What is ground rent?
Ground rent is a regular payment made by the owner of a leasehold property to the freeholder or a superior Leaseholder, as required under a lease. A ground rent is created when a freehold piece of land or a building is sold on a long lease or leases. The ground rent provides an income for the landowner. A building can be either sold as a single house or divided as flats.
What are service charges?
Your service charge is your legal apportionment of the share of the costs incurred in maintaining, renewing, replacing and insuring the communal areas and structure of your building in accordance with the terms of your lease, for example, costs for cleaning the communal areas, ground maintenance, lifts maintenance, repairs and maintenance within the communal areas.
Why do I have to pay these charges and what will happen if I don’t?
You must pay service charges because it is in the terms of your lease and is legally binding. As trustees of the service charge fund, we are also legally bound to ensure that those who should pay, pay their service charge. It is also crucial for us as your Managing Agent that service charges are paid on time, to ensure that sufficient funds are available to continue the services we provide.
How often do you collect service charges?
Service charges are collected in line with covenants of your lease.
When do you issue service charge accounts?
Typically, service charge accounts are issued between 3-6 months after the year-end. Occasionally this can take longer. If this is the case, you will be issued a Section 20b notice (in line with the Leasehold and Tenancy Act). This notice will advise of any delays, list expenditures to date and set a final deadline by which final accounts will be ready.
How do I know what my service charge is spent on?
At the end of each financial year, statements are prepared by an independent accountant showing income and expenditure for your property. The statements are circulated to all leaseholders, who can be provided with further details of any items of expenditure upon request.
I have a query about my service charge. Who should I contact?
We are pleased to provide you with information about your service charges and how these are calculated and what the service charge funds have been used for.
How can I pay my service charge?
You will receive a service charge request at the frequency your lease dictates, typically annually, half yearly or quarterly. You can pay the demanded amount either by standing order, internet banking or by debit or credit by calling our office. Should you need to discuss your service charge account, please contact us.
I have a maintenance issue, is it covered by the service charge?
As managing agents, we would only become involved with an issue within the communal areas or estate of the property. Anything maintenance related within your own apartment/demise would be the responsibility of the owner.
What is a balancing charge/deficit?
Best practice is for Managing Agents to produce audited year end accounts and service charge accounts within 6 months of the financial year end. Leaseholders have a legal obligation to contribute to their allocated proportion of actual costs incurred. Should the proportion of actual costs incurred be greater than the total of the anticipated demands, the leaseholder will be required to make payment of the balance/deficit. However, should the proportion of actual costs incurred be lower than the total of anticipated demands, a credit will be made to the leaseholders account.
I own the freehold of my house, why am I being asked to pay service charge?
A managing agent may be appointed to maintain the communal grounds i.e. car parks or landscaped areas, by the Freeholder or resident management company. Your transfer document will detail your requirement to contribute towards the maintenance of these areas. If you do not hold a copy, your conveyancing solicitor will be able provide you with a copy.
Why do I need to pay buildings insurance?
Under the terms of most leases a freeholder/management company is required to insure the building, excluding your home contents. You are required to contribute to this through the service charge.
What is a Section 20 Notice?
Section 20 of the Landlord & Tenant Act 1985 (as amended by the Commonhold & Leasehold Reform Act 2002) sets out a three-stage consultation process which must be followed when carrying out qualifying works to a building where the contribution from any one lessee exceeds £250, or a qualifying long-term agreement where the contribution from any one lessee exceeds £100 in one financial year.
Stage One – s20
For qualifying works, under Section 20 managing agents / freeholders must serve a “Notice of Intention to Carry Out Works” on all lessees.
This Notice must generally describe the proposed works, state the reasons for considering the proposed works, and invite leaseholders to make written observations within 30 days.
It is a requirement that a correspondence address for these observations be stated within the s20 notice. The Notice of Intention offers lessees the opportunity to provide the name of a contractor from whom the landlord, managing agents or Resident’s Management Company (RMC) can try to obtain estimates for the proposed works.
Stage Two – s20
At the expiration of the 30 day consultation period, at least two estimates should be obtained: one of these estimates must be from a person completely independent of the landlord, the managing agent or the RMC.
If nominations were made within the consultation period, then estimates should have been obtained from at least one of these nominations. The landlord/agent/RMC must then provide a “Statement of Estimates” which will set out the details of estimates that have been obtained and a summary of observations received within the consultation period.
All estimates obtained must be made available for inspection by the lessees, including estimates obtained from nominated contractors.
A “Notice to Accompany the Statement of Estimates” must also be served in conjunction with the Statement of Estimates, which sets out the hours involved, and a place where details of the estimates may be inspected, again inviting lessees to make written observations on the estimates within 30 days, and specifying the address to which those observations should be sent.
Stage Three – s20
If, at the expiration of the consultation period, the chosen contractor did not provide the lowest estimate, then a “Notice of Reasons” must be served upon all lessees.
This means that the landlord/agent/RMC must state the reasons for awarding the contract where they do not opt for the lowest estimate.