How to read a service charge before you agree to it

Buyers scrutinise the purchase price for months and accept the service charge in an afternoon. This is backwards. The purchase happens once; the service charge continues for as long as you own the property, and it determines whether the building you bought stays the building you bought.

Low charges are not a saving

A service charge set below the genuine running cost of a development does not reduce that cost. It defers it. Maintenance is skipped, reserves go unfunded, and the shortfall surfaces later as a special levy — usually at the point when something has already failed.

The useful question is not whether the charge is small. It is whether it is sufficient.

What a credible schedule shows

• Line-by-line allocation: security, power, water, waste, cleaning, insurance, and common-area repair as separate figures rather than a single total.
• A sinking fund contribution for major replacements — lifts, generators, pumps, roofing — that will eventually come due whether or not anyone budgeted for them.
• The basis of apportionment between units, so you can see why your share is what it is.
• Who sets the charge, how often it is reviewed, and what residents can see or contest.

A building with a funded reserve is a building where the next major repair is already paid for. A building without one is a building where it is not.

Ask who is doing the managing

Facility management is a discipline, not an afterthought. The relevant questions are whether the manager is contracted long-term, whether they were involved before completion, and whether they have any continuing relationship with the people who built the development.

Where the group that developed a scheme also manages it, the incentive runs in the right direction: shortcuts taken during construction become problems that the same group has to live with and pay for.

Before you sign

Ask for the current schedule, the reserve balance, and the last two years of actual spend against budget. A well-run development produces those without hesitation. A reluctance to produce them is the most informative answer you will receive.