Supporting Fair, Transparent, and Compliant Service Charges

With the new service charge code imminent, we’ve been working with our clients to ensure service charges are fair, transparent, and compliant.  

Often, managing agents and landlords bear the brunt of frustration over rising service charges, which can also be made worse when rising costs are unexpected for the leaseholder.  

Ensuring a fair, transparent and compliant approach, helps to mitigate these risks and foster trust among key stakeholders.

Inside the Box Approach to Setting Up Service Charges 

Early Involvement of Advisors 

Engaging advisors early in the process to understand how the building works, establish and write up an apportionment methodology and set up the service charge budget, is key. This allows for the budget, and thinking behind it, to be thoroughly tested. It also provides the ability for it to be updated to reflect any changes or new information in the run-up to completion and occupation. 

Mobilisation Period 

The mobilisation period is essential for obtaining preliminary quotes from potential suppliers. This helps in establishing a baseline for service costs and to manage resident expectations. 

Managing Agents and Firm Quotes 

Once managing agents are appointed, they should utilise the early evidence collected to manage client expectations. They should be instructed to obtain at least three firm quotes, to ensure competitive pricing and the quality of service. Based on the duration of the contract and cost to individual leaseholders, the landlord may need to undertake formal consultation with leaseholders. 

Regular and Honest Updates 

It’s important to maintain regular and transparent communication with property owners about service charges. Regular updates help to manage expectations and ensure all parties are well-informed. 

Budget Management 

The budget should be a living document, regularly updated to reflect actual costs and changes. This approach helps in managing expectations and ensuring value for money. 

Simplified Schemes 

Avoid designing overly complex schemes with numerous mechanical and electrical (M&E) systems or excessive staffing, which can become operationally intensive and costly for residents.  

Maintenance Packages and Warranties 

When installing M&E systems, it is prudent to purchase comprehensive maintenance packages and robust warranties upfront to minimise future costs and operational issues. 

Designing with Operation and Management in Mind 

Designing buildings with their future operation and management in mind is crucial for minimising ongoing costs. It is important to consider how a building will be maintained and operated from the outset, rather than as an afterthought, to ensure long-term cost efficiency and effective management. 

As we anticipate the introduction of a new service charge code, it is essential to continue striving for fairness, transparency, and compliance in service charges. By adopting best practices and adhering to established guidelines, we can ensure that service charges remain fair, transparent, and compliant, ultimately benefiting all stakeholders involved.  

For further guidance and support on this matter, please get in touch. Email: hello@itboxadvisory.co.uk.