Well isn’t this the million dollar question?! We are sure every resident living in a leasehold property has at some stage looked at their service charge bill and thought, can’t any savings be made here?
Well the answer to that is usually yes!
With every service charge demand you receive, you should also receive a copy of the service charge budget. This is the document that sets out all the costs the landlord/managing agent expects to incur in the next 12 month period.
The budget will list all regular types of expenditure such as cleaning, gardening, window cleaning and so on and also any one off expenses that are expected to be incurred.
If last year £3,000 was spent on cleaning costs and no additional work is being carried out this year, yet the budgeted amount has increased to £4,000, you would be well within your rights to ask why.
It is important when you receive that budget, you review this properly and consider the costs that are being budgeted for and whether these are reasonable.
For example, if last year £3,000 was spent on cleaning costs and no additional work is being carried out this year, yet the budgeted amount has increased to £4,000, you would be well within your rights to ask why.
Similarly, if you know your development holds a very healthy reserve fund and no major works are due, you would be entitled to enquire as to why another substantial sum is being accounted for as a reserve contribution this year.
Your managing agent/management company may well be able to explain any increased costs but by simply raising your queries, you could benefit from some savings.
Also consider if the current contractors are doing a good job for the fee they receive. Do the window cleaners regularly let the residents down, for example? We are of the view that any resident is entitled to put forward a contractor for any one off job or regular contract. Any resident could have a connection to a reliable company that could provide the same service for less, so why not? If a resident suggests a change of contractor to us, perhaps in order to be able to save costs or just for an even better service, and that contractor complies with our requirements (i.e has the necessary experience and skills and is regulated by the relevant regulatory body), we see no reason why not to switch.
Also keep an eye on the management fees on that budget and any associated “admin” fees. Perhaps your service charge has increased because your managing agent has increased its costs. Was this agreed and is the increase fair? Is there a management contract that specifies when and by how much fees can increase? Are there other administrative fees being charged that you feel should form part of the agent’s standard management fee? These are all expenses that can be challenged.
We are always transparent with our fees and often fix these for a certain period of time so there are no unexpected increases for residents. Our contracts will also deal with agreeing any fee increases so these will not just be hiked up, with no explanation, after the first couple of years. Will your agent do the same? Perhaps ask the question and if not consider switching agents!
In conclusion, do not think that you no right to query or challenge your service charge bill and do consider that there are active steps you and your neighbours could be taking to help bring those costs down.
For further information please get in touch.
