The difficulty with comparing service charge costs between individual blocks of flats can be explained by considering in a number of factors. The method of calculation can differ for each block in line with any variance in leasehold arrangements. The property size, type, height, condition, age, service facilities, plant, lifts, equipment and lease particulars can all have a significant influence on the maintenance and running costs. In addition, the maintenance and repairs history and sinking fund provision may also vary considerably making comparisons of the level of freehold service charges extremely difficult. Not only will the freehold property and its condition be unique, but the property services necessary in managing and maintaining the building can be quite different along with the requirements of the property lease.
In summary you should not compare apples with oranges and in many cases there are probably good reasons for any two landlord service charges being different. Here are some possible explanations which may be applicable in comparing one typical block management scenario with another.
(i) You may have a more comprehensive set of services funded through your service charge (e.g. site manager or porter, all windows cleaned, lifts, car parking, entry systems etc.).
(ii) Does your neighbour's service charge include sinking funds to allow for future repairs and maintenance? If not, their charge is likely to fluctuate dramatically from year to year as large expenditure falls due. Large items may well be charged for separately as and when they arise being additional to any regular landlord service charge.
(iii) How many individual flats are in the neighbouring building? Smaller blocks of flats with less units tend to have a higher maintenance charge per unit. Overall maintenance costs are often disproportionately more expensive where the cost is shared by fewer lessees. If service charges are spread across a large number of flats it follows that the proportion for each leaseholder will be less. For example, a roof repair provided for only 6 flats is expensive compared to the same facility provided for 32.
(iv) Do you have extensive gardens or is your block an older building? If so, your service charge could be adversely affected. The presence of asbestos for example can have a dramatic effect on the costs of any works being carried out.
(v) What size is your apartment? The method of service charge calculation should be stated in the property lease. It may be apportioned by reference to the floor area of your apartment. If you own a two bedroom apartment and your friend owns a studio apartment then this can make a significant difference. Some leases simply share all costs equally and this can clearly alter the portion payable quite significantly from one block to the next.
(vi) The location and access arrangements to carry out works can also have an impact on service charge. Where service contractors are unable to erect scaffold, or carry out their works in a cost effective manner extra time and costs will result. Difficulties with materials deliveries, parking, craneage, disposal of rubbish etc will all have an affect whereas simple standard procedures with no special requirements will not attract a premium.
Having checked your lease and the other matters described above, you may still consider you are being overcharged. As a long suffering leaseholder there are a number of options available. Why not consider asking your landlord to employ a professionally qualified managing agent. If you insist that a firm is appointed which is Regulated by RICS (The Royal Institution of Chartered Surveyors) the service standards they must work to are set out in the RICS Code. This Code serves to protect clients from unscrupulous practices and in addition requires auditing and protection measures are put in place being subject to regular inspection by the institution.
Other options may also be open to disgruntled leaseholders including taking up their Right to Manage or indeed Enfranchisement where the freehold can be purchased by a majority of the lessees. However these alternatives are not always possible and can take time requiring the co-operation of others to initiate. Whatever solution is to be found, I trust that the above will serve as a useful point of reference to help those who may be subject to overcharging.
It is of course prudent to look into the above matters either before or at the time of purchasing a leasehold property in a block of flats. Generally the management and maintenance costs will tend to be reflected in the service charge of any property over a period of years. A conveyancing solicitor should request this information in their investigation and search with the freehold block management agent.
I have further explored this subject in a separate article entitled 'Service Charges Too High? How Can Leaseholders Go About Challenging Them?' which I trust will assist.
Additional service charge advice and support may be obtained from a good block management agent providing residential freehold property services for blocks of flats. Readers are advised to search for block management agent services which are benchmarked to the quality standards set out by The Royal Institution of Chartered Surveyors (RICS). These professional practices or management agents benchmark their property services to the RICS Service Charge Residential Management Code. which was approved by the housing minister in 2009. RICS Chartered Surveyors which are 'Regulated by RICS' must comply with this code which is rigorously enforced by the RICS which carries out regular inspections of their member firms. Regulation also secures a number of other benefits for freehold management companies, landlords and leaseholders. Service charge monies must be safely managed in a secure ring fenced client bank account with funds being insured and subject to regular checking and bank reconciliation. In addition the services provided must reach the required standards Typical block management agent services are covered under the RICS Code including:-
- Property Maintenance and Repairs
- Leaseholder Enquiries
- Financial Control
- Expenditure
- Budgeting
- Service Charge & Ground Rent Collection
- Accounts
- Client Reporting
- Lease compliance
- Co. Secretary
For further information and advice regarding the management of residential freeholds or other property matters please contact us at our details below.
Residential Freehold Management and Maintenance Services for Blocks of Flats
VFM's property management services are benchmarked to the quality standards set out by The Royal Institution of Chartered Surveyors (RICS).
Property Maintenance and Repairs
- Leaseholder Enquiries
- Financial Control
- Expenditure
- Budgeting
- Service Charge & Ground Rent Collection
- Accounts
- Client Reporting
- Lease compliance
- Co. Secretary
For further information and advice regarding the management of residential freeholds or other property services please contact us at vfm@vfmproperty.com or visit our website http://www.vfmproperty.com.
Russell Dyer is Director of London based VFM Property Management Chartered Surveyors, Property and Development Consultants Tel 020 8658 6824 Fax 0871 990 2366
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