Our experience is that most homeowners who pay a service charge have never had a proper explanation of why they have this extra bill and even fewer realise that they should have a say on how it is spent.
A brief history of service charges
Way back in 2004 local government decided to make it a requirement that before giving planning permission for a housing development an arrangement had to be in place for maintenance of the communal spaces “in perpetuity”. This was around the same time that developers were providing much smaller gardens and therefore had to make up this space in the form of shared greens or landscaped areas.
The idea was that long after the development was complete, the homeowners could be sure that someone would keep cutting the grass and weeding the shrub beds. Conveniently this reduced costs for the council or roads service who might have maintained these areas in the past.
What are the arrangements for maintaining the communal areas in housing developments?
In nearly all cases the developer registers a dormant limited company and makes it a condition of the house purchase that the owner becomes a shareholder. This means that when the development is complete the owners collectively own all the communal areas and all decisions regarding the management are taken democratically. There will also be a set of rules contained in the deeds (which are a legally binding contract) that everyone in the development has to live by. Welcome to your Residents Management Company!
What can go wrong with a Residents Management Company?
A common set of rules and everyone having an equal vote sounds like a model of democracy and you’d think this would guarantee peace and harmony in the development for years on end. Unfortunately this is rarely the case and here’s why:
1. The property owner does not understand the arrangement either because their solicitor never explained it to them or, they were overwhelmed with the stress of moving house to take it all on board.2. The developer appoints the managing agent who quotes the smallest fee to avoid putting off buyers.3. The managing agent doesn’t have the time or resources to provide more than the minimum service, shareholders remain in the dark about the finer aspects of their management company and become disengaged and wonder why they have to pay a service charge.