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What is a Reasonable Service Charge?

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Is your service charge reasonable? Maybe you have been paying for maintenance that never seems to get done, or for a cleaner who doesn’t show up.

There are many benefits to a service charge. For example, the tenants don’t have to worry about any of the maintenance or upkeep of communal areas. However, if you are being charged an unreasonable service charge, you may need to contact a property lawyer or raise a dispute.

In this article, we will discuss what a service charge is, what you may be paying for and how a landlord will calculate this charge. We’ll consider what makes a service charge reasonable, and what to do if it’s not.

What is a Service Charge?

A service charge is a fee that the leaseholders must pay to their landlord. This charge is used to maintain the building, look after communal areas, and complete any necessary maintenance. This price generally includes services like cleaning common areas, building insurance, maintaining lifts and any necessary repairs.

The service charge should be a reasonable fee that reflects the needs of the building.

What Are You Paying For?

Whether you are the leaseholder of a flat or house, you will be required to pay a service charge to your landlord. This charge covers areas such as:

  • Completing repairs in the communal areas. For example, replacing a broken window or fixing a broken lock.
  • Maintaining the building’s communal garden if there is one
  • Contract costs for anyone working in the building, e.g. a regular cleaner or gardener
  • Building insurance
  • The cost of managing the building
  • Utilities for communal areas of the building
  • Regularly servicing and lifts in the building
  • Maintaining the heating systems

How is Service Charge Calculated?

The service charge is determined by the landlord or property management. It is generally an estimate based on the previous year’s expenses but will also reflect any larges costs that are expected to occur in the near future. For instance, if the lift has broken-down, the cost of its repair will be reflected in the service charge.

If you are part of a flat with multiple leaseholders in the building, the service charge will be split among you.

What Makes a Service Charge Reasonable?

When paying for a service charge, it is important to ensure that what you are paying isn’t excessive or unreasonable. There are a few different factors that are considered when determining if a service charge is reasonable, these include:

The Size of the Property

Service charge focuses on the maintenance and upkeep of the building. Because of this, leaseholders living in a large building can expect to pay a higher service charge than those living in a small property. This can include the size of the garden and communal areas in the building.

How Frequently Work is Needed

It’s important that the building is clean and maintained regularly however, some services are just not needed that frequently. For example, hiring a cleaner to clean common areas of a building daily is excessive and is unnecessarily adding to the property’s service charge. This job could be done just as well with a weekly, or even monthly clean.

A History of High-Quality Maintenance

If a property has a long history of exceptional maintenance standards, a higher service charge can be expected as the landlord and property managers strive to maintain this standard.

The Standard of Work Being Done

Paying a high service charge for subpar work is not reasonable. The more being spent by the landlord, the higher the quality of work should be.

Whether the Service Charge is Being Used to Benefit the Leaseholders

If work is completed using funds from the service charge, it should be in the interest of all of the leaseholders. For example, maintenance on communal areas benefits everyone, but repairs being carried out in an individual’s property would not be considered reasonable.

What Can You Do if You Don’t Believe Your Service Charge is Reasonable?

Within the Landlords and Tenant Act 1985, leaseholders have the ability to apply for Tribunal in order to resolve any disagreements regarding the reasonableness of the service charge. The First-tier Tribunal or FFT will make a decision based on the standard of work, frequency of work, property scale, benefits of leaseholders, etc. This allows them to determine how reasonable the service charge is.

The Tribunal will then let the leaseholder know exactly how much a reasonable service charge would be for their situation.

Who Can Help?

If you believe that your service charge is unreasonable, speak to a residential property expert. They can provide support and guidance to help you to dispute unreasonable service charges and take your dispute to the First-tier Tribunal.

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