© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
Whenever a managing agent isn’t doing their job properly, at some point, at least one leaseholder will undoubtedly utter a variation on the phrase “what are we paying this service charge for when we aren’t getting any service?” But contrary to popular belief, the service charge doesn’t just disappear into the managing agent’s pocket – or at least it shouldn’t! Andrew Adamides breaks down the whys and wherefores of what the service charge is for, how it’s calculated and where it should be going.
Put in its simplest terms, the service charge you pay as a leaseholder is your share of the total cost of the management, maintenance and day-to-day running of the block your flat is in. The cost can vary widely depending on the building – a small block of studio and one-bedroom flats will obviously have a far lower service charge than a luxury development with a pool, gym and concierge. But the purpose for which the money is paid is the same in both cases.
Under the terms of a lease, the freeholder is required to provide certain services for the upkeep of the block, and can charge leaseholders for this.
The exact details of the individual costs within this will be detailed in your lease, and can include;
The fee charged by the managing agent will also be part of the charge. There may also be a contribution to a Reserve Fund, money saved specifically in case something within the block needs to be replaced or repaired outside of the regular upkeep and maintenance. For example, if a lift needs to be replaced, or the building redecorated.
Your lease will generally also show the percentage of the total that your flat pays of the total cost of providing all these services. It will also provide details of how often the service charge is collected. This is usually quarterly, biannually or annually, and can be in advance or in arrears.
The actual calculation of your service charge can be done in a number of ways, although the amount asked must be reasonable, and can be challenged at the Leasehold Valuation Tribunal if it is not.
The various methods used to calculate service charges have included;
• Splitting the charge equally between the units within a building;
• Splitting the charge between units based on their size in terms of the amount of the overall floorspace they occupy;
• Splitting the charge between units based on the number of bedrooms (and sometimes bathrooms) they have;
• Dividing the charge based on the rateable value of a property.
This last method was used in older leases. When rateable values ceased to be used, the calculation method used in these leases was converted into a percentage format.
Nowadays, new leases usually use the method of dividing the charge between flats on the basis of their size in terms of the proportion of the building’s floorspace that they take up. Some go further and split the cost of maintenance, electricity, cleaning, etc, in this manner, but divide the cost of building insurance, agent fees and accountancy/ audit fees equally among the units.
If you have any comments or questions about this subject or any other matter you have read in The Little Red Book, please call 08700 600 663.