How much do management companies charge? 

Managing agent fees vary throughought the country anything form £250 per annum ber flat plus VAT to as much as £500 per unit for higher end blocks with high levels of amenity. A fair and reasonable level for a 2 bedroom property within the M25 should be around the £275 per flat per annum plus VAT.  

Who pays the service or estate charge?

The service charge payable for a flat is usually laid out in your original lease.

Normally the charge is split equally between all the flats in the block within the development. If, a private development contains both flats and houses, the global service charge is split between costs for the estate as a whole (for example maintenance of any roads not adopted by the local council) and costs relating just to the blocks of flats, for example costs relating to lift maintenance. The former set of costs are split equally across all properties on the complex and the latter set allocated equally across the apartments only.

How is the service or estate charge broken down?

Funds necessary to pay contractors for ongoing maintenance, including their time and third party costs.
Funds or provisions needed for general repairs.
Funds or provisions needed to pay for cyclical, longer-term major works.
Funds needed to pay for insurance for the block.
Funds required for legislative upkeep, eg Health & Safety and statutory reporting aspects, billing and information provision.
Funds required for the services of the managing agent.
VAT and IPT (insurance premium tax) as applicable.

What is the difference between a service charge budget and a year-end service charge account?

The service charge budget or estimate is a share of likely costs for the forth coming year and is usually payable quarterly in advance. The estimated budget is based upon experience in previous year's expenditure and known items of future major expenditure.

The end of year service charge account is a statement of actual spend over the past year and your portion of those costs. When the year-end service charge account is provided, a summary of the amount paid at the beginning of the year for the service charge budget, (and the difference between the two) is included normally. If the actual year-end expenditure is higher than the estimated, the difference will need to be settled by the leaseholder. If there has been an over-estimate at the year-end service charge account, the difference will be carried forward to the next accounting period as a credit.

Why could there be a difference between the service charge estimate and the year-end service charge account?

There are multiple reasons why the actual amount expenditure annually may be different from the estimated budget :

Unforeseen expenditure eg emergency repairs.
Additional costs to remove non-domestic waste (fly-tipping).
Inflated buildings insurance premiums as a result of an RCA (re-instatement cost assessment).
Excess insurance uplift - higher claims on the buildings insurance.

F Arden,