Leaseholders: Are you over-paying too much on your service charge?

6 May 2016

Service charges are the funds that a leaseholder pays to the freeholder of a property in order for the property to be maintained and cared for. Freeholders can make their own decisions on how much they want the leaseholder to pay, so that the level of service can be sustained. However, there can be a difference of opinion between the two parties if the leaseholder feels that they are overpaying on service charges, especially if they feel that they are not getting the best treatment on their property.

An article written a few years ago featured in the Independent newspaper gave advice on what leaseholders should do if they feel they are being overpriced on service charges and not getting all they can from the service. We at Prime Property Management feel that this is a serious matter, and leaseholders should be getting their value for money for their property as promised by a management company or agent.

If leaseholders believe that their service charges are too high, one tip that the article suggested was that they can ask the freeholder or managing company for a full break down of the service charge account, which will show what is being spent on the upkeep of the property, and it must be produced within 1 month of the written request. Leaseholders have a legal right to do this according to the Landlord and Tenant Act (1985). Even if you think it’s because you are living in London, fast-becoming the most expensive city to live in Europe, a service charge with a high rate should not be tolerated if the service being delivered is less than great.

If a leaseholder and a managing agent or freeholder have a dispute over the service charge, the article also mentions taking it up with the First Tier Tribunal (FTT), which will cost less than going to court. The FTT hears both sides of the dispute and will make a decision based on the evidence and experience of the members of the FTT members. Bear in mind, though, that there is a fee for this service, and once you have covered your costs it may be as much as the service charge you were disputing!

Another route that is encouraged by many is Right To Manage (RTM). A viable option under the Commonhold and Leasehold Reform Act (2002), this involves flat owners banding together to form an RTM company which will give them greater authority over how their property is managed. It is thought that if leaseholders go this route, service charges are more than likely to decrease, and tenant satisfaction will be at higher levels than before.

It is a note to mention that your first port of call should be the Leasehold Advisory Service (www.lease-advice.org). If you are in doubt over your service charges, and not sure what to do next, go to the site, and it should be able to help to make a decision.