Why do I have to pay? - The Service or Estate charge explained

Posted Saturday, December 7, 2019


Why

The aim of this blog is to very simply outline why you pay a fee to a managing agent.

When you buy a new home, whether it’s on a new estate, or in an existing apartment block, it’s inevitable that you will have to pay some form of service or estate charge, and the question we, as managing agents get asked the most is “why do I have to pay it?”.

This blog should answer this question and most associated questions such as:

“Why do I have to pay for grass cutting when I don’t have any verges outside my house?”

“Why should I pay for play parks when I don’t have any children?”

“Why do I have to pay for pot-hole repairs when surely the council pays for that?”

“Why do I pay additional fees when I pay council tax?”

If, as a homeowner, you haven’t been fully informed about a service or estate charge, this is essential reading for you. When you purchase a property (be it a house or an apartment), you’re buying the deeds to that individual home. With houses, certain areas of land may be included, that may not always be next to your house but will be clearly outlined on the deeds. With an apartment, you’re purchasing a lease, which means that you don’t own the building, nor other parts of either the building or the environment. What happens next depends on whether you’ve bought a house or an apartment. Let’s look at houses first.

Things to consider about your housing estate

Houses on estates (or developments) generally have what we refer to as ‘external common areas’, used by anyone on the estate, or visitors etc. These areas may include grass verges and green spaces, play parks, landscaped gardens, hedges, footpaths and roads that the local council chooses not to adopt. Without putting signposts on each of these areas, it’s difficult for anyone to determine who owns what, but let’s start with roads.

Some roads once built end up being ‘adopted’ by the local authorities so that they can run public transport services through the estate. These roads are maintained by the local council, who are responsible for the general upkeep of the road surfaces, repair works (such as potholes), also street lighting (installation and operative works). It goes without saying that roads suffer wear and tear no matter who ‘owns’ them, with damage created by climate, heavy traffic, and age.

Other areas require upkeep too. Grass doesn’t stop growing, hedgerows love to spread, street light bulbs go out, and play parks get used and often abused. These areas are not under the management of the local authorities, and if left unattended you can imagine what the estate would look like after just a few months, let alone a few years! Now let’s look at apartment blocks

Things to think about in your apartment block

Any apartment block will have ‘internal common areas’ as well as ‘external common areas’. These may include entrance halls, stairwells, lifts, parking bays or ports, gardens and refuse collection areas, all of which require additional maintenance such as redecorating, lock or gate replacements etc. Again, imagine what would happen if the lift breaks or the stairwell light isn't replaced? How unpleasant would it be if the entrance hall and corridors were never refreshed with a new coat of paint? Imagine how difficult it would be to navigate dark stairwells if the light bulb was never replaced, or even worse if the lift broke down, and wasn't repaired? Additionally, who would deal with noisy neighbours, or items left in the corridors, or residents blocking the carpark?

Bring in the management team

All of the above issues are real, everyday challenges that someone needs to address. This is where a property Managing Agent steps in. The developer releases phases of the site in tranches. As they do so, they appoint what’s called a Managing Agent, who will then be responsible for the upkeep of all of the said ‘common parts’. It is their duty to ensure that the estate is kept clean, safe, and a nice environment to live in, and that any moving parts such as lifts, locks, and gates are kept in full working order. They do this by hiring contractors to supply services such as garden and grounds maintenance repairs and replacements, and obviously these services need to be paid for. On top of that, certain things require insurance cover, surveying or regular Health & Safety assessments. It's worth noting here that a pro-active Managing Agent will act quickly when things do go wrong, break down or need urgent maintenance because that's important to you as a homeowner right?

This is what you're paying for

The payment for all these services comes from the aptly named service (or estate) charge. This is the sum that the Managing Agent sets as a yearly budget, that has been carefully considered in order to meet the needs of the entire estate, for the year. The total amount required is divided by the number of properties on the estate. It goes without saying that it takes a lot of experience and expertise to configure the annual budget, and not all managing agents are good at this, which is why a certain amount of controversy surrounds the property management industry as a whole. Done well, the setting of the annual service charge will be a fair amount; enough to cover all costs, with a reserve fund to cover emergency requirements and clearly set out itemising exactly what the homeowner is paying for.

But I pay Council tax!

Your local authorities provide a wide range of services to the general public which will include transport, emergency services and refuse collection as well as the general upkeep of areas that they are responsible for. For a full list of services supplied by them, or if you want to know which roads they have adopted on your estate you can contact your local council or most details can be found on their website.

Ask an expert

It is our aim to bring clarity to all the questions asked by our customers – you the homeowners. If you have a question that needs answering simply get in touch using the form below, and we’ll get right back to you.

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