In Prime Central London service charges for luxury buildings have generally gone up in line with inflation.
“The point at which you should be concerned about service charges is if they rise substantially above this rate.” says Simon Barnes of H.Barnes & Co. “This is an indication that there is generally something amiss and potentially a cause for concern unless money is being paid out for major works such as redecoration of the building or the replacement of a lift or communal boiler.”
What are service charges?
Service charges relate to a leasehold property and the associated running costs of the building such as communal heating, hot water, the lighting of communal areas, maintenance and upkeep of the roof and building structure and (in every case) the cost of insuring the building.
Often there is what is known as a “sinking fund” or “reserve fund” which is a charge that is made in addition to, but usually collected at the same time as a service charge, which is set aside to pay for future major works. For example, owners might be asked to pay in an extra £1000 or £2000 per year into a fund which is build up over time to pay for works to the building such as new lifts or redecoration of the common parts, rather than being asked to stump up £15,000 or £20,000 in addition to their annual service charge as and when these works need doing. This is usually the sign of a well-managed building, though admittedly it does benefit people who intend staying put for a long period of time rather than those who will only stay for a year or two. [Read more…]