A service charge is the cost of providing services to a building. They cover all the shared items within your building, for example, general repairs, recurring maintenance, buildings insurance, lifts, communal lighting, management fees, reserve fund contributions, cleaning shared areas etc.
It has also become increasingly common that new housing developments and estates are also having their shared areas maintained via a service or estate charge. An estate charge sits on the same principles as a service charge, but is used solely for the ‘estate’, outside areas and their amenities. These are typically all Public Open Space, drainage, street lighting, shared access route, play parks/areas etc.
How your service charge is organized, what is covers and the amount you contribute is typically written in your lease. This can be split as an equal percentage per unit, a varied percentage per unit (adding up to 100%), or by set bands of contribution per unit. The service charge can also be broken up into separate schedules, so for example the ground floor units may not pay towards any lift related items. You can also find that estate charges can be on their own schedule for properties which both have a service charge and estate charge requirement.
Service charges and estate charges can easily be explained as the shared costs, between all owners, for the annual and planned works associated with your property/development as a whole. They are in place for the benefit of the property/development and are required for safe running in line with legislation, as well as for improvements to the asset.
For more information on service charges, feel free to to view the RICS (Royal Institution of Chartered Surveyors) code of practice, Section 7.
For details on how we can help you with your block or estate management requirements please contact us.