Service Charges

Do we have an online Portal to see what’s happening with our own Service Charge Account?

Yes, each resident will be asked for their email address and sent an invitation to their own account. This enables them to see their Service Charge Account Balance and lets us communicate with them. Any issues raised by a Leaseholder will be logged on the system so they are able to see on their online portal when the issue is resolved.

What are my ongoing financial commitments in regard to making payments for Service Charges as a Leaseholder?

Most of the financial charges a leaseholder will have to meet will reflect the costs of providing services to the group of leaseholders of whom he is one. Those services should be specified in the lease as those which the landlord is obliged to provide: primarily, maintaining the building, providing essential services to that building (including insurance), the upkeep of any grounds, the employment of staff and the general management of the property. It is possible to divide service charges into three broad categories:

  • day-to-day expenditure – costs like heating and lighting of the common parts, cleaning, insurance, salaries and management fees which are payable every year
  • cyclical expenditure – money spent on a regular periodic basis like external painting
  • periodic long-term expenditure – usually major spending on infrequent projects like lift or roof replacement
This breakdown of expenditure may be reflected in the way in which money is held and accounted for on a scheme with separate funds for each type. Whatever the breakdown, there are detailed and specific rules on how and when income and expenditure must be accounted for.

What is a service charge and why do I have to pay it?

The service charge fees cover the costs of maintaining the building and providing essential services to that building (including insurance), gardening, cleaning and the general maintenance and management of the communal areas of your property. Within your Lease or Transfer you can find the elements of what your service charge is to contribute towards and when you are expected to make payments towards them.

How can I pay my Service Charge?

Love Your Block will issue your Service Charge Demands with 21 days notice prior to the expected payment date. You will also have forewarning of when Service Charge payments are due throughout the year, having had the minutes from the Annual General Meeting. We are all about making things easy for you and are able to facilitate payment by accepting standing orders, bank transfers and cheques.

How is my Service Charge calculated?

Love Your Block will work with the Directors of the Company to draft a budget. This will show a breakdown of costs which need to be contributed towards in the smooth running of your block. We will take into consideration the last years spend, any future schedules of maintenance that need to be considered and any other items which we feel need to be taken into thought about. This draft budget will then be presented at the AGM for all leaseholders to see and comment upon. We like to work in consultation with you and ensure that you understand why you are paying what you are being asked for.

What happens if I don’t pay my Service Charge?

Love Your Block have clear and sensitive procedures which are adhered to and regularly reviewed. We seek to minimise the impact of debt and have proactive procedures in place, as well as reactive ones. This includes;

  • issuing demands in advance of the due dates
  • facilitating the ease of payment (direct debits and automatic bank transfers are encouraged)
  • excellent communication of the budgets, explanatory notes and meetings with Directors and leaseholders at the AGMs.
It is the Leaseholder’s obligation under the terms of their Lease/Transfer to pay Service Charges and they may face legal proceedings if they do not comply. We find that most of these problems can be resolved in discussion between the parties concerned. Our debtors’ management procedure will allow for such issues to be identified and rectified swiftly and efficiently and we find that in the majority of cases non-payment is due to either a misunderstanding or banking error. In the minority of cases which cannot be solved it may be necessary to take firmer action.

Where is the Service Charge Money held?

Upon starting with a new client Love Your Block open up bank accounts in the name of your company. All Service Charge payments will flow into this account and invoices for services to the block will flow out upon receiving invoices from contractors and suppliers. Funds are held in trust and this is in accordance with Section 42 of the Landlord & Tenant Act 1987. With Love Your Block, our clients are able to see their Service Charge account balance through your own online portal at a time that is convenient to you. We also ensure that Directors of the company have quarterly financial reporting which includes: Overdue Service Charge units, income and expenditure, balance sheets and a budget vs actuals tracking analysis.

What is a Reserve or sinking fund?

Monies held for the purpose of long term expenditure are normally held separately in what are termed reserve or sinking funds. Such funds are important because they spread the cost of major works over many years and thus facilitate budgeting by landlords and leaseholders alike. With these funds, leaseholders’ contributions can be equalised over the years rather than the individual who, for example, happens to own a lease in the year when the building needs re-roofing or the lift replacing and has to carry the whole burden. Otherwise, the unlucky leaseholder would effectively subsidise his predecessors and successors.

How much money should we set aside as a Reserve Fund?

We recommend that all blocks carry a reserve fund to ensure that—as a minimum—any necessary over-budget expenditure during the year (e.g. emergency drain clearance) can be paid for without needing to raise top-up service charge payment requests. We can advise on an appropriate amount during the on-boarding process. Ideally, your reserve fund should also build up funds so that there is enough money to cover work in your building’s Planned Preventative Maintenance schedule (if you have one).

We’re not sure that our current Service Charge Budget is correct, can you help?

Absolutely, that’s certainly something we work with you to do when you come on board. We need to review and agree the budget as a whole, but also to ensure that there is a reserve building up to cover any potential overspend during the year (to avoid having to issue top-up demands to leaseholders, which is never a nice thing to do!).

What about preparing the accounts, can we choose our own Accountant?

You may not even need to. It is all determined by your lease. If your lease states that there are no accounts or service charge certificates/notices required then we will provide the year-end financial report as part of our regular reporting for no extra fee. Some leases do not require an accountant to produce the annual service charge accounts at all. Therefore, if we are required to produce a Service Charge Certificate for you it will be £150.00 annually (including VAT). If your lease states that you must have an accountant to produce the Service Charge Accounts then for blocks of 5 and below there will be a fee of £450 (including VAT). Blocks of 6 and above will have a fee of £600 (including VAT). You are able to choose your own accountant, but please note that there is a £100 + VAT fee from us to produce reports for a different accountant of your choosing. This is because our partner accountant has access to our financial system, whereas we'd need to produce the reports for any accountant you choose. We will always work responsibly to ensure that any expenditure from your account is fair and reasonable.

Does your Managing Agent's Fee also cover the Maintenance and Repair work at the property?

No. Our fee, whether you are on the Fully Managed Service or the Remote Managed Service covers the work that we do to run your block on behalf of your Residents Management Company (including all the administration, project management of minor works for the FMS, financial, technical and legal works required). To help you understand the process more, your Service Charge payments are collected from you into your own client bank account. Our fees are paid out of this account - as are any other invoices for works carried out on your behalf (maintenance and repair work, accountancy fees etc). That is why setting a budget is critical. By setting a budget at the AGM we can track expenditure throughout the year and try to make accurate projections for expenditure going forward. Knowing what you are likely to spend in the coming year can help avoid the necessity for 'lumpy' payments in-between the Service Charge Demand Payments, and make it easier to accurately forecast what your Service Charge Payments need to be to cover the services to your block.