How do service charges work?
The landlord or managing agent prepares an annual budget, and tenants pay on account, often quarterly. After year-end, actual costs are compared with the budget and each tenant receives a balancing charge or credit according to its apportionment in the lease.
In England and Wales, residential service charges are subject to statutory controls, including reasonableness and consultation for major works, and commercial service charges are guided by a professional code of practice. Other markets have their own rules, for example strata levies in Australia and Singapore.
See also: CAM & service-charge reconciliation and RIOO in the UK.
What does a service charge year-end look like?
Example (illustrative figures). A block's budget is £120,000 and actual costs are £126,000. A flat with a 2.5% apportionment paid £3,000 on account and owes a balancing charge of 2.5% × £126,000 − £3,000 = £150.
Related
Related terms
