Service Charge

A service charge is a payment made by leaseholders to the freeholder or a management company appointed by the freeholder to cover the costs of maintaining, repairing, and managing the common parts of the building.

What service charges typically cover: buildings insurance, cleaning and maintenance of communal areas, gardening, lift maintenance, external decorating, window cleaning for communal windows, management company fees, and contributions to a sinking fund for major future works.

Service charges for residential flats typically range from £500 to £3,000+ per year for a standard flat, and considerably more for luxury blocks or those with complex facilities (lifts, concierge, parking structures).

Key risks for investors with leasehold flats: - Service charges can increase significantly without warning if major works are needed - The freeholder can issue a Section 20 notice for major works, requiring all leaseholders to contribute (potentially thousands of pounds per flat) - Poorly managed blocks with inadequate sinking funds can face large one-off demands

Before purchasing a leasehold property, always request the last three years of service charge accounts and ask specifically whether any major works are planned or have been identified as necessary. Your solicitor should raise these enquiries formally with the vendor's solicitor.