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Residential Service Charges - What Should A Tenant Be Paying For?

View profile for Sara Garnett
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What Is A Service Charge?

A service charge is a payment to the landlord or management company, traditionally to cover the costs incurred by the landlord in maintaining the structure of the building and any common areas and the costs of cleaning, lighting and heating any communal areas.  The cost of the buildings insurance may also be included together with a management fee.

New apartments which are being built tend to have more costs which are recoverable from tenants through a service charge.  Some developers are even offering gym facilities, cinema rooms and concierge services to attract tenants, the costs of which are included within the service charge rather than on a “pay as you use” basis.

It is vital that you investigate the service charge when you are considering the affordability of a particular property and before committing to the purchase.  You should find out the current service charge payable, details of the last three years service charge and whether there are any proposals to incur any expenditure which would mean an increase in the service charge.  You also need to check the terms of the lease to see what services the landlord can charge you for and whether there are any limits on the amount you can required to pay. 

Is There Any Limit On What Can Be Charged?

You can only be required to pay for the costs of services which the lease places an obligation on you to pay. Although it is common for leases to include a provision which enables the landlord to charge for “any other services provided by the landlord”. 

There are also laws in place which protect residential tenants from excessive service charges and provide that the costs must be reasonably incurred and the work or services must be of a reasonable standard. 

Does A Tenant Have Any Say In The Works To Be Carried Out?

If the proposed work to a residential property would result in any one tenant paying more than £250 or if the agreement is going to last for more than 12 months and will result in one tenant paying more than £100 in any 12 month accounting period the landlord must give the tenants notice and take note of any response from the tenants.  The landlord must obtain at least two estimates and the tenant has a right to nominate alternative contractors.  The estimates must be made available for the tenants to inspect and the landlord must take note of any observations from the tenants and give reasons for selecting the successful contractor.

Can The Landlord Claim For Work Carried Out Years Ago?

A landlord must issue a demand for payment within 18 months of the work being completed unless he has served notice within that period stating that costs have been incurred and that the tenant will be required to contribute.

 

Service charges for residential properties are a complex area and we have a team of specialists at Tilly Bailey & Irvine who can advise both landlords and tenants on their rights and obligations.

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