required under a service charge for one building and not for the other. We always read through the lease of every new property we take on and make sure the leaseholder is paying the correct amount of service charge for their building.
The service charge only covers communal services i.e. anything shared by more than one property.
Examples of these services include (but are not limited to):
- communal cleaning
- grounds maintenance/gardening
- communal repairs
- bulk rubbish removal
- communal electricity
- communal water
- communal TV systems
- buildings insurance
- fire protection/fire risk assessment
It also covers administrative items when required, such as:
- managing agents fees
- accountants fees
- legal advice
- surveyors and other professional fees
- directors’ & officers’ liability insurance
Finally, there may also be an element for a reserve fund. This is a type of “savings plan” against future major works such as a communal roof replacement or car park resurfacing. Whilst it is not possible to guarantee that this fund will cover such work in full, Blocsphere will try to project the likely cost and budget accordingly. This money will be kept in a trust account and the lease will set out what the landlord can spend the money on.
We hope this made the topic of service charge a lot clearer, especially if you are new to leasehold. Blocsphere are proud to have transparent management fees which makes us stand out from other managing agents. When you choose us for your block and estate management you won’t find any hidden fees or charges in our estimates, so you can have continued confidence in our service.