Where Do Your Service Charges Go? Breaking Down the Costs
For many shared owners, the phrase “service charges” can feel confusing, frustrating or simply unclear. It’s one of the most common topics people want explained, and it’s understandable — your home is a major investment, and you want to know exactly what you’re paying for. So, let’s break down what service charges actually are, why they exist, and how housing associations like Love Living Homes work to keep them fair and transparent.
A service charge is a payment residents make to cover the shared costs of managing and maintaining their building and/or estate. They are billed by the managing agent (this might not always be your landlord/housing association, like LLH, it could be a company employed on their (or the Developers) behalf to manage the development for them).
These aren’t profits or optional extras. In fact, by law, service charges must only cover the actual cost of providing the services listed in your lease. According to the Leasehold Advisory Service (LEASE), a government-backed body offering free advice, service charges have to be “reasonable”, reflect the real cost of services delivered, and be supported by accounts and evidence. You can read more about your rights at lease-advice.org.
One of the biggest myths is that service charges are profit-making for housing associations. They’re not allowed to make a profit from them, and reputable landlords aim to keep costs as stable as possible. Housing associations negotiate contracts for cleaning, landscaping and maintenance on behalf of all residents, which usually leads to better value than individuals sourcing these services alone. The goal is to maintain the building and shared spaces so the development remains safe, welcoming and in good condition over the long term.
Service charges typically include estate management, grounds maintenance and the upkeep of communal areas. This can mean looking after entrance halls, lifts, car parks, shared gardens and bin stores, as well as making sure communal lighting, door entry systems and pathways are safe and functional. Cleaning contractors, grounds maintenance contractors[LB1] , caretakers and maintenance teams all play a part in keeping the environment running smoothly. While some residents may feel they don’t use every service personally, the services exist to maintain the overall quality and safety of the development, which protects everyone’s home and long-term property value.
It should also be noted that, as a general rule, Town and Country Housing (the main arm of LLH) provides the building insurance for leasehold and shared ownership properties (unless TCH is not the freeholder). As a Shared Owner/Leaseholder, your insurance is covered in your service charge. This makes sure that yours and our investment in your home is secure and that you have enough insurance cover to repair, or even rebuild, your home should something happen to it. Like many housing associations, prices that we’re able to negotiate for building insurance have increased since 2024. We know that this has a direct impact on our residents, and we’ve been working with our insurers to get the best deal that we can.
There is also a perception that residents are paying for things they don’t personally use. For example, someone on the ground floor might not use the lift, or someone without a car might not use the car park. But the purpose of estate-wide services is to maintain the whole development, not only the individual home. A well-kept site supports fire safety, hygiene, comfort and community wellbeing, and crucially, it preserves the value of every shared ownership property on the development. Please note that if you live in a house, you will not pay towards services provided to a block of flats, only the estate-managed areas.
Another part of your service charge covers statutory health and safety requirements. This includes fire alarm testing and external wall fire reviews, emergency lighting checks, asbestos monitoring, gas and electrical safety assessments in communal areas and regular building inspections. These checks are a legal responsibility for landlords, and failing to carry them out can put residents at risk. With new building safety laws introduced in recent years, especially following the Building Safety Act, these obligations have become even more important and more frequent. However, for shared owners, it is your responsibility for front doors as this forms part of your property.
A portion of service charges may also go towards long-term investment planning, sometimes known as a sinking fund or reserve fund. This money is set aside gradually to cover major future works for communal properties like replacing roofs, upgrading lifts or resurfacing car parks. Setting aside funds over time prevents sudden large bills for residents in the years to come. The government’s guidance on sinking funds, shared through lease and other advisory services, explains that these funds help spread costs “fairly and predictably” so there are no financial shocks when big repairs arise. However, where extensive works are required that exceed the available funds, residents are expected to contribute.
Another big myth is that residents pay for a service they don’t receive. At the start of the contractual year, estimates are sent to residents on what their suspected service charges may be. Love Living Homes works to ensure residents receive clear information about how service charges are calculated and what they cover. Residents only pay for the services provided, for example, if a communal garden is not maintained then the costs are reduced (or credited into service charge accounts) at the end of the year, typically by 30th September annually. Costs are based on actual invoices and contracts, and residents have the right to ask for breakdowns and supporting evidence. Annual service charge statements and budgets (estimates) are provided so residents can see how money has been allocated, what services have been delivered and whether costs have gone up or down from previous years. These are often referred to as variable service charges as they are based on an estimate and then a final “actual” account, so they will likely vary slightly from estimate to actual due to some costs not being able to be fully estimated, such as responsive repair. LLH works with trusted contractors, reviews performance and aims to strike a balance between quality and affordability.
Understanding service charges can make ownership feel far more transparent and manageable. When you know exactly where your money is going, it’s easier to feel confident that your home and development are being properly maintained. And if you’re thinking about taking your next step on the property ladder, you can explore the latest shared ownership homes through Love Living Homes.