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How to reduce your service charge

How to reduce your service charge
7th June 2018 Editor

Do you feel you are paying too much for your service charge? Peter McCabe of Clear Building Management offers a checklist to help you assess if your service charge is fair – and identify where any savings can be made.

A little while ago Clear BM took over the management of a development that had seen a small but steady year-on-year increase in its service charge levels. Within 12 months – and for the first time in the block’s 30-year history – we had managed to substantially reduce their service charge.

We saved leaseholders a third off their insurance and, without exception, EVERY product and service we procured (even using the same supplier) has been at a lower cost than the leaseholders were paying to their former managing agent.

And it wasn’t rocket science – it all comes down to transparency and value for money.

So how can you identify areas for savings in your service charge?

  • Check for over-riders and commissions
    This is an essential point. Unfortunately, there are still too many managing agents taking a slice of the pie through commissions and over-riders. Ask your managing agent about their approach to commission – and change to a fairer agent if you can. A transparent and clear managing agent will never charge you commission or take a kickback from suppliers.
  • Are suppliers independent?
    Do your research into the companies supplying your development. They should be independent and not linked to the freeholder or managing agent; independence means you can negotiate a fairer rate.
  • Get competitive quotes
    Make sure your managing agent is getting competitive bids for work that is carried out. The lowest price may not always be the option you select but it can help with negotiations – and keep your contractors on their toes.
  • Check the management fee level – can you renegotiate?
    The management fee charged by agents has a tendency to creep up. Is this justifiable? Sometimes yes, but occasionally it isn’t and, if you can’t negotiate a lower rate, you may need to switch agents to put the brakes on the price rise.
  • Is maintenance being carried out properly or are poor repairs leading to excessive emergency works?
    Your service charge budget should allow for sufficient repairs and maintenance works to keep the development in good repair. A stitch in time saves nine etc etc. Scrimping on repairs however can lead to sharp spikes in the service charge when emergency repairs are required. Make sure you understand the maintenance plan and keep an eye on emergency costs.
  • Review your insurance policy
    Putting your block insurance ‘out to market’ will usually generate a more cost-effective quote and/or better cover. This is also a chance to interrogate commission levels

Naturally, older blocks with more maintenance requirements may command a higher service charge, likewise those with more extensive facilities. However, all too often leaseholders are paying far too high a service charge because the managing agents are either beholden to the freeholder or the residents management company is not holding them to account.

Common-sense property management cost savings

For a conversation about your service charge levels, talk to the property management people at Clear Building Management. We operate under the clear mantra of “those who pay should have the say”, providing common-sense cost savings and total transparency.