Frequently Asked Questions - Service Charges
If you purchase a freehold property, you will own the home and the land it is built on. There may however be a freehold company who owns the estate areas, such as communal car parking or garden areas. If you buy a leasehold property you are actually buying the rights to live in a property for a set period of time. You won't actually own the structure, or the grounds it is situated on. Most flats are leasehold.
The Service Charge payable for a given year is based on an estimate of costs, so property owners will pay an estimated Service Charge on-account. Once the actual costs incurred during the Service Charge accounting year have been calculated, they are set against the estimated costs to establish whether there was a surplus or deficit of funds.
The difference between the actual and estimated costs represents the Service Charge adjustment. This is then added to each property owner's Service Charge account in the form of a credit, where there is a surplus of funds for the year, or a debit if there is a deficit of funds. It is a covenant within each Lease and Transfer that the Service Charge adjustment is paid on demand.
At the end of each financial year, a summary of expenditure is prepared by an independent accountant showing income and expenditure for your property. The statements are circulated to all leaseholders.
We recognise that personal circumstances change and some property owners may find that they have difficulty in meeting service charge payment obligations. In the first instance please contact our Customer Services team to discuss payment options or email us using our feedback form on the Contact Us page, particularly if you have received a letter from our Credit Control department.
We are appointed to maintain any communal grounds i.e. car parks or landscaped areas, by the Freeholder of these areas. Your Transfer document will outline your requirement to contribute towards the maintenance of these areas.
All funds paid on account are paid into a named, interest-bearing bank account, held under a statutory trust, which is specific to your Consort development and protected by legislation. The account is independent of the trading accounts of Consort Property Management (which is a trading division of OM Property Management Limited). Any money paid into this account can only be spent on your development. The account balance accumulates interest and the accounts for each period will reflect any interest accumulated within the year.
The terms of your Lease or Transfer requires you to contribute towards the upkeep of the development from the date of the legal completion of your purchase. Whilst the development may not be fully completed and Consort Property Management may not have commenced their management duties (in full), the purchaser remains under covenant to pay the Service Charges demanded. Its important to understand that this is an on-account payment until actual expenditure is known. However, during this period we endeavour to be flexible and may agree reduced on-account payments where appropriate. Our Customer Services department will be happy to discuss this, should you require further clarification. Please call the team on 08451 947 044 (lo-call).
Advance Billing ensures that funds are held for initial expenses e.g. insurance costs, and to pay contractors once the development becomes fully managed by Consort Property Management. It is also important to ensure that the development's bank account does not become overdrawn; thereby incurring extra charges which may further increase the Service Charge. Upon the certification of the first set of annual accounts, any surplus Service Charge funds are redistributed back to the property owners in accordance with the relevant covenants contained within their Lease or Transfer.
If you purchase a freehold property, you will own the home and the land it is built on. There may however be a freehold company who owns the estate areas, such as communal car parking or garden areas, which we have been appointed to maintain and for which service charges are due.
All invoices for Service Charges and Ground Rents are due on specified dates within the year and we will always provide a demand for payment by the respective due dates. If your account is settled by Direct Debit, the invoice will be for your information only.
This usually occurs when a sale has taken place and your solicitor has not registered the assignment with us or the Freeholder as required by your Lease. You should contact your solicitor immediately to ensure that the position is regularised.
Until registration has taken place, we are unable to amend the record relating to your property. However, as the owner, you are responsible for the charges and should pay these even though you may be resolving matters with your solicitor.
As the current owner, you are now liable for making this payment. However, your solicitor should have made arrangements to cover this contingency, usually by retaining an amount of the money due to the person who sold the property to you. You should check this with your solicitor.
Under the terms of most Leases we are required to insure the whole building but not your belongings and home contents. Where your bank or building society has required you to insure through them, you should obtain from us a copy of the insurance summary details and current schedule and give this to them.
There is often an adjustment to the service charge after the year end as it is unlikely that our estimate will equal the amount expended during the year.
This adjustment can be a credit if we over estimate or a debit if we under estimate.
If we under estimate; an invoice will be sent to you for the balance due. If we over estimate, the adjustment are credited to your account and can reduce future invoices.
It is common sense and good practice to save for future known large expenditure and the proverbial 'rainy day'. That's why it is sensible for a development to have its own 'Reserve Fund'.
Reserve Funds are collected to help contribute towards the cost of non annual expenditure such as external and internal decorations, the renewal or major repair to parts of the building or plant and machinery such as lifts and pumps.
An amount is collected each year so that money is accumulated and available to meet either significant unexpected expenditure or other periodic repair or renewals.
The process also helps to ensure fairness, so that every leaseholder is making an annual contribution to future major works costs, even if no work is carried out whilst that leaseholder is in occupation. The leaseholder therefore shares the cost of parts of the building or equipment wearing out relative to the period he or she was an owner.
The money is held in the same way as other service charge funds in a bank account, held under a statutory trust, with any interest being for the benefit of the reserve fund. The money can only be spent on your development.