A service charge is a payment that a tenant makes to the landlord or management company in return for services provided by them in relation to the property in accordance with the terms of the lease.
The services normally include but are not limited to maintenance and repairs to the building, insurance, lifts, porters, lighting and cleaning to communal areas.
The lease sets out the services that are to be provided and the proportion that the tenant is to pay of the cost of providing those services.
The contribution can be a fixed amount or variable amount based upon an estimation of what the likely cost will be for providing the services over the year or the actual cost of providing the services over the year.
The landlord or management company can only recover the cost of providing the services detailed in the lease.
Costs for any additional services cannot be recovered from the tenant and the landlord or management company is not obliged to provide any services in addition to those which they have agreed to provide, as are listed in the lease.
The terms of the lease are instrumental in determining what services are to be provided, how and when the service charge is payable.
The lease needs to be carefully drafted and the wording of the service charge provisions considered in every scenario because the tenant wants to ensure that all the services necessary for the building are being provided and the landlord or management company need to make sure they are aware of the services they need to provide and the steps they need to take contractually to demand service charge.
Residential service charges are heavily regulated by statute. Complying with the terms of the lease is the first step to recover service charge sums from the tenant.
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