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Leaseholders' service charges

Service charges are the amounts you are expected to pay in accordance with your lease agreement, which is in effect your contract with your landlord, in return for the services the lease gives landlord an obligation to provide. There are various different service charge elements, and they should relate either to your building, to your flat or to your estate.

You will also hear in different places about “major works”.  These relate to separate major repair schemes which are consulted with residents before they take place, but also result in charges being made to leaseholders, and those charges are still legally service charges. However, they are generally referred to in Housing circles as “major works” as opposed to “service charges” or “day-to-day service charges”, which are taken to cover the costs of day-to-day service provision.

The Service Charge is based on actual expenditure incurred by the Lessors (the landlord) in pursuance of, or in connection with, the performance of their obligations mentioned in the Lease.

In the vast majority of lease agreements held by The Royal Borough, there are three inter-linked sections to look at to establish this:

  1. Clause 3, sub-clause (ii) – which is normally located around a third of the ay into the lease agreement – states that the leaseholder must pay a service charge for the services provided by the landlord as listed in the fifth schedule of the lease.
  2. The 5th schedule is usually the last part of the lease agreement. Apart from the first part of the 5th schedule, the remaining parts of that schedule refer to the outside areas of the block or estate and to management costs. The first part, however, states that the service charge must be paid in conjunction with the landlord fulfilling its duties as laid out in clause 4, sub-clause (ii) of the lease agreement.
  3. Clause 4, sub-clause (ii) is also about a third of the way into the lease agreement and lists the various obligations that the landlord has. These will include the repair/renewal/replacement and maintenance of various parts or areas of the block/estate, and should include all of the types of work that major works schemes will contain. You will see that it also includes (normally) the installation of entry phones and communal TV aerials. The installations are usually the only “improvement” that can be recharged to leaseholders under TMO leases.

The works included in the scheme are compared to each lease individually to ensure hat they match clause 4, sub-clause (ii) and/or the 5th schedule.

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