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Rental portfolio with Flats

Are block management charges, if excessive allowable ?

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Client has a number of flats in rental portfilio

On one of the flats, the block management service charge tendered by the freeholder is almost equal to the rent. this is of course unusual and, i suspect includes some kind of capital expenditure, such as roof or building fabric repairs. (not seen the service charge buget so at this stage, pure speculation).

Question is ...

if the service charge includes costs which, appear to be capital in nature, are the management charges allowable as a rental income deduction ?


Replies (3)

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By bernard michael
05th Oct 2017 16:03

What does the lease say about the charges and how they are calculated ?.
Has the excess started this year or has it been excessive for several years ?

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By floggy
05th Oct 2017 16:20

No idea,
I know from preparing block accounts, there can be items which, are deemed to be capital in nature. I havent seen the rental demands or budget for the year.
Its more if there is a new roof, Lift, windows, landscaping of gardens etc.
If they are capital and not repairs, do theu need to be disallowed

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By thomas34
06th Oct 2017 09:10

Don't really agree with the logic of disallowing some or all of the management charges. The contract will be with either the freeholder direct or their appointed management company. Either way the leaseholder is paying for a revenue item i.e. sorting out repairs and maintenance to the common areas, replacing windows, making the roof leak-proof etc.

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