Looking after your Service Charge Fund
The service charge reflects the costs of providing the range of services and maintaining the common parts of a particular development. Each property owner contributes by means of the service charge which is normally governed by the terms of the lease. All annual service charge payments are transferred directly into a development specific ‘trust’ account at a third party bank and are not paid into the managing agent’s bank account.
The ‘on account’ service charge is based on an estimate prepared each year of all the running costs of your development. These could include a number of elements. Some of the most common are:
- Landscape maintenance – from cutting the grass, maintaining communal gardens, watering and sweeping. Every development’s requirements will be different and be managed accordingly
- Lighting, heating and cleaning of communal internal areas
- Window cleaning – specific to each development, but would typically include all external windows as well as internal windows in communal areas
- Lift maintenance
- Fire equipment maintenance
- Other electrical and mechanical equipment maintenance – specific to each development but could include items such as water pumps, entry or security gates, communal heating boilers etc.
- General repairs and maintenance
- Buildings insurance – in the case of apartments, full buildings insurance is required under the terms of the lease to cover the risks relevant to the development. Standard insurance risks might include fire, explosion, lightning, aircraft, terrorism, storm or flood, sprinkler leakage, subsidence or landside etc.
- Bank Charges and Audit fees
- Salaries of any onsite staff that are employed specifically to work for the development
- Management fee – the only part of the annual service charge which is paid over to the managing agent from the developments trust account
When year-end accounts are prepared the actual costs are compared to the estimate and a ‘balancing charge’ made or credit given.
