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Simar Nagi | 08 Dec 2022

Leasehold Property Service Charges: Pro Tips to Tackle Them

Leasehold Property Service Charges: Pro Tips to Tackle Them

Leasehold property refers to the property on the land given on lease to the property developer for a certain period of time. The actual ownership still belongs to the original owner (usually the government agency). The occupancy of the realty can even range from 30 to 99 years. The developer has the right to develop apartments, flats, and floor projects on a leasehold base. 

Disadvantages of Leasehold Property

When we talk about leasehold, there are chances to encounter more cons than advantages.

  • The major disadvantage of a leasehold property is paying a service charge. Service Charge issues in leasehold property arise as many people are unaware of the policies and criteria. 

  • The time you read the Terms of your Lease, it should specify how your service charge is calculated, when you are supposed to pay, and what form it can and cannot be used for. 

  • In most cases, service charge issues arise in India mainly because service charges are variable and change year to year in line with the estimated or specific amount of money spent on property maintenance. 

  • Apart from Service Charge issues in leasehold property, some other uncertainties arise when the lease period of land ends, and you want the renewal of the occupancy contract. This issue specifically comes when the property lease ends for approximately 30-33 years shorter tenures. 

  • While asking for contract renewal, one also has to bear a few costs in the form of property tax. 

  • The liberties of the leasehold are limited. Due to this, the leaseholder requires permission from the freeholder from time to time in case of repair or other changes needed. 

  • One is supposed to pay ground rent to the freehold owner. And with time, the rent also increases, thus increasing the charges for the leaseholder. 

  • Sub-letting of a leasehold property is not allowed. 

  • In many cases, keeping pets on the property is now allowed by leaseholders. 

Despite facing the Service Charge issues in a leasehold property, many people are unaware of the basic meaning, how the service charge is calculated, and tips in dealing with the freeholder. 

What do service charges in India cover?

Property maintenance and specialist services like locksmiths, repair people, electricians, plumbers etc. 

Building insurance. The contract cost for people supplying regular services in the form of gardeners, cleaners etc

How is the service charge calculated?

  • The landlord is well aware of the money they need to connect and set aside for future maintenance projects.

  • The estimated figure will be bifurcated between all of the apartments in your block or according to the size of your flat.

  • If somehow they realise the collection of money was less than what was spent, they will increase the cost in upcoming years for whatever factors. 

It would help if you smartly protect yourself from the Service Charge issues in a leasehold property. That is why the following are some tips through which you wil be able to deal with the freeholder easily.

1. You hold the right to know everything about the leasehold property service charges. 

Every time the landlord demands a service charge, he is obliged to give you a statement of your rights. So beware- dont assume that all contracts are the same. 

2. Get a piece of information prior itself about how much things are likely to cost 

Some agents give an estimate of the average service charge bill. Demand a list of any planned major work and ask the landlord to provide an estimated service charge for the upcoming years. Keep the last 3 years' details of service charges handy before reading the next 5 years of service charges. 

3. Befriend your maintenance person 

Imagine you are living in a large building; all you can do is try to become friends with the person who does the maintenance work. Then, whenever you encounter some minor issues like unclogging toilets, draining air from the radiator, switching bulbs and tube lights, you can directly ask for their help. In this manner, you will eliminate the process of contacting the landlord entirely. 

4. Communicate in case of problems 

Communication is key. Speak to your landlord whenever you encounter any issue and settle things face to face. If other leaseholders face the issue you are facing, contact them and go together and discuss. You can also consult the building's tenant's association. 

Hopefully, these tips will help you tackle Service Charge issues in leasehold property and other issues you face from time to time. Remember that with leasehold property, the landlord is assigned to take care of common areas of the property. Therefore, always ensure what you are paying in advance and what you will be liable to pay in the future. 

Also read: Know the Difference Between Freehold VS Leasehold Property


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