Service charges explained

Why do I have to pay service charges?

Everyone who buys a property on a development signs legal documentation (a lease for an apartment or a transfer for a house.) This is, in effect a contract which contains, among other things, clauses obliging them to pay a share of the costs to manage and maintain all areas of the development that are not for the sole use of an individual property. These areas include corridors within a block of apartments and grounds and landscaping around the outside. It will also include less obvious items such as satellite systems, pumps, communal electricity, buildings insurance and refuse management not provided by the local authority*. The service charge also contains an amount we set aside for longer term maintenance such as decoration and carpet replacement.

 *Services vary between developments.

How is my service charges calculated? 

BRAM estimates what the likely cost to maintain your development each year will be and put these figures into a document called the Service Charge Estimate. This cost estimate lists all the services** that will eventually be provided on your development as well as their likely annual cost. Each property owner will then pay for the services they specifically receive (for example if you live in Block A you will not pay for the service provided to Block B) and this is usually calculated using the size of your property. We refer to these items in the cost estimate as Building Costs. Some services are for the benefit of everyone on the development (such as landscaping of garden areas that all residents can enjoy) and these costs will usually be split equally amongst all properties on the development. We often refer to these items in the Service Charge Estimate as Estate Costs. Also included in the Service Charge Estimate is the Management Fee. This is the fee BRAM charge each customer for the administration of the services previously described. This fee will always be competitive within the market and will be used to provide a high level of customer service. The estimated cost of all the services you benefit from are then added up to give you your total service charge contribution.

 **On newer developments it is often the case that a service or facility that appears in the Service Charge Estimate is not physically available on the development due to the construction programme. In order that the service charge is a fair reflection of the total annual cost, BRAM still collect your share however we will endeavour to be flexible and may agree to reduce the service charge relating to a particular service or provision.

When do you collect my service charge?

If you purchase your Barratt London home from new we will collect a proportion of service charge via your solicitor. This is a pro rata amount from the date you complete the purchase up until the date when the next annual or half year demand falls due. If you are a second or subsequent purchaser, payment will be co-ordinated by your solicitor at the time of purchase.  We then, depending on what the lease or transfer states, collect the service charge from you either once or twice a year at the prescribed times. The service charge is always collected in advance so that there is money available in order to pay for the services provided.

What is ground rent and why do I have to pay this as well?

Ground Rent is a separate charge payable to the freeholder (owner) of the land on which your property is built (this is generally applicable to apartments only). BRAM will sometimes collect this on behalf of the freeholder and this will be clearly stated on your demand.

When do I get to see what the real costs for maintenance are, not just the estimated cost?

Each development will have specific service charge year end. We will endeavour to produce accounts within four months of this year end. These accounts will show the amount we have collected in service charge for the year against the amount we have actually spent in order to maintain the development. If we have collected more for a service or piece of equipment than we have actually needed then that amount will be refunded to you in the same proportion that it was collected. Similarly if we have not collected enough for an item then the shortfall will be recovered from you to balance the accounts. We call this the Year End Balancing Charge.  The accounts will likely show some items as over-estimated and some as under-estimated and you will receive your Year End Balancing Charge based on the overall position of the schedules (Block Costs, Estate Cost etc.) that you benefit from. Naturally, as the development is completed and we gain more specific experience of the running costs we adjust the cost estimate to more accurately reflect them. Our aim will always be to minimise any major variances in costs and as such keep surprises to a minimum.

BRAM have collected my service charge share, but have stated that they might not use it all as the development is quite new and not all services are being provided. Where does the money go in the meantime?

BRAM set up an individual bank account for each and every development we manage. This account has trust status which means that it is entirely independent of BRAMs’ day to day business transactions and is guaranteed to be “ring fenced” by Barclays Bank PLC in the unlikely event that BRAM were to enter administration or become insolvent. Your service charge payment is made payable to Barratt Asset Management Limited but is placed into this development specific account. We only take money out of this account to pay for services provided on your development.

How can I pay the service charge? 

You can pay your service charge via your bank or by cheque. We are also happy to receive your payment monthly by standing order and you can arrange this directly with your bank. Please refer to the specific instructions detailed on your statement provided in this pack.

What happens if I don't pay my service charge on time?

You should make sure the service charge is paid on the due date to ensure that we have money available to meet the cost of any maintenance that is required. We will send a reminder 21 days after the due date. If the service charge remains outstanding after this reminder we will take further appropriate action to recover the service charge and the administration costs of this process will be passed onto you.