A service charge budget is one of the few documents that determines what you pay for your home, and it usually arrives with no explanation at all. Most people file it. Here's how to actually read one.
The headline number tells you very little on its own. A budget rising ten per cent might be entirely reasonable if insurance premiums jumped and the block finally started funding its reserve. A flat budget might be a warning sign that necessary work is being deferred to keep the figure down.
What matters is the shape of the spending underneath.
Put this year's budget next to last year's actuals — not last year's budget. Budgets are estimates; actuals are what happened. Any line that has moved by more than about fifteen per cent deserves a question, in either direction.
A line that has fallen sharply is worth as much attention as one that has risen. It often means work stopped rather than got cheaper.
Reserves pay for the things that happen every fifteen or twenty years — roofs, lifts, external decoration. If your block contributes nothing, that money hasn't been saved; it's simply been postponed, and it will arrive one day as a large bill under a Section 20 consultation.
A reserve contribution should be backed by some kind of longer-term plan. If nobody can produce one, the number was guessed.
The management fee should be clearly stated, usually per unit per year. What's worth asking is what sits outside it. Company secretarial work, out-of-hours calls, and administration around major works are all sometimes charged separately — which is legitimate if disclosed, and less so if not.
Ask directly whether the agent receives commission on the buildings insurance. It's a common arrangement and it should be declared.
Fire risk assessment actions, lift servicing, water hygiene, communal electrical testing — these are recurring obligations. If they don't appear anywhere, either someone else is paying for them or they aren't being done.
You have statutory rights to inspect the accounts and the invoices behind them. Using those rights isn't hostile, it's the system working as intended. A well-run building has nothing in the file it would rather you didn't see.
If you'd like a second opinion on yours, send it over. We'll tell you honestly what we make of it, including when the answer is that it looks fine.
Send us your last service charge budget. We'll tell you honestly whether you're getting value — no obligation either way.