Service charge budget for 2020

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    Service charge budget for 2020

    Hi
    I have received a budget for the servcie charges for 2020. This is sent as a budget proposal, but at same time suggests that charges will start in January 2020, making it not a proposal but a matter of fact, as far as the service agent is concerned.
    I am querying one of the proposed charges and have asked for details to justify the specific charge proposed.
    Is the servcie agent required to give full details of the proposed charge, which is in fact a new charge not seen in previous years?

    #2
    Only if the lease requires that. There is no legal requirement to provide details of the budget, although it is best practice to do so.

    The typical reason for seeing new types of charge is health and safety, e.g. emergency light testing.

    Comment


      #3
      The budget proposal is a rough estimate of maintenance spending for the year and is used to calculated what each flat should be charged for their annual service charge levy.

      The audited accounts which are produce about 6 months after the year end will show you what was actually spent

      Comment


        #4
        The agent should be transparent and explain any new proposed charges and any other significant changes in the budget

        Comment


          #5
          Thanks for replies so far.
          Normally I would not request detail info at the budget stage but the sum involved represents an increase of 20% on the total service charge over last year. This new charge is equal to the sum of all cleaning and electricity making it now the second largest charge behind insurance.
          The subject is `Fire Protection`.
          A full assessment was done in 2017 and all remedial work needed was carried out in 2018, at substantial cost to leasholders (like changing hinges to all doors, fire strips, new locks on electricity cupboard doors) in other words all legal upgrades from when the block was built..
          It is as usual dissapointing that there is no legal requirement for the servcie company to explain any sudden new charges.
          Guess I will just keep asking for it until they or me get fed up.

          Comment


            #6
            Is this a purpose built block or a conversion? Is there a reserve fund?

            For a purpose built block, the only likely ongoing costs are monthly and annual tests of emergency lighting and monthly checks that the residents are obeying policies on use of common areas and fire safety measures are still working.

            If there is a reserve fund, the charges may include fire risk assessment and electrical inspections, every five years, and replacement of batteries every five years.

            Conversions may have a lot more fire safety measures that require regular testing and maintenance.

            Comment


              #7
              A 20% increase should be explained by the agent. Perhaps if you threaten to withhold part of the charges, including part of the agent's fee, until you receive a response, it will prompt them to be reasonable and reply to you.

              Comment


                #8
                It's only a "should", i.e. best practice, not a "must", i.e. required by law.

                They have explained it, but only in two words, not given a detailed schedule of what is included. The summary accounts, after the end of the year, probably won't provide any more detail and, in terms of legal rights, the OP would need to request sight of the invoices to work out the details.

                Also, transparency is more about things like commission.

                If the OP is going to withhold money, they had better be sure the costs are unreasonable, as they could end up paying upwards of £200 in tribunal and court fees.

                If it is inspection and testing, it could probably be delegated to a competent resident, but if they are billing for cleaning, that probably means the residents aren't willing to be volunteers. For checking housekeeping (rules on storage in common areas, in particular) it can be better to use an outsider, as residents may be reluctant to complain about the unsafe practices of their neighbours.

                There is a higher level of responsibility needed for annual testing, of lights and alarms, as the system may not be fully effective for several hours after the test. In an office, weekly/monthly testing would normally be done by an office manager, but annual testing would be done by a contractor.

                The cleaner might be asked to look for housekeeping breaches, but it might not be reasonable to ask them to check that doors are closing properly.

                Comment


                  #9
                  I do not think that a management company or an agent would receive any sympathy from a Tribunal if it failed to respond to a reasonable request from a leaseholder for an explanation of what he/she is being asked to pay. The suggestion of withholding monies was made to encourage the agent to respond rather than invite legal action to be taken.

                  Comment


                    #10
                    Thanks for all replies. To give more info,here goes

                    This is a purpose built block. No cladding, only 30 flats over 2 floors. (Ground/First/second) No lift.
                    No reserve fund in place (all spent 10 years ago and never replaced)
                    Fire Risk assessment done in 2017, All its recommendations/work required duly carried out during 2018.
                    There is a central Alarm System (just simple alarm no sprinklers)
                    Currently the alarm system is tested weekly (by outside contractor)
                    The checking of common areas/storage has been agreed with the cleaner and the extra charge is incorporated within the cleaning charge, not Fire Protection.
                    Until the Fire risk assessment the alarm system had not been checked for years nor any weekly testing done (only every 3 or 4 months).
                    So I accept that the risk assessment called for annual checking of the Alarm system, but the amount quoted in the budget seems to me to be way too much for that.
                    So that is all that I am asking for, an explanation as to how this figure has been arrived at.
                    One would have thought that this was not a difficult thing to do, there must have been some basis for the figure in the first place.

                    Comment


                      #11
                      A central alarm system implies there are fire safety defects in the construction. That shouldn't normally happen for purpose built flats.

                      It also implies that there is a simultaneous evacuation policy, for which you really need fire wardens and regular drills.

                      The instructions for the alarm system would have required weekly testing regardless of the fire risk assessment, so there was no excuse for not doing that. Central systems tend to have batteries with life expectancies of about four years, but which could fail much earlier, which is why they require annual servicing. Detector heads nee replacing at least every 10 years. I suspect that annual servicing is a money spinner for the installers, but most businesses would consider it not to be a handyman job.

                      Regarding the FTT, I think they would look poorly on a freeholder who failed to provide the information once the application had been made, but I'm not sure that failing to provide it earlier would be enough to justify awarding costs against them.

                      Comment


                        #12
                        You are entitled to a satisfactory explanation and if you do not receive one, you are entitled to deduct that amount until you receive an explanation or to estimate a reasonable amount yourself. I very much doubt that legal action would be threatened or taken over estimated charges. You would need to consider carefully the actual costs when you receive a summary.

                        Comment


                          #13
                          I run an RTM Company, following the number of high profile fires in multi occupancy buildings, fire protection is becoming a significant issue for blocks of flats, insurance in some buildings is almost doubling and insurance companies are carrying out detailed assessments of buildings and requiring any issues rectifying or they will refuse to insure. You may not be aware of what needs doing but I would contact your man.co. and ask.

                          You say that a risk assessment was carried out in 2018 however A LOT has happened since then. Some insurers who were quite happy to insure blocks of flats have now pulled out of the market altogether, the remaining insurers are hiking their prices up and placing large requirements on management companies in terms of fire safety.

                          Comment


                            #14
                            Hi
                            Yes the `budget ` has now been given as the service charge for 2020. No explanation given, not even a reply to 3 emails I sent asking the reason for this charge.
                            Added to that we have just received a letter sayinbg that the currents service management company has been passed tp another company, without any consultation with anyone.
                            Oddly (or maybe not in the case of this company) it has been passed to an0ther agency very close to the original (both are 140 miles away from the block of flats and original managment company have only ever visited the block on one occasion in the last 5 years) and durther to that they have just increased their charge for 2020 (now presumably going to the new company) by yest an further 30%, the third time in 3 years, again I have asked for explanation and was told they have been undercharging us, and that as fat as they were concrened the average managment fee per flat in the UK is £200, and that our charge would increase until that figure was reached, and that hs now happened.
                            Problem we have is that 60% of the flats are now in the hands of landlords who couldn`t care less, and there is little that he rest of us owner occuloiers can do.

                            Comment


                              #15
                              I am currently looking at one bed flats for my daughter and am finding the service charges to be so high, or I think they are. They range from between £1200 to £1800 per year per flat in purpose builds.

                              My concern is how much is a MA allowed to increase the SR per year as they are already so high? This applies to both share of freehold and leased properties.

                              Comment

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