If you live in a flat, you’ll be used to budgeting for your annual service charge, but how do you know if the amount you’re paying is fair and reasonable? Peter McCabe of Clear Building Management offers advice on how to assess if your service charge is fair.
As a leaseholder, you have a right to be able to clearly see how your service charge monies are being spent. Transparency is key to helping leaseholders understand what they need to pay, it can also encourage prompt settlement of demands, which can be essential in smaller developments and those that run without a surplus.
However, we’ve met many leaseholders who have felt like they’ve been kept in the dark when it comes to things like maintenance and insurance costs and are understandably concerned as to how their money is being spent.
So how can you tell if your service charge is fair?
Sometimes of course your managing agent or RMC directors will have no choice but to increase the service charge – we have all read reports of high levels of inflation and rising prices across fuel, basic goods and wages, which will of course have a potential impact on the cost of maintaining your property. Inflation aside however, there are several things you can investigate to help you understand if you are being charged fairly for your property management service.
1. Does the managing agent take over-riders or commissions?
This is one way in which we are regularly able to deliver cost savings to new Clear BM customers. There are too many agents still taking a slice of the property management pie by taking a kickback from suppliers. Ask your managing agent to ditch the commission and pass it on to the leaseholders instead.
2. Are suppliers and contractors independent?
This might take a bit of research but is often worthwhile. Ensure that you and your fellow leaseholders are getting a fair deal from suppliers and that they are not linked to the managing agent or the freeholder.
3. Are competitive quotes being sought?
Make sure your managing agent is getting competitive bids for work that is carried out at your block. The lowest price may not always be best, but it can help with negotiations – and competitive tendering keep contractors on their toes.
4. How often do emergency repairs take place at your development?
Regular emergencies or last-minute works are often a sign of poor management and will generally lead to increased costs overall. Your service charge budget should allow for adequate maintenance levels to avoid sharp spikes in cost when emergency repairs are needed.
5. Check the management fee level
The fee charged by managing agents can creep up – often this is entirely justifiable (see inflation point above!) but occasionally it isn’t. Don’t be afraid to negotiate on this or talk to another managing agent to understand what they would charge you.
6. Check when your insurance policy was last put out to tender
As with point 1, insurance is regularly an area where we can deliver cost savings to new property management clients. Ask your managing agent to put your block insurance out to market to see if they can secure a better price or better cover. At the same time you can also interrogate the commission levels of course…
Whilst any sensible leaseholder should be wary of a managing agent that promises a five-star service at a rock bottom price, all too often leaseholders are paying far too high a service charge because the managing agents are either beholden to the freeholder or the RMC is not holding them to account.
Naturally, older blocks with more maintenance requirements may lead to a higher service charge, likewise those with more extensive facilities so it can be difficult to compare service charges across developments, yet there are several steps you can take to see if your service charge is fair.
For a sensible discussion about your service charge and a more transparent approach to property management, talk to the team at Clear Building Management.
