This guide explains:

• What your service charge means for you
• When to expect your service charge and how it’s calculated
• Key topics including the different roles in property management, the reserve fund and major works
• Answers to common questions from homeowners

We’re here to make you feel confident about your service charges, making them easier to understand and manage, so you can focus on enjoying your home.

Communications

• Providing management information to our customers.
• Keeping in touch with individual customers regarding management correspondence.
• Provision of our customer service team to handle all customer inquiries.
• Access to your online account where you can view and pay bills, report issues, and review information on your property.

Development Management

• Preparing specifications for works (such as cleaning, window cleaning, and gardening), arranging tendering, and administering maintenance contracts.
• Conducting property inspections, general visits, and addressing arising issues.
• Arranging ad-hoc repairs and managing contractor/supplier performance.
• Employing and working with specialist advisors such as building surveyors or structural engineers.
• Providing an on-call Development/Property Manager 365 days a year for out-of-hours support.

Regulatory Compliance

• Managing communal area insurance claims with the insurer.
• Administering public liability insurance and providing professional indemnity insurance.
• Arranging periodic health and safety and fire risk assessments of the communal areas.
• Reviewing and organising works resulting from the risk assessments conducted.

In recent years, we have seen escalating costs, beyond our control. This has included key areas such as building insurance, utilities, repairs, and staffing, alongside the financial impact of new building safety regulations, which was also reflected in research by The Property Institute’s Service Charge Index, which offers insight into service charge costs across England and Wales.  

While most service charge categories saw sharp increases, management fees remained relatively stable, rising below the rate of inflation. These charges reflect actual expenditure rather than profit, and property managers are working to contain costs despite ongoing challenges like cladding remediation and regulatory changes. 

According to The Property Institute’s Service Charge Index published in 2024, there was an increase in service charges of 41% between 2019 and 2024 outpacing inflation.  

The Service Charge Index looked at a sample of over 108 service charge information across 10 property management companies operating in the UK. It included buildings of all heights and ownership models, including some freehold estates. 

Over the five-year data period (2019 and 2024) on average:  

• Building insurance costs rose 92% 

• Utilities costs rose 73%  

• Health & Safety costs rose 40%  

• On-site staff costs increased 37%  

• Repair and maintenance costs rose 36%  

• Contributions to reserve funds, which is largely driven by rising costs in materials and labour, increased 34%  

Management fees increased 21%  

The introduction of the Building Safety Act (BSA) in 2024 also added further financial pressure, with some estates incurring over £50,000 in BSA-related costs. Buildings over 18 metres saw a 49% rise in service charges, compared to 42% for those under 18 metres. 

Despite these increases, management fees rose more modestly, increasing by just 21% over the same five-year period, below the cumulative inflation rate of 23%. The report emphasises that service charges are not profit-generating; they reflect actual expenditures, with any surplus or deficit returned to leaseholders. Property managers are working to contain costs amid inflationary pressures and the while also complying with new fire and structural safety regulations affecting buildings of all heights. 

Here we explain what the changes are, when they will apply and who they will be affecting, as well as the details of the costs involved.

His Majesty’s Revenue and Customs (HMRC) has introduced new guidance regarding the payment of VAT for site-based staff at developments.

The guidance requires that Property Managers must add VAT to the cost of site staff collected through the development service charge from 1 November 2018.

This means that any site staff costs after this date will have a 20% VAT charge attached. This will not affect the other parts of your service charge, which already include VAT.

You can read the new guidance on the Government’s website here.

2. Why are you making these changes now?

HMRC has been very explicit in its guidance that VAT must be added to the cost of site staff from 1 November 2018. We have sought expert tax advice to understand this in greater detail and the findings have made it very clear that all managing agents, including FirstPort, must adhere to the guidance. FirstPort does not benefit financially from this tax charge.

3. Which members of staff are affected, and what is included in the revised charge?

Site staff refers to a member of staff directly employed by us connected with the day-to-day running of an estate, dwelling or block of flats. At FirstPort this includes, but is not limited to:

• Development Managers/Assistant Development Managers
• Concierge
• Caretakers
• Cleaners
• Maintenance Operatives
• Gardeners

So, specifically included in the VAT charge are:

• All employee payroll costs, including salary, benefits, National Insurance, and pension contributions

Not included in the VAT charge:

• Staff training
• Staff expenses
• Development Manager flat costs, including Council Tax (where a Development Manager is residential)

4. What will the cost be for me personally?

This only affects developments where you pay a service charge and where there are dedicated site staff employed by FirstPort. You may live on a development where this change does not affect you directly.

If you are affected by this, your share of the VAT will depend on the lease/deeds at your development. As with all charges, your share will be as specified in your lease/deeds. The exact amount will be highlighted in your next budget or service charge accounts as follows:

• All service charge budgets issued from 1 October 2018 onwards will show the VAT on site-based staff from 1 November 2018.
• All service charge accounts issued for developments with financial year ends from 30 November 2018 onwards will have VAT included on site-based staff from 1 November 2018. The additional VAT charge will show as a variance from the previously notified service charge budget, as these were issued before the HMRC announcement. Any overall surplus or deficit will be added to your next invoice.

5. When will I have to pay?

The VAT will be applied from 1 November 2018 and will be added to your next service charge invoice, and clearly marked. It will be part of the total service charge amount, payable in the normal way.

6. What does the payment I currently incur for site staff cover?

Individuals and teams working at your site ensure the smooth day-to-day running of your development. For example, Development Managers keep on top of any maintenance and local issues, concierge staff welcome visitors to your development and look after deliveries, and cleaners make sure that communal areas are looking the best they can be. The number of staff required on-site is based on the size and complexity of the development.

7. Will you make any profit out of this additional charge?

This is not an additional charge made by FirstPort. It is a tax charge applied by HMRC that FirstPort collects and pays directly to HMRC. FirstPort does not benefit from this charge.

In general, it is a good idea to keep savings for that unexpected expenditure and the proverbial ‘rainy day’. That’s why we believe it’s sensible for a development to have its own ‘Reserve/Contingency Fund’ (your lease sets out whether we can collect these at your development – we only do this where it is allowed).

These reserves are collected to help contribute towards the cost of non-annual expenditure like major repairs or external and internal decorations. We set out in the annual budget how much is being collected in that year. The money accumulates over time, and the annual accounts we send you also show a statement of the overall amount saved for your development. Any interest is credited to the reserve fund.

The money is held in the same way as other service charge money in a trust account. This means the money can only be spent on your development.

2. Where do you keep the money I pay you?

The service charge (and reserve/contingency) money you pay FirstPort is held in a bank account under what’s called a statutory trust. This means that should anything happen to FirstPort, such as it went into liquidation, your money is kept safe and outside the liquidation process. The account is held at Barclays Bank in your development’s name. This account is held completely separate from all other FirstPort accounts. Any interest is paid into the account and is for the benefit of residents at the development. Funds in your development bank account are safe, completely independent and can only be used for the purposes of your specific development.

All our bank accounts are protected by the UK regulator, the Financial Services Authority (FSA) and the Financial Services Compensation Scheme (FSCS).

3. Why do I have to pay additional charges?

From time to time, you might have to ask us to carry out some additional services specifically for your home. For example, if you are planning to sell your property, you or your solicitor might need to request a detailed information pack. Or perhaps you may wish to seek formal consent from your landlord to sublet your property or to keep a pet (if your lease requires it).

Your lease may also set out some specific legal obligations for you to fulfil on buying, selling or transferring your property so that legal records can be properly updated. For example, your solicitor may need to serve a Notice of Transfer when you purchase or perhaps a Licence to Assign on selling or transferring your property.

As these requests are particular to an individual property and circumstance, they are not covered by the service charge you pay – which goes towards all the communal running costs and services. That’s why we have to ask you for a fixed fee for each specific service required – to cover the additional work we do. We benchmark these costs regularly to ensure that they are reasonable.

We have a dedicated procurement team who work hard to obtain competitive prices and negotiate cost savings for insurance cover, utility providers and maintenance contracts through our bulk purchasing power.

Electricity

The original developer arranges for the services to be connected to the building. You’re responsible for paying the electricity bill for your own property though, so when you buy your property, you’ll need to ask the electricity company to connect the supply once the purchase is completed. As your property manager, we arrange for the electricity for the communal areas of your development, which is covered by your service charge.

Pumps

Some developments and buildings may have a communal fresh water pump or even a pump station.

If you have a pump station at your property, the likelihood is that the development is not connected directly to the main sewer system. Therefore, the waste from the property flows to a storage chamber fitted with submersible pumps which discharge automatically to the main sewer system. When liquid waste enters the Local or Water Authority sewer systems, it may typically pass through many more pumping stations handling progressively bigger flows before reaching the treatment works.

The fact that your development has its own private pumping station, should not be viewed as an unusual situation, perhaps just something which you’ve not known about or had any responsibility for in the past. Sewage pump systems are designed to handle foul water, natural human waste and biodegradable products.

Other household waste and non-biodegradable products should never be disposed of through the drainage system, regardless of whether your property has its own pump system or not. If you would like any help or advice on living with a pump station please get in touch with your Customer Services team.

Telephone systems

A telephone point is usually provided in each property. Every customer would normally apply for their own connection.

Television

Each flat has a socket connected to a communal aerial to connect a television. You will need to have your own TV licence unless you are exempt.

Water

Water is usually calculated from a meter and sewage charges are collected on behalf of the water authority. Any water used for the communal areas of the development, such as in landscaping, is charged back to leaseholders via the service charge.

There is often an adjustment to the service charge after the year-end, as it is unlikely that our estimate will equal the amount expended during the year.

This adjustment can be a credit if we overestimate or a debit if we underestimate. If we under estimate, an invoice will be sent to you for the balance due. If we overestimate, the adjustment is credited to your account and can reduce future invoices.

If you live in an independent retirement living development you will be invited to a residents’ meeting held by the Area Manager where you can ask any questions. We keep a record of all invoices and requests to see this information can be made at any time.

For residents in general residential developments, the property management will provide a summary of service charge expenditure for the financial year broken down by categories of expenditure.

We prepare a budget or best estimate of what we believe we will spend on your service charges at the beginning of each financial year (this is set by the lease for your property and states the twelve-month period on which your service charges must be accounted for). We start this process about three months before the accounting year starts – you will typically receive the finished budget about a month before the financial year begins. (If you live in an independent retirement living development you will usually be invited to a budget meeting, held by the Area Manager, where they will consult with you before the budget is finalised).

For newly built developments, the service charges are based on estimated costs. We make every attempt to make sure the budget is accurate and as close as possible to the actual future costs. Service charges may well be lower in the early months or even the first couple of years as we may not be providing all the services at your development, or not all parts of the development may be occupied. For established developments, the previous year’s costs are used to prepare the estimate for the coming year.

Following the end of the development’s financial year, the annual accounts are prepared and then audited by an independent accountant. A summary is then sent to every owner. Within the accounts that we send you will be a complete summary of everything that we have spent at your development – broken down by categories of expenditure. We highlight where expenditure hasn’t been in line with our estimate, giving an explanation for any significant differences. (If you live in an independent retirement living development you will be invited to a residents’ meeting held by the Area Manager where you can ask any questions). We keep a record of all invoices, and requests to see this information can be made at any time.

2. Why can the amount I need to pay vary?

There is often a need to adjust the amount of service charge you owe after the year-end as it is unlikely that our estimate will exactly equal the amount we spent during the year. This adjustment can be a credit (if we overestimate) or a debit (if we underestimate). If we underestimate, an invoice will be sent to you for the balance due. If we overestimate, the adjustment is credited to your account and will reduce your next service charge payment.

3. Where do you keep the money I pay you?

The service charge (and reserve/contingency) money you pay FirstPort is held in a bank account under what’s called a statutory trust. This means that should anything happen to FirstPort, such as it went into liquidation, your money is kept safe and outside the liquidation process. The account is held at Barclays Bank in your development’s name. This account is held completely separate from all other FirstPort accounts. Any interest is paid into the account and is for the benefit of residents at the development.

Funds in your development bank account are safe, completely independent and can only be used for the purposes of your specific development.

All our bank accounts are protected by the UK regulator, the Financial Services Authority (FSA) and the Financial Services Compensation Scheme (FSCS).

4. Where can I find more information on service charges?

For residents in general residential developments, we send your estimated service charges for the next financial year prepared by the Property Manager. They will be happy to answer any questions on the budget they have set for the year. Please get in touch with your Property Manager via your Customer Services team.

5. When do I pay my service charge?

Details of when you need to pay your service change can be found in your lease. If your lease specifies that your service charge needs to be paid once or twice throughout the year, but you want to set up a regular direct debit to pay your service charge, then a £24 fee will be applied to your account to cover the extra administration involved. Simply contact our customer service team to set up a regular direct debit for your service charge.