Top 5 tips to see if your service charge is fair

If you live in a flat, you’ll be used to budgeting for your annual service charge, but how do you know if the amount you’re paying is fair and reasonable? IPM offers advice on how to assess if your service charge is fair.

As a leaseholder, you have a right to be able to clearly see how your service charge monies are being spent and what they are being spent on. Transparency is key to helping leaseholders understand what they need to pay, it can also encourage prompt settlement of demands, which can be essential in smaller developments and those that run without a surplus.

However, we’ve met many leaseholders who have felt like they’ve been kept in the dark when it comes to things like maintenance and insurance costs and are understandably concerned as to how their money is being spent.

So how can you tell if your service charge is fair?

Sometimes of course your managing agent or RMC directors will have no choice but to increase the service charge, this is due to the rising costs of services procured to manage buildings and materials required – we have all read reports of high levels of inflation and rising prices across fuel, basic goods and wages, which will of course have a potential impact on the cost of maintaining your property. Inflation aside however, there are several things you can investigate to help you understand if you are being charged fairly for your property management service.

1. Are the contractors independent?

This might take a bit of research but is often worthwhile. Ensure that you and your fellow leaseholders are getting a fair deal from suppliers and that they are not linked to the managing agent or the freeholder Independent contractors should be sought to get a fair price for the work required.

2. Are competitive quotes being sought?

Make sure your managing agent is getting competitive bids for work that is carried out at your block. The lowest price may not always be best, but it can help with negotiations – and competitive tendering keep contractors and suppliers on their toes.

3. How often do emergency repairs take place at your development?

Regular emergencies or last-minute works are often a sign of poor management and will generally lead to increased costs overall due to the reactive nature of the repairs. Your service charge budget should allow for adequate maintenance levels to avoid sharp spikes in cost when emergency repairs are needed.

4. Check the management fee level

The fee charged by managing agents can creep up – often this is entirely justifiable (see inflation point above!) but occasionally it isn’t. Don’t be afraid to negotiate on this or talk your managing agent to understand the charges. transparency is key to all good relationships with your managing agent.

5. Check when your insurance policy was last put out to tender

As with point 1, insurance is regularly an area where we can deliver cost savings to new property management clients. Ask your managing agent to put your block insurance out to market to see if they can secure a better price or better cover. At the same time you can also interrogate the commission levels of course…

Whilst any sensible leaseholder should be wary of a managing agent that promises a five-star service at a rock bottom price, all too often leaseholders are paying far too high a service charge because the managing agents are either beholden to the freeholder or the RMC is not holding them to account.

Naturally, older blocks with more maintenance requirements may lead to a higher service charge, likewise those with more extensive facilities or listed buildings can be difficult to compare service charges across developments, yet there are several steps you can take to see if your service charge is fair.

For a sensible discussion about your service charge and a more transparent approach to property management, talk to the team at IPM.

Eco-friendly ways to add value and reduce running costs to a property

For property owners looking to make eco-friendly home improvements that might also add value, IPM has provided seven tips.

With the advancement of green heating technology and advancements in materials, homeowners are starting to seriously consider green or renewable ways to run their homes to reduce their carbon footprint.

There are actually a number of ways to run your home while saving some money and doing your bit for the environment. It’s not just the environment that people are concerned with either; energy prices are rising, so it’s no surprise that people are looking for more efficient ways to manage their homes and reduce their costs. If you’re looking for an eco-heating solution, then here are some alternative options available to you:

1. Insulation

Upgrading a home’s insulation, specifically solid wall insulation, is one of the best ways of improving efficiency and reducing energy usage. It costs an estimated £2,750 to do but can boost property value by 3%. Based on the average UK house price of £273,762, this equates to £8,213, adding value to the tune of £5,463. This makes it the most profitable eco-friendly upgrade available to homeowners when it comes to adding value to their home, as well as reducing their carbon footprint.

2. Electric car charging port

Despite the increasing popularity of electric and hybrid cars, it’s still very rare to find a home that comes with its own charge point. Installation is relatively inexpensive, around £800, and can add around 1.5% to the home’s value, adding £3,306 in value.

3. Boiler upgrade

Many homes can still benefit from a good old fashioned boiler upgrade. While notoriously expensive to do, around £2,500, the increased efficiency and longevity that a new boiler provides adds around 1.9% to the home’s value, adding £2,701 in value.

4. Tankless water system

Similarly, if a home uses a tank system for its hot water, in which it uses a large tank to store large amounts of water that must then be heated every time hot water is required, it’s a very good idea to replace it with a tankless heater system. Doing so costs around £1,275 but adds 1.2% to the property’s value, a boost of £1,984.

5. Double glazing

Fitting double-glazed windows throughout the home is very expensive, costing an estimated £6,575. It is, however, an essential step towards creating an energy efficient and warm home and is so important to homebuyers that the improvement adds 3% to the value of a property. Measured against the cost, this brings an added value of £1,638.

6. LED lighting and roof repairs

Increased efficiency and good profits can also be added through installing energy efficient LED lighting throughout the home (£1,069 profit), and addressing any faults or weaknesses with the roof (£987 profit).

7. Solar panels

Despite being one of the most common ways of improving the carbon footprint of a home, it seems they do very little in terms of added value. Installation is expensive, around £5,875, while the value added is estimated to be £1,916, a loss of -£3,959. However, there are obvious savings to be made from reduced utility bills, so if the owner is planning to stay in the home for many years to come, solar panels can still offer good savings.

James Forrester, Managing Director of Barrows and Forrester, comments: “Eco-friendly home renovations and upgrades can be a brilliant way of reducing the running costs of your home, which is something that has been brought into focus due to the spiralling cost of living.

“But they don’t just reduce the day-to-day costs associated with our homes, they can also add value for such a time that you do come to sell.

“In addition to the financial benefits they bring to the home, they can also help us make a positive change with regards to the environment and this eco-friendly conscience is something we are seeing more and more from the modern-day homebuyer.”

Government launches new service for leaseholders to track Building Safety Fund progress

Leaseholders will be able to track their building owner’s progress on remediation through a new online service, the Department for Levelling Up, Housing and Communities (DLUHC) has announced.

Through the new Leaseholder and Resident Service, which aims to speed up the process of removing unsafe non-aluminium composite material (ACM) cladding from the highest-risk buildings, leaseholders in tower blocks will have access to updates on the status of their building’s application to the government’s Building Safety Fund.

As part of the process, leaseholders will be given a unique code to track their building’s progress.

The government said the online portal, launched today, will expose building owners who are failing to take action to fix their properties by making the process more transparent.

The move follows housing secretary Michael Gove’s building safety announcement last week, during which he promised leaseholders statutory protection from non-cladding costs.

He also said he would force developers to foot a £4bn bill to remove unsafe cladding from buildings between 11 and 18 metres tall.

The Building Safety Fund was launched in May 2020 after chancellor Rishi Sunak announced that the government would be providing £1bn in funding to remove dangerous non-ACM cladding from buildings taller than 18 metres.

In 2021, the government announced that it would be increasing the funding by £3.5bn.

But the latest figures from the DLUHC, published today, show that progress is slow. None of the social housing blocks granted building safety funding have had their remediation work completed yet.

So far the government has approved £976m for the remediation of non-ACM cladding – £851m for the private sector and £125m for the social sector.

But as of 31 December 2021, the Building Safety Fund’s total expenditure, including both sectors, was only £219m.

Building safety minister Lord Stephen Greenhalgh said: “It is unacceptable that four years after the Grenfell tragedy innocent leaseholders are still living in buildings with unsafe cladding.”

He added that building owners are responsible for making their buildings safe.

“We will no longer allow them to shirk from their duties and hide behind processes and corporate loopholes.

“Everyone – including leaseholders – has a right to know what is happening with their building and to live safely,” he said.

Geeta Nanda, chair of the G15 and chief executive of Metropolitan Thames Valley, said that ensuring residents affected by building safety issues are kept up to date with information is “essential”.

“We welcome the new Building Safety Fund online portal, which will help ensure that the information being provided to residents on this critical funding support is as accurate and up to date as possible,” she said.

Kate Henderson, chief executive of the National Housing Federation, said greater transparency over the progress of the Building Safety Find is a “positive move”.

“Housing associations are committed to working with the government to tackle the building safety crisis and support all efforts to protect leaseholders from costs,” she added.

WHY HAS THE GOVERNMENT INTRODUCED THIS SERVICE?

The applicant for the BSF, usually the building owner or managing agent, is responsible for keeping leaseholders and residents updated about the progress of their building’s BSF application. Rather than waiting for information from the applicant, leaseholders and residents will be able to access information directly.

HOW CAN THE SERVICE BE ACCESSED?

Leaseholders and residents can access the Service by inputting a ‘unique building code’ for their building.  All applicants have been sent information about the Service and their building code before its launch and they have been asked to share this with leaseholders and residents.

In addition, each private sector resident will be sent their building code directly via the post (20-24 Jan).

If you are a leaseholder and do not have this information, you should request it from the applicant (usually the building owner or managing agent).

HOW OFTEN WILL THE INFORMATION ON THE SERVICE BE UPDATED?

All application status updates will be published on the third week of each month.

DOES THE SERVICE INCLUDE INFORMATION ON BUILDINGS WITH ACM CLADDING?

No. The Service currently only includes buildings that are part of the Building Safety Fund (BSF) which covers unsafe non-ACM cladded buildings.

The government is however considering options for providing information on ACM cladded buildings and will review feedback on the new Service to inform decisions.

In the meantime, leaseholders and residents of buildings with ACM cladding that are being remediated should contact their responsible entity (usually the building owner or managing agent) for updates on ACM projects.

 

You can find out more information on the government website.

How to get the most from your Property Management company

GETTING THE BEST FROM YOUR PROPERTY MANAGING AGENT

It is critical to future management arrangements to establish at the outset the role and responsibilities of the property managing agent:

  • what responsibilities and authorities the agent will have;
  • how much service charge money they can spend without your authority;
  • response times and other timescales for action; and
  • the authorised lines of reporting and communication.

Both the individual leaseholders and the agent should be clear as to from whom instructions are to be received. An agent cannot work if expected to receive instructions from all lessees. The usual and most effective arrangement is for the agent to attend, and report to, meetings of the Board of the RMC. In between meetings the Board could nominate one of its directors to be the main point of contact. By treating the agent as a form of general manager, he or she will provide useful input to policy and take overall responsibility for day-to-day affairs. Meetings should be properly organised and the Board’s instructions to the agent clearly minuted. The Board should set clear lines of communication, understood and observed by both sides.

Remember that the agent cannot take instructions from the Board that would put him in breach of any landlord and tenant law, code of practice or other statutory guidance eg health and safety legislation.

The Board should also establish how the agent is to respond to questions from individual residents and his/her accountability to those individuals. The residents should be clearly informed by the Board of the identity of the agent, duties and limits of authority. Although the agent will be working for the residents as a whole, the employer is the Board, and the residents must be clear that the agent carries the authority and support of the Board in respect of all his/her actions. The agent should not be placed in any position of ambiguity in dealing with individual flat-owners and, of course, cannot take instructions from them.

IPM are members of the Institute of Residential Property Management, RICS, ARMA, the property ombudsman and other highly regarding business accreditations. If you’d like to find out more information about our property management service for your development or block of flats, please get in touch on 01302 729 500.

Benefits of Using a Property Management Agent

Using a Block Management Agent

This article provides basic guidance on why you should appoint a managing agent, where leaseholders are subject to the payment of a service charge. It is particularly relevant if you are a director of a resident management or right to manage company with a block of flats.

Flat-owners may acquire management responsibilities in different ways: through acquisition of the freehold of the building, through the statutory Right to Manage (RTM) or simply by delegation of the management responsibilities from the landlord. Whatever the route, the management is normally exercised through some form of resident management company (RMC). The RMC will assume responsibility for the management and repair of the building, and for compliance with the obligations of the lease and the wide range of relevant statutory requirements. It will have to assess how best to achieve this, usually by appointment of a professional block managing agent.

The role of a residential block managing agent today is a complex one and requires a highly professional approach. To carry out the role requires knowledge of landlord and tenant law, building construction, Health and Safety regulations, basic accounting and more.

Professional managing agents bring an organised approach to the planning and collection of the service charges and reserve funds, the timetables for redecoration, repairs, inspection and supervision of works.

Their assessment of what must be done, and when, will be independent of private interests and preferences, and based solely upon their duty to keep the premises in good repair. The process of collecting funds and the responsibility for taking steps to recover unpaid charges will fall under the responsibility of the managing agent.

A managing agent handles all the mundane and time-consuming administration. If issues and disputes arise, these can be dealt with impartially by the managing agent who’s primary goal is to ensure they site is well maintained and stays in good condition.

Managing agents should hold professional indemnity insurance as a further protection against negligent acts or incompetence and have the responsibility for compliance with leases, laws and codes of practice.

For more information about the services covered by our team at Inspired Property Management or to discuss your potential site management requirements, please speak to one of our Property Management Experts who can advise you further.