What Is a Reasonable Service Charge?

If you've been informed that you have to pay a service charge and have never paid one before, you may have no point of comparison. This can leave you wondering whether your service charge is reasonable or not. So, what is a reasonable service charge?

In this insight, we will break down the factors that can help you determine if your service charge is reasonable, based on your amenities as well as England's average service charge data, researched by Sunny Avenue.

Key Takeaways

• The average annual service charge for a £300k-400K property in England is about £1,689. This can help you compare your charge to see if it's reasonable.
• To know if your charge is fair, think about the amenities, size of your property, location, age of the building, and what others have paid in similar properties. These factors help determine if your charge makes sense.
• Different property types can have different charges. Maisonettes may have higher charges because they share costs with only one other leaseholder, while large blocks of flats may have higher charges due to shared facilities and more expenses.
• If you feel your charge is unfair, talk to a property solicitor. They can guide you on your rights and potential solutions. 

What Is The Average Service Charge? (2023)

The average annual service charge is £2216, based on English properties of up to £600k and £1,654 up to £300k. To determine if your service charge is reasonable, you need to consider the size of your property alongside what amenities you are paying for. For example, if you have leisure facilities, expect to pay more for maintenance.

A service charge is a fee paid by leaseholders to their landlord. It covers maintenance, upkeep of communal areas, and necessary repairs. It includes things like cleaning common areas, building insurance, and lift maintenance. The service charge should be reasonable and reflect the building's needs. It's calculated by the landlord based on previous expenses and future costs. 

To assess what we believe is a reasonable service charge, Sunny Avenue has researched 60 properties with service charges across England and different value brackets, ranging from 200K to 600k. We used a Median to find the average service charge for each bracket. It is worth noting, these properties are random and as prices increased, there were a greater number of properties from the South, where property prices are more expensive. A more expensive property will usually come with a higher service charge,

These are our findings:

Looking at the data, we can see that as the property value goes up, the average service charge also tends to go up. For properties worth £100k-£200k, the average charge is £1,124.42, while for properties worth £500k-£600k, the average charge is £3,621.90. This means that higher-priced properties usually have higher service charges because they may have more maintenance needs or extra amenities. Remember, these are averages and individual properties may have different charges based on their specific features.

Consider the data as an average property type, if your property sits within the above ranges with higher-than-average facilities, you may expect to pay a higher service charge.

How Do You Determine If Your Service Charge Is Reasonable?

To determine if your service charge is reasonable there are some factors to consider. These factors normally work in a simple way. The more facilities, space, gardens, communal areas, and the older the property, the more you can expect to pay. Consider your property against these facilities and think about the costs associated with these:

Amenities and Services

Think about what you get in return for the service charge, like maintenance, security, cleaning, and shared facilities. If you receive good amenities and services, it can justify a higher charge.

Property Size

Consider the size of your property compared to others in the same building. Bigger properties usually have higher charges because they require more maintenance and care.

Location

Take into account where your property is located. Charges can vary based on the local property market, cost of living, and nearby amenities. Living in a more desirable or convenient area might mean higher charges.

Building Age and Condition

The age and condition of the building can affect charges. Older buildings often need more repairs and maintenance, which can impact the service charge.

Service Charge History

Look into what others in similar properties have paid in the past. This can give you an idea of what's considered normal for your area and help you judge if your charge is reasonable.

What Can You Do If Your Service Charge Is Not Reasonable?

If you think your service charge is not a reasonable amount, here's what you can do:

• Read your lease agreement carefully to understand what it says about service charges.
• Talk to your landlord or property management about your concerns. Explain why you think the charge is unfair and try to negotiate your service charge.
• If talking doesn't work, you can get advice from a property lawyer who knows about leases. They can help you understand your rights and what you can do.
• Sometimes, there are services available that can help you and your landlord find a fair solution, like mediation or dispute resolution. They bring in a neutral person to help sort things out.
• In the UK, you can also apply to the First-tier Tribunal (Property Chamber) if you think your service charge is unfair. They will listen to both sides and make a decision about what's reasonable.

How Does Property Type Affect Service Charges?

Property type can have a large affect on the amount of service charge you need to pay. For example, if you own a leasehold on a maisonette, you will need to split the costs with only one other leaseholder. That can result in higher service charge costs. Where as, if you own a leasehold in a large block of flats, you are able to split the maintenance costs with the other leaseholders. If you do not have a lot of facilities, you may not have to pay so much.

Service Charge on Maisonettes:

Maintenance and Upkeep

The cost of maintaining communal areas, such as gardens and shared spaces, will be split between the two leaseholders in a maisonette. Since there are fewer leaseholders sharing the cost, the individual share can be higher compared to properties with more leaseholders. This is because the maintenance costs are distributed among a smaller group.

Shared Facilities

If the maisonette has additional shared facilities like a communal gym or parking area, the maintenance and upkeep costs for those facilities will also be divided between the two leaseholders. This can contribute to higher service charges compared to properties without such facilities.

Size and Scale

The overall size and scale of the property can influence service charges. Maisonettes often have their own individual external areas, such as gardens or balconies, which may require separate maintenance and incur additional costs compared to apartments or flats.

Property Management

The efficiency and professionalism of the property management company can also impact service charges. Well-managed properties may have lower service charges due to effective cost management and economies of scale.

Service Charge on Flats:

Flats in Large Blocks

If you live in a big block of flats, you'll likely have more neighbours and shared areas like lobbies, hallways, and gardens. Maintaining these spaces and amenities costs money, so the service charges tend to be higher to cover those expenses.

Common Areas and Facilities

In large blocks, you might share things like lifts, parking areas, or leisure facilities. The cost of cleaning, repairing, and maintaining these shared spaces adds to the service charges, especially since more flats are sharing the costs.

Management and Maintenance Costs

Managing and maintaining large blocks requires more staff and resources. Property management companies or resident associations handle these tasks, and their fees are included in the service charges, making them higher for flats in large blocks.

Major Works and Sinking Funds

Large blocks set aside funds for major repairs or renovations. These funds are collected through service charges over time. Flats in big blocks may have higher charges to build and maintain these funds.

Shared Utilities and Services

Flats in large blocks often share things like heating, water, or waste management services. The costs for these shared services are divided between the flat owners, which can contribute to higher service charges.

Professional Management

Large blocks may hire professional property management companies. These companies handle various tasks and charge fees, which can increase the service charges.

How Much Is Too Much For Service Charge?

To determine if a service charge is too much, compare it to the average. In England, the average annual service charge for properties up to £600k is around £2,216. Consider this benchmark alongside factors like amenities, property size, property type, service charge history, and seek professional advice if needed.

Remember, what's considered "too much" depends on various factors specific to your property and location.