Twice a year an envelope arrives, a number sits at the bottom, and very few leaseholders could say where more than half of it goes. The service charge may be the least read expensive document in British housing, which is a shame, because the breakdown is usually attached.
Broadly, the money divides into things the building consumes, things the building saves for, and the cost of someone organising both.
The predictable half
Buildings insurance is often the largest single line, and it covers the structure, not your belongings, which is why you still need contents cover. Around it sit the running costs: cleaning of common parts, gardening, electricity for hallway lighting, lift servicing, fire alarm testing, door entry maintenance. In larger blocks add staff costs and utilities for shared facilities. These lines move with inflation and contractor prices, and a competent managing agent retenders the big contracts rather than renewing them out of habit. It is a fair question to ask when the insurance and the lift contract last went to market.
The fund you should be glad to see
A reserve fund, sometimes called a sinking fund, collects money now for the roof in eight years and the external decoration in four. Leaseholders sometimes resent it, since you may sell before the roof is done, but the alternative is worse: a block with no reserves meets every big job with a sudden one-off demand. A healthy reserve fund also smooths the moment a surveyor finds something. When major works do come, remember that any project costing an individual leaseholder more than £250 triggers the section 20 consultation process, which gives you notice of the works, sight of estimates and a right to comment before contracts are signed.
The management fee itself is the line leaseholders resent most and scrutinise least. It should be stated plainly, per flat or for the block, rather than buried as a percentage across other lines.
Your rights when the number looks wrong
Service charges must be reasonably incurred, and the law gives you tools to test that. You can ask the landlord or agent in writing for a summary of the service charge account, and then to inspect the invoices and receipts behind it. Do this before arguing, because half of all disputes dissolve when the paperwork appears. Where a charge still looks wrong, the First-tier Tribunal can decide whether it is payable and reasonable. Withholding payment without advice is the one move to avoid, since arrears can put your lease at risk even when your complaint has merit.
If the answers you get are slow, vague or missing, the problem is usually the agent rather than the arithmetic, and blocks do change agents. Among the 1,499 property management companies listed here are block specialists who publish what they manage and where. Compare block managers near your building, or outline the block and ask firms to quote against your current fee.
Either way, file this year's demand with its breakdown and read both pages. Ten minutes with the actual document beats an hour of speculation in the residents' chat.
