A guide to service charges

Your share of the landlord’s costs is known as a service charge. These vary considerably. Service charges for flats in tower blocks can be very high, especially when a block is quite old and needs a lot of refurbishment. Here are two examples of service charge bills:

Service charges bill example 1

Service charges bill example 2

There are two kinds of service charges: annual charges for day-to-day maintenance and major works service charges (a lump sum, which can be £20,000 or even more) when a lot of repair or refurbishment work is needed. To get a rough idea of how high service charges are in your block, it is worth asking someone who has already bought a flat in it what charges they have had to pay. Or you could contact your local residents’ or leaseholders’ association.

If you decide you want to buy, your landlord must tell you how much the property will cost and they must also give you an estimate of any service charge you will have to pay during the first five years of your lease. If the lease says you must pay some of the costs of improvement, the estimate must cover these too. Once they have given you an estimate, the landlord is not allowed to charge you more than that figure during the first five years of your lease, except to take account of inflation.

There is no special limit on charges for repairs carried out after the first five years. You need to remember that you may have to pay ‘major works’ service charges whenever your block is repaired. There are several schemes to help pay your service charges – ask your landlord about them.

Some freeholders may also have to pay service charges for the repair and maintenance of shared communal areas on an estate – for example, pathways, play areas and gardens.

For more detailed information about service charges, read our Guide to Service Charges part 1 and part 2.

The estimate of service charges before you buy will also cover charges for building services such as caretaking or the provision of hot water. But charges of this kind can change, even during the first five years of a lease.

You will be told about any known structural defects affecting the building. If your landlord wants you to pay for work to put them right during the first five years, the estimate of service charges for repairs must cover this. But you may also have to pay for some of the costs of work done after the first five years.

You may have the right to a loan from your landlord to help pay a service charge for repairs during the first 10 years of your lease. The service charge bill will say if a loan is available.

The law protects you from service charges that can be shown to be unreasonable.