Annual Building Service Charges: Your Questions Answered

As a leaseholder, you may have to pay an annual service charge towards the upkeep of your building or development. But what is this charge and what exactly does it cover? Here, we look at the most common questions people have about building service charges.

What is an annual building service charge?

The annual building service charge is the fee you pay to cover the overall management of your building. Typically, this fee is levied by a managing agent – a third-party company responsible for looking after the building or development. It’s important to note the service charge is different to ground rent, which is the financial consideration payable under the terms of the long lease between you (the lessee) and your landlord.

How much is a typical annual service charge?

Service charges can vary dramatically. The average annual service charge is around £1,800 to £2,000, although it can be significantly higher for luxury properties in prime locations.

What exactly does the annual service charge pay for?

The service charge includes all the pro rata costs for the repair and maintenance of the building, including its common areas. In other words, the service charge pays for all the things – big and small – that make your building or development a safe and comfortable place to live. This usually includes:

  • Everyday maintenance and management
  • Repairs to the building or development as required
  • Buildings insurance, and health and safety measures
  • Gardening and maintenance of the grounds
  • Cleaning of communal spaces and windows
  • Wages for any staff employed at the development (for example, a concierge)
  • The managing agent’s professional fees

What are the advantages of the service charge?

If you’ve ever lived in a poorly-run building, you’ll know it can really impact your quality of life, not to mention the value of your property. A well-run building or development – i.e. one that is properly serviced, comfortable and safe – is a far more pleasant place to live, and a better financial investment.

How do I know the money is being used properly?

This is one of the biggest concerns people have about service charges, yet a scrupulous managing agent will always be transparent about how your money is being spent. For example, at Perry Hill, each building or development that we run has its own dedicated bank account for service charges and, every year, we share a detailed breakdown of the account with payees, setting out how the money has been spent.

With 25 years’ experience managing buildings and developments across the South East, Perry Hill understands how to deliver maximum value for development owners and residents. Learn more about our trusted approach to property management.

How a Red Book Valuation Can Reduce Your Inheritance Tax Liability

We all know that Inheritance Tax (IHT) can cost families a lot of money when a loved one dies. But did you know that there are steps you can take to reduce the amount of IHT payable? One way is to get an independent valuation of property assets (also sometimes known as a ‘probate valuation’).

What is IHT?

IHT is essentially the tax payable on assets left behind when a person dies. In the current tax year (2019/2020), anyone is allowed to leave an estate worth up to £475,000 – which includes the recently introduced £150,000 ‘main residence’ allowance – without being subject to IHT. Estates above this threshold are subject to a tax of 40%, on the amount above the threshold.

IHT applies to assets such as property, investments, vehicles and cash. In many cases, property makes up the largest part of a person’s estate – and, therefore, is the element most likely to push an estate over the IHT threshold.

Getting an independent probate valuation for IHT purposes

At Perry Hill, we work with families and representatives of the deceased to provide an independent value of property assets for probate. This valuation process applies whether the deceased had left a will or not. It’s absolutely vital this valuation is accurate because the market value of the property at the date of transfer (usually, the date of the deceased’s death) is used to calculate how much IHT is payable.

We also work with property owners to provide comprehensive assessments and valuations for the purposes of estate planning – thereby helping clients proactively reduce the tax burden for beneficiaries.

As with any valuation being used for tax purposes, probate valuations must be carried out by a professional member of RICS, the Royal Institution of Chartered Surveyors, according to RICS Red Book standards. That’s why the valuation is often referred to as a ‘Red Book valuation’.

Reducing your IHT liability

Whether you’re navigating the difficult probate process, or putting together your own estate plan, working with a professionally recognised valuer is the safest way to ensure you get a fair valuation and that you or your loved ones don’t pay any more tax than necessary.

Perry Hill’s independent, RICS-accredited chartered surveyors provide valuations across London and Surrey, helping to ensure our clients’ best interests are represented. Find out more about our Red Book valuation services.

Perry Hill Chartered Surveyors Are Surrey Property Awards Category Winners

We’re delighted to share some exciting news with you: Perry Hill was voted the ‘Best Commercial Agent & Chartered Surveyor’ at the Surrey Property Awards 2019 annual event in November.

We had a great night celebrating our joint success! This award is not down to one individual, but all of our team working together and for going the extra mile to deliver our vision to become Surrey’s preeminent firm of chartered surveyors and valuers.

A massive thank you to our network of wonderful clients and strategic alliance partners for choosing to work with us, but also for supporting our firm to grow and develop.

Thank you for your nominations and voting; here’s to working together for years to come.

Looking for new commercial premises? A chartered surveyor is worth their weight in gold

Whether you’re starting a new venture, expanding your operations, looking to downsize, or moving to a new location, finding the right commercial premises is critical. Having a good chartered surveyor on your side can save you time, money and hassle during this process – and throughout the lifecycle of your occupancy. Here’s how.

Finding and assessing properties

(commercial agency services)

Chartered surveyors are property experts. So it makes sense that they assist with property search and selection, helping businesses with both lettings and property sales. At Perry Hill, we’ve found this approach brings big benefits; for example, when it comes to negotiating rent or assessing the condition of a property, we have an in-depth idea of the market and building. This helps the client avoid paying too much (in terms of rent or sale price), and helps reduce the risk of acquiring a property with defects.

Mitigating risk

(dilapidations and repair)

You’d expect to have a building survey done before purchasing a home, but did you know chartered surveyors regularly carry out building surveys on commercial lettings, as well? Many commercial tenants opt to have a building survey completed before they take on a new lease because it can save a fortune in unexpected repairs. It also helps to reduce the risk of inheriting repair obligations from a previous tenant.

Another way to reduce risk in commercial lettings is to get a surveyor to draw up a Schedule of Condition at the start of the lease. This forensic report on the property’s condition – including detailed photographs – acts as a contractual agreement between the tenant and landlord, and clearly defines the condition of the property. This serves to limit the tenant’s obligations to repair or maintain the property, and protects both parties against future disputes.

Negotiating a fair rent

(market value)

Engaging Perry Hill as rent review surveyors is a great way to ensure you’re not paying over the odds for your commercial premises. During the rent review, a chartered surveyor will assess the rental value of the property, taking into account valuation standards and current market conditions, then provide a detailed report on its rental value – a vital tool for rent negotiations, be they at rent review or lease renewal.

If you’re looking for new commercial premises, Perry Hill Chartered Surveyors can support you with the search and selection, carry out building surveys and inspections, and provide trusted rent reviews. What’s more, our experienced surveyors are accredited by RICS, the Royal Institution of Chartered Surveyors, meaning you can count on getting accurate, fair advice every time. 

The Importance of a Break Notice in Commercial Leases

A break notice or break clause is an essential part of any commercial lease, since it allows either the landlord or tenant to terminate the lease early. So far so simple. But making sure the break notice is worth the paper it’s written on? That’s where many commercial leases go wrong.

Why do you need a break clause?

The break clause can be one of the most difficult elements to negotiate in a commercial lease. Yet, there are clear benefits to both tenants and landlords. For the tenant, a break clause gives a certain amount of flexibility to react to market conditions – for example, by downsizing (or perhaps moving to a bigger space) as the business demands. It’s a much-needed safety net for tenants, particularly in unpredictable times like these.

And what about landlords? Surely they want to hang onto tenants for the full term of the lease? For the most part, that’s true. However, sometimes a landlord may want to redevelop or sell the property before the end of the lease. The break clause gives them that opportunity.

The potential pitfalls of a break clause

The idea behind the break clause may be simple, but the reality is often more complex than people expect. The courts deal with a surprising number of disputes over commercial lease break clauses – specifically, exercising a break clause to end a lease early.

In many of these cases, the break clause has been drafted in such an ambiguous way, it makes it difficult to exercise the clause in practice. Or sometimes the procedure for exercising the break clause hasn’t been properly followed, or certain conditions haven’t been met. Whatever the underlying reason, these disputes can be extremely costly.

Therefore, when you’re negotiating a new commercial lease, it pays to give your break clause plenty of attention, and seek specialist advice on whether it really protects your interests. It could save you a great deal of money and legal wrangling further down the line.

At Perry Hill Chartered Surveyors, we work with both tenants and landlords across London and the South East to agree unambiguous break clauses in commercial leases. From leisure and retail premises, to offices, industrial warehouses and mixed-use schemes, our team will ensure your commercial lease works for you. Talk to us about your commercial lease needs.

Do I Need a Home Buyer Report or a Building Survey?

We’re often asked what exactly is the difference between a Home Buyer Report and a Building Survey. Our RICS-registered Chartered Surveyors provide both Home Buyer Reports and Building Surveys for commercial and residential properties.

In this article, we’ll explain the differences between a Home Buyer Report and a Building Survey so that you get the property inspection that you need as part of a house purchase, sale or lease.

What is a Home Buyer Report? 

A Home Buyer Report is a type of property survey recommended to the home buyer that provides a review of a property and lists details regarding its structure, condition and other factors that could affect the property.

Considering the costs involved with purchasing a property, it’s a good idea to consider having a property survey taken so you can get a clearer understanding of exactly what you are paying for.

What is a Building Survey? 

A Building Survey is another type of property inspection for both commercial and residential properties. A Building Survey goes into a lot more detail than a Home Buyer Report by providing much more detail in the written report.

Building Surveys carried out by Perry Hill Chartered Surveyors provide a 30-page report with around 200 photos, a list of external and internal actions and the likely cost to fix.

Building Surveys are particularly common for older properties and those with obvious structural concerns and for buyers wanting to know the potential cost of problems with the property they are buying.  Though the Home Buyer Report does not go into as much detail, it is still adequate inspection for many home buyers.

What is the difference between a Home Buyer Report and a Building Survey? 

One of the main differences between a Home Buyer Report and a Building Survey is the detail in which a Building Survey goes into. A full structural Building Survey gives a much more comprehensive review of the property and offers professional advice on the issues raised in the report.

A Home Buyer Report follows a standard format and clearly highlights any property defects.  Where Building Surveys can be tailored more to the property and concerns of the party wanting the building inspected, a Home Buyer Report is much more “out of the box”, for homes with a similar construction type, condition, and size.

The Home Buyer Report includes the following:

  • Traffic Light System of Defects – A traffic light coding system uses green, amber, and red to describe the urgency in which a problem needs to be addressed.
  • General property information describing the current condition of the property and highlighting any areas to be concerned about.
  • Reinstatement costs – A Home Buyer Report, if requested, can provide accurate valuation and rebuild costs to be provided to legal advisors and financial lenders.
  • General repairs advice highlighting the main defects that could affect the value of the property.

A Building Survey also includes the following:

  • Detailed research – Prior to the building inspection, detailed research will be carried out to find out more about the land, location, and property history.
  • Detailed advice – A Building Survey will highlight issues and concerns in the building, and also provide professional advice about the time and cost of repairing the urgent defects. In addition to this, a building survey will outline the cause of any issues so you can address these also.
  • Tailored reporting – The opportunity to discuss concerns regarding the building and tailor the inspection and report to these.

What are the Benefits of a Building Survey? 

A Building Survey provides a detailed report with expert opinions that can be used to guide your decision as to whether or not a property is considered a good or bad investment. A Building Survey is often considered an investment within the property industry and can help you avoid costly issues you may not have been able to foresee.

The Building Survey gives you a detailed evaluation of problems and is entirely in your best interests upon deciding to purchase a commercial or residential property. The benefits of a Building Survey include:

  • Actionable Insights – Building Surveys don’t just highlight problems, they provide solutions too. With professional opinions and advice, a building survey investigates each issue to find the cause of the problem and provide you with options for repairing and preventing it from happening again.
  • Budgeting – A Building Survey gives you the opportunity to budget towards the repair costs needed to fix and maintain the building.
  • Negotiation – With the results of a Building Survey you can negotiate the price with the seller to factor in the condition of the property and the repair costs you will need to consider.
  • Extremely detailed – A Building Survey looks at more than just obvious defects that can be seen on the surface. The Building Survey digs deeper and examines under flooring, between walls and on the roof. A building surveyor may also use various tools to help determine any issues that cannot be seen by the naked eye, whereas other surveys simply report on noticeable and obvious defects.

A Building Survey is also extremely valuable to sellers that need to know the steps they should take prior to selling a property. Those investing in a Building Survey report will receive factual information, advice, and priorities outlining which parts of the building need addressing, the potential costs, and time needed. This information allows the sellers to address these issues before putting the property on the market and will considerably increase the value of the property once resolved.

Building Surveys are particularly common for commercial premises such as industrial units, retail spaces, and office buildings.

Building Survey Process with Perry Hill Chartered Surveyors

When you contact one of our RICS Chartered Surveyors we will discuss with you any information you can provide to us about the property, and find out more about why you would like to obtain a Building Survey. This information will guide us through the process and allow us to provide closely tailored advice and recommendations throughout our inspection and within the detailed report that will be delivered to you within 10 working days of the property inspection.

On the inspection day, we will arrive at the property at an agreed time and will begin to inspect the property room to room. We will have with us the equipment needed to enter roof spaces and outbuilding, as well as camera equipment to take photos of the roof,  and will spend a few hours carrying out the Building Survey.

After this stage, we will compile our findings into an extensive document that comments and advises on the best way to approach any property defects found during the inspection, together with photographic evidence. We break down the key actions that need to be fixed both externally and internally, with a budget to fix the issues so that you can see how much the work is likely to cost.

Once you have received your property report, we will be happy to discuss the report in detail with you to ensure that you understand everything completely. If you have any questions at all or would like to seek further advice, we will be happy to help.

Contacting Perry Hill Chartered Surveyors

There are differences between Home Buyer Reports and Building Surveys, but it is important that you seek trustworthy guidance as to the survey your property would be better suited towards. Our helpful team of RICS surveyors will give you the advice you need about the different property surveys and help guide you in the right direction.

Perry Hill Chartered Surveyors provide property inspection services throughout London and the wider South-East region. Our clients range from both commercial and residential and recognise the quality and attention to detail covered in both our property survey reports and customer service.

Please find more information about Building Surveys at our dedicated Building Survey Reports page, or Contact Us to speak to a member of our team.

Planning building work on your property? Get a pre-building Schedule of Condition report first

When carrying out construction work on your property, there’s always a risk of damage to a neighbour’s property – especially in terraced and semi-detached properties. To help reduce liability and scope for neighbour disputes, it’s well worth investing in a pre-building Schedule of Condition report before work starts.

What is a Schedule of Condition?

The Schedule of Condition is essentially a building survey, but one designed to record the condition and defects of an adjoining property. It’s a forensically detailed report (including photographs) itemising the full condition of the neighbouring property pre-works.

Why document the condition of your neighbour’s property? Because it reduces your risk in the long term. For example, if your neighbour files a claim for damages resulting from your building works, you’ll have a complete, independent record of their property’s condition before work started, and this will help to determine whether their claim has any grounds.

What sort of construction work are we talking about?

At Perry Hill, we recommend getting a Schedule of Condition report in advance of any building project that might impact neighbouring properties. This may include a rear extension, structural alterations, loft conversion or basement conversion. The report can be used for both residential and commercial properties.

Investing in peace of mind

Construction work can be stressful and disruptive. If there’s one thing you don’t need on top of that upheaval, it’s a dispute with the people next door. For you and your neighbour, the Schedule of Condition report provides important reassurance, because both parties know there’s a factual record of the adjoining property’s condition before work started.

Then, when the construction work is finished, a further inspection can be carried out, checking off against the Schedule of Condition report and confirming whether any damage or issues have arisen as a result of the works. It’s a sensible way to maintain good neighbour relations before, during and after a building project.

To find out how a pre-building Schedule of Condition can help ensure your construction work is a success, talk to Perry Hill. Our team of chartered surveyors can carry out all kinds of building inspections and reports, and provide trusted advice on the best way forward for your property.

Why You Should Get a Pre-Building Schedule of Condition Report Before Commencing Building Work

When carrying out construction work on your property, there’s always a risk of damage to a neighbour’s property – especially in terraced and semi-detached properties. To help reduce liability and scope for neighbour disputes, it’s well worth investing in a pre-building Schedule of Condition report before work starts.

What is a Schedule of Condition?

The Schedule of Condition is essentially a building survey, but one designed to record the condition and defects of an adjoining property. It’s a forensically detailed report (including photographs) itemising the full condition of the neighbouring property pre-works.

Why document the condition of your neighbour’s property?

Because it reduces your risk in the long term. For example, if your neighbour files a claim for damages resulting from your building works, you’ll have a complete, independent record of their property’s condition before work started, and this will help to determine whether their claim has any grounds.

What sort of construction work are we talking about?

At Perry Hill, we recommend getting a Schedule of Condition report in advance of any building project that might impact neighbouring properties. This may include a rear extension, structural alterations, loft conversion or basement conversion. The report can be used for both residential and commercial properties.

Investing in peace of mind

Construction work can be stressful and disruptive. If there’s one thing you don’t need on top of that upheaval, it’s a dispute with the people next door. For you and your neighbour, the Schedule of Condition report provides important reassurance, because both parties know there’s a factual record of the adjoining property’s condition before work started.

Then, when the construction work is finished, a further inspection can be carried out, checking off against the Schedule of Condition report and confirming whether any damage or issues have arisen as a result of the works. It’s a sensible way to maintain good neighbour relations before, during and after a building project.

To find out how a pre-building Schedule of Condition can help ensure your construction work is a success, talk to Perry Hill. Our team of chartered surveyors can carry out all kinds of building inspections and reports, and provide trusted advice on the best way forward for your property.

What is a Photographic Schedule of Condition report? (And how can it benefit landlords and tenants?)

Last month, we explored what happens when a tenant fails to repair or maintain a building, and how a Schedule of Dilapidations can help to document and address maintenance issues.

Yet, there’s another report that can serve to avoid unexpected maintenance issues and disputes altogether: the Schedule of Condition. Let’s look at what a typical Schedule of Condition covers – and see how it benefits both parties in a commercial lease.

A forensic breakdown of the property’s condition

The Schedule of Condition provides a factual record (including detailed photographs) of the condition of a property. Essentially, it supports the lease by acting as a contractual agreement between the landlord and tenant on the condition of the property, and the repair/maintenance duties for the duration of the lease.

The Schedule of Condition is therefore used at the start of a new lease, and is designed to protect both parties against future disputes – particularly at the end of the lease.

If a landlord or tenant attempts to prepare their own Schedule of Condition without taking professional advice, it’s unlikely to be detailed enough to provide any real protection. That’s why the report should always be prepared by a chartered surveyor.

Protecting landlords and tenants

Any commercial lease will have a section covering the tenant’s obligations to repair and maintain the property. Without a detailed Schedule of Condition, the extent of those obligations can be open to interpretation – potentially leading to disagreements further down the line.

Because the Schedule of Condition provides contractual certainty on the state of the property and maintenance requirements, it reduces the risk of unpleasant (and potentially expensive) surprises for either party. What’s more, at the end of the lease, it eliminates the need to spend time and money negotiating any claim for dilapidations.

This peace of mind is priceless for both landlords and tenants. For the landlord, the Schedule of Condition reduces their liability and clarifies their expectations. And for the tenant, they know up front exactly what their maintenance obligations will be.

Get expert help

We at Perry Hill Chartered Surveyors believe the Schedule of Condition is a vital prerequisite when leasing premises, and our team has many years’ experience preparing these reports for both landlords and tenants. Discover how our forensic approach to detail can help protect your interests.

Why would a landlord issue a Schedule of Dilapidations?

It’s typical for a lease to set out certain obligations for the tenant in terms of keeping the property in a good state of repair. When a tenant is in breach of these requirements – perhaps by neglecting maintenance or misusing the property in some way – the landlord may issue a Schedule of Dilapidations.

What does the Schedule of Dilapidations cover?

In simple terms, the Schedule of Dilapidations is a document stating that the tenant has failed or is failing to repair/maintain the building. It will usually set out items of disrepair and what needs to be fixed; however, some Schedules of Dilapidations are more detailed than others, depending on whether they’re issued during the lease (known as an Interim Schedule of Dilapidations) near the end of the lease (Terminal Schedule of Dilapidations) or after the lease has expired (Final Schedule of Dilapidations).

Learn more about our Schedule of Dilapidations services.

A proactive approach to maintenance issues

As a landlord, why would you go to the trouble of issuing a Schedule of Dilapidations? The benefits are clear:

  • Maintenance issues can be flagged and addressed early, instead of letting problems get worse.
    The Schedule of Dilapidations requires the tenant to take action, thereby providing a clear, legal way forward.
  • It reduces the risk of financial loss and helps to protect the value of your investment – remember, the cost of issuing a Schedule of Dilapidations may be a fraction of the cost of repairs or lost rental income further down the line.
  • If the tenant doesn’t fulfil their obligations, you have a paper trail to support a claim for damages.

It’s worth noting that the Schedule of Dilapidations benefits the tenant, too:

  • They have an itemised list of what work is needed, and in the event of a dispute, the Schedule serves as a useful starting point for negotiations.
  • The tenant can get on top of maintenance issues before they become major, expensive problems. No one wants a big, unexpected repair bill at the end of their tenancy!

At Perry Hill Chartered Surveyors, we work with both landlords and tenants to resolve dilapidations claims, and provide support with all aspects of dilapidations – from conducting inspections to issuing the paperwork. Let us help you navigate this potentially difficult process with confidence.

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