Service charges – the lifeblood of block management?

Managing agent or self-manage?

Self-management. When leaseholders have had a bad experience with unresponsive or expensive managing agents, it can seem like a much more appealing option. And it’s true, for smaller blocks of flats, self-managing can mean a better quality of block management and better value for money. Saving money on administration and investing it back into the building to cover for the possibility of any upcoming major works is a sensible plan. It’s not always the easiest option though!

Living in a flat carries with it communal responsibilities; however, as with most groups of people, the majority of residents tend to be pretty apathetic and it falls to a few conscientious souls to keep things on track. Effective property management is dependent on good cashflow and efficient credit control; having enough cash in the kitty to pay contractors when needed will keep them onside and willing to make themselves available for the next emergency.

What’s the key to successful property management?

Collecting everyone’s service charges on time is key to successful resident management companies, whether self-managed or not, but a lot of self-managed blocks neglect to send out service charge demands. This means that they are relying on the residents’ integrity and goodwill to pay their service charge on time. Worse, from a legal point of view, without sending out a service charge demand, or if it has been served incorrectly, there is no way of recovering the debt if someone defaults or stops paying.

It’s crucial, therefore, for people who self-manage properties to set up a system that works for service charge demands and collection. There are two elements that must be considered: what the lease says, and how the law says you must make these demands. If you’re not an experienced block managing agent, or a solicitor or accountant who specialises in service charge legislation and accounts, you could end up in problems before you know it.