Frequently Asked Questions
Services charges are fees that cover services in communal or shared areas. These are either charged monthly or invoiced to you separately.
One of the key aspects of being a shared owner or a 100% leaseholder (you own the property out outright) is that you will be required to pay a service charge.
This is a sum of money which covers your share of the cost of maintaining the communal area of your development. It is important to understand how service charges work, are calculated, charged and your rights and responsibilities. We aim to be transparent with you over the costs involved in being a leaseholder, as buying your new home is a big financial decision.
Some developments in which your home is located was built by us, whereas others were built by private developers. Therefore, in some cases these developments will be managed by an external managing agent (EMA), rather than by us.
EMA’s will also produce the service charges for the development. There are a few differences between developments managed by us and those managed by an external managing agent.
Below is a list of some of the main differences.
Love Living Homes (or TCH) managed developments:
- We set up the service charge budget
- We charge a management fee to cover our costs
- We manage and control all the communal areas maintenance and repairs in the development
External Managing Agent (EMA) managed developments:
- The EMA sets up the service charge budget. We analyse this budget, and challenge where necessary but ultimately the charges levied can vary substantially between different EMAs, as well as be somewhat different to those we would charge
- The EMA charges a management fee to cover their costs and profit margin. We also add a management fee on top of the EMA’s figures to cover our costs (e.g. maintenance of your rent and service charge account and the cost of running our customer care line), as well as an audit fee to cover the cost of producing annual accounts. Our charges are combined with the EMAs’ costs, so that you just pay one monthly charge
- The EMA manages and controls all the communal area maintenance and repairs in the development. This will mean that the frequency that EMAs carry out services, such as cleaning, may vary from the frequency of services at our developments. We may decide in the future to bring in an EMA to manage a development we own on our behalf. If this happens, residents will be consulted in accordance with the relevant legal requirements.
Below are examples of items which are commonly found within service charge budgets. You will pay some or all the following charges depending on your developments budget. Every service charge budget varies, so your development’s budget may not include all the items below, but it may also include some items not listed here.
How much you pay is decided by the terms of your lease. You cannot be charged for any costs that the lease does not allow for.
- Communal Repairs – this covers the cost of general repairs to the communal areas of the development. For example, repairs to communal lighting, communal windows, communal door fixings, Bin/bike shed repairs etc.
- Combined cleaning – this covers the cost of our chosen cleaning company who will keep the communal areas clean. This may include:
For apartment blocks and maisonettes this may include:
- Sweeping/hoovering of shared parts of the apartment block
- Cleaning entrance halls
- Sweeping bin areas
- Removing low level graffiti
- Cleaning communal windows
- External litter picking
Other intensive cleaning work is carried out from time to time in addition to the above. These services can vary from area to area.
- Door entry systems – this covers the cost of maintaining the intercom system and door entry systems, in the communal areas. You are responsible for the equipment inside your own home as per your lease. Please be advised that if we are called out to a repair to the system that is found to be solely in your flat then you will be recharged directly for the call out and repair. This does not include replacement fobs or communal keys. These will be charged for separately. See here for more info on replacement fobs or communal keys
- Gardening and grounds maintenance – this will cover the cost of gardening and external sweeping. Gardening is normally done more regularly during spring and summer when plants and grass grow more quickly, so require more frequent tending
- Building insurance - This covers the cost of insuring the structure of the building you live in. If you are a shared owner of a house, it is our responsibility, as per the lease, to insure the main structure of your home (the freehold).
- If you live in a flat, we ensure the freehold of the building which encompasses your apartment. You are responsible for ensuring the contents of your property whether you live in a house or flat as our buildings’ insurance does not cover this. You must not take out your own buildings’ insurance, you only need to take out contents’ insurance
- Administration and Management fees - this covers the financial and administrative running costs of providing our service to leaseholders. This is a flat rate fee dependent on the type of property and whether we manage the development, or whether it is managed by an EMA. This fee is outlined in your lease
The administration and management fees are separate from the insurance premium or the ground rent. Here are some examples of costs which are incurred in providing a Leasehold Management service;
- The salaries of staff
- The office costs e.g. office equipment (desks, chairs etc) postage, job adverts, printing and stationery
- A share of the cost of the building where the staff are located, e.g. electricity bills, rates, general running costs
- Computer costs
- Arranging buildings insurance and making any necessary claims for the structure and the common parts
- Responding to customers’ queries
- Supporting you if you need to make a claim under the block policy
- Audit fee - In most cases we are legally bound to ensure that your service charge accounts are independently audited at the end of each financial year. An independent accountant carries out the audit. They charge for this service and this cost is recovered from homeowners who each pay their proportion
- Lift maintenance - this covers the cost of servicing, maintaining and repairing any lifts within your development. Lifts are all also fitted with emergency call buttons which will connect you with lift maintenance contractors if the lift breaks down. This service requires a telephone line with its own number, as well as a number of test calls each month. Service charges will also cover this service
- Sinking fund (also known as a reserve fund)- This refers to an amount of money which is collected, usually monthly as part of the Service Charges for the property, to cover the cost of communal items when they eventually need to be replaced through wear and tear. The sink fund will then avoid you receiving large one-off bills.
A sinking fund helps to ensure that all occupants, past and present contribute to the fund over the years they resident in the property. As replacement components, such as a lift, may not be replace for 20 years it is fair and reasonable for all residents utilising the lift over the 20 years contribute to its replacement.
Before any major works are carried out, we must legally consult with leaseholders and give reasons why it considers it necessary to carry out works over a certain value. This is so that we abide by the terms of the Landlord and Tenant Act 1985 and The Commonhold and Leaseholder Reform Action 2002. If emergency major works need to be carried out to the building and there is no time for consultation, then dispensation may be sought from the First Tier Tribunal, but leaseholders will be kept fully informed.
The amount payable into the sinking fund for your property is calculated based on an assessment of how long communal items are expected to last before they need repairing, re-decorating or replacing. Examples of such items are footpaths, parking areas, porches, roofs, guttering, window frames, lifts etc.
Occasionally, there might be insufficient funds in the sinking fund to pay for major works. The shortfall will then be recharged to leaseholders in accordance with the terms of the lease. Where sinking funds have not been set up, an invoice is sent to the leaseholder for the whole amount and payment is due on demand. It is therefore advisable that if you do not currently pay into a sink fund that you set up your own fund so that invoices can be paid more easily.
Money paid into the sinking fund stays with the property and is not re-fundable. So, for example, if you were to sell your home after four years and no major works had been carried out in that period, you would not be entitled to a refund.
If you currently pay service charges and want to check to see if there is a sinking fund for your property, this is detailed on your service charge statement.
- Bin costs - Often bins are hired from the local council, rather than purchased. This hire fee covers the cost of any bin repairs or replacements required.
- Bulk rubbish and fly tipping clearance - this covers the cost of removing bulky items such as furniture and any excess rubbish which does not fit inside the bins which the council will not remove as part of normal weekly collections. You should arrange for your own removal of bulky items to reduce service charge expenditure on this item. If you witness one of your neighbours or someone else fly tipping please let us know, we will try to charge that individual directly rather than spread the cost to the entire estate.
- Communal lighting and electricity in apartment blocks - this covers the cost of supplying electricity to the communal areas, e.g. to the lift, hallways, door entry system and any external lighting
- Fire Protection /Equipment including:
- Automatic Opening Ventilation systems (AOV systems). When smoke or fire is detected in communal areas such as a corridor, vents automatically open to allow smoke to be taken out of the building, usually via windows or a shaft to the roof
- Dry risers in apartment blocks - These are pipes leading to communal hallways and stairwells throughout the development which the fire brigade can connect their fire engine’s water supply to. This ensures that they can get a water supply in to all areas of a development, to enable them to put out fires more quickly. Dry risers need to be maintained to ensure they are fit for purpose
- Fire Risk assessments
- Lighting protection - Many larger developments are fitted with lightning protection systems, which ground any lightning strike into the ground below the development
- Emergency lighting in apartment blocks – If the event of a power cut, emergency lighting will automatically switch on to ensure that there is still lighting inside internal communal hallways and stairwells
- Water pumps/boosters - The pressure of the water mains supply is not strong enough to pump water up to flats several floors from ground floor level – so taller blocks require water pumps to ensure all apartments can receive an acceptable level of pressure on their water supply. Sometimes these systems include a water tank, which also requires further servicing
- Communal boilers - Some new developments contain communal heating and hot water systems. These systems have a large central boiler that typically feeds heating and hot water into every property, rather than each property having its own boiler. Leaseholders will usually be charged separately for their heating and hot water usage costs (as these are not service chargeable items), these bills are normally based on meter readings
- Playground equipment - Cost of carrying out safety inspections and repairs to any communal play areas within the development. Regardless on use, you will pay towards this as it is an ‘Estate Cost’ and therefore rechargeable as per your lease
- Your development might also have additional mechanical and electrical services that require maintaining and servicing. Examples of these include sprinkler systems, drainage systems, fire alarms, fire safety inspections, CCTV and electric vehicle gates/ rolling shutters underground parking
Please note that the above examples of service charges listed in this section is not exhaustive. Your lease will tell you which charges you are liable for.
In accordance with the Landlord and Tenant Act our service charge budgets are an estimate on what we (or in some cases the external managing agent) believe the costs of maintaining the communal areas of the development will be over the financial year (1 April – 31 March).
With a new development, we will obtain quotes for items such as cleaning and lift maintenance (if applicable) and estimate annual charges for items such as communal electricity use and repairs.
At the end of the financial year, we will look at the actual cost of providing services against the estimate. Our reconciliations will then be audited by a firm of independent external accountants. We shall then advise you whether the overall service charge account is showing a surplus (excess) or a deficit (shortage) and either arrange a refund or seek additional payment of the balance from you.
After we have audited the accounts for a few years, we will have a more detailed idea of the cost of managing your development. We are then able to set more accurate service charge budgets.
We work out the total annual cost of providing services to your estate or block of flats and apportion it between all the homes on the scheme. Your lease may reflect apportionment percentages otherwise costs will be apportioned on a ‘fair and reasonable’ basis. To help you spread the cost of the annual charge, we divide it into regular instalments throughout the year and you pay it at the same time as any rent that you pay.
If, at the end of the year, we have spent less than we estimated, your service charge account will be in surplus and your account will be credited. If we spend more than we estimated, you will have to pay this sum within the time scale stated on the final account.
Service charges generally do rise year on year, to consider inflationary measures, as well as the cost of providing services. In some cases, service charges can even reduce, but this is rare.
Every service charge budget varies, in some instances service charges are the same for everyone in some developments, whereas in other developments, service charges are based on the size of the property (meaning those with a larger property will pay a higher service charge).
If you believe that you are not able to make payments, then you will need to urgently contact us to discuss your options.
Purchasing a home is a very big decision and you must be sure you can afford the commitment you are taking on.
We do not make any profit on the service charges, apart from the money received via the administration & management fee element. Therefore, any surpluses in service charges that occur will always be credited back to you.