Service Charges: All You Need to Know
If you're exploring Shared Ownership for the first time, you've probably come across the term "service charges" and wondered what it actually means. But don’t let this phrase be off-putting; let us tell you what's involved.
Service charges are a normal part of most leasehold homes, including Shared Ownership homes. These charges are not unique to Shared Ownership, and they're much easier to understand once you know what they cover.
This Shared Ownership guide breaks down what service charges are, why they exist, and what you can expect as a Shared Ownership buyer.
What are Service Charges?
Service charges are payments that residents contribute towards the upkeep, management and maintenance of shared areas and services within a development. Think of them as the running costs for everything that benefits everyone living there. That might include:
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Cleaning and maintenance of communal areas such as hallways, stairwells and lobbies
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Lifts and communal lighting
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Landscaping, gardening and grounds maintenance
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Building insurance
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Repairs and safety checks, including fire alarms and door entry systems
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Estate management costs
For apartment buildings, these charges are typically unavoidable. Shared spaces need ongoing care and maintenance to ensure they’re safe, secure and well maintained.
It's important to remember that service charges are part and parcel of leasehold properties, not an issue with Shared Ownership homes. You'll find them across many leasehold properties, whether they're Shared Ownership homes, private sale properties or other types of leasehold housing.
How Do Service Charges Affect Shared Owners?
They're paid in addition to your rent and mortgage. Your monthly outgoings will usually include your mortgage payment, rent on the share you don't own, and your service charge contribution.
They vary by development. The amount depends on the facilities and services available. For example, developments with more communal areas, landscaped spaces or additional services may have higher charges than smaller developments.
Costs are reviewed annually. Service charges can increase or decrease depending on the actual costs of maintaining and managing the building or estate. Buyers are informed of any changes as part of the annual review process.
You'll receive an estimate before you buy. When you purchase a new home, the service charge is estimated for the first year. This is because no one’s lived in the property to have any accounts or costs to base the service charge budget on. From year 2, the service charge will be set in line with expenditure plus the administration charge which will increase in line with the terms of your lease.
Shared Owners pay the full service charge. Even if you only own a percentage of your home, you'll pay 100% of the service charge. That's because you're receiving 100% of the benefit of the services provided, including building maintenance, communal facilities and building insurance.
You can request a clear summary of costs. If you’d like a simple breakdown of what your service charge covers and how it’s calculated, you’ll receive this in the Key Information document provided. You can ask for a summary at any point after the first year so you feel fully informed and confident about your ongoing costs.
For many people exploring Shared Ownership, understanding service charges is an important step in building a realistic monthly budget.
Your independent financial advisor can help break down all your costs and explain exactly what you'll be paying each month and will stress test your finances to help plan for any changes in costs after the initial years’ estimate. Southern Housing New Homes can help connect buyers with free independent financial advice to support informed decision-making.
Why Southern Housing New Homes?
Southern Housing New Homes committed to being transparent about service charges and helping buyers understand exactly what they're paying for. The important thing is that you'll receive information about service charges before you buy, giving you the opportunity to understand the costs and plan your budget accordingly.
Whether you're looking at homes in London, or exploring opportunities across the South East, our aim is to make the buying process straightforward and transparent as possible.
If you're ready to take the next step, Southern Housing New Homes is here to help you explore your options and find a home that works for your lifestyle and budget.
Explore homes available on our website today.