Think of service charge when buying a house

It is every family’s dream to own a house one day, hence the toil of lifetime savings. Owning that house with high speed lifts, uninterrupted borehole water supply, heated swimming pool, fully equipped gym and a backup generator for all areas. Name it. I call it the nebulous, fanatical concept of an amateur buyer. But do you pause to think of what it takes to maintain these fantasies?

The Royal Institution of Chartered Surveyors (RICS) Code of Practice document service charges quite simply: “Service charges enable an owner/management to recover costs of servicing and operating a property from the occupiers, as well as any others who benefit from and use the services and facilities provided.” It is a charge made to recover costs incurred in providing services to premises.

It is no great exaggeration that service charges are one of the intricately ‘hidden costs’ of any property purchase. As many developers, to the cheer by home buyers, incessantly continue to install a whole host of extras in their new developments, service costs are rising and must be an important consideration when buying property.

Take a tour around city estates, you will not miss the famous list of shame of those defaulting on service charge. I bet you will encounter houses with disconnected water supply or standoff at entrances when guards refuse to open gates for residents who have not paid service charge. This is one of the main areas for dispute in most residences.

Still, most buyers pay little consideration to what awaits them on the other end as monthly service charge when buying a house. Instead, they focus on the house selling price and are further swayed by the amenities.

Without incisive attention to what it will take to maintain the amenities, they wonder in the Disneyland of ecstatic living. Inadvertently, many end up with monthly service charge nearing or equal to their previous house rent. The shackles of monthly rents they were running away from is baptised as service charge.

Take time

In one recent residential development we managed, buyers were happy that the developer was providing a back-up generator not only for common services as is the norm but for all residential units as well. In view of our frequent power surges it makes sense, right?

But they had not thought about the cost of running a 350kva generator for a day, with only half the residents having moved in and majority of them at work during the power outage.

Trouble started during the first month of occupancy over who should shoulder such costs. It was akin to running such a generator for a day to serve four families out the thirty yet everyone had to contribute equally.

That was just one service amenity, this development had a heated pool, steam and sauna, fully equipped gym, high speed lifts, landscaped garden and borehole, all to be charged for maintenance. One year down, I am aware of three families that had to relocate due to cost of service charge. They just did not foresee it.

It is imperative to know how much you will be paying as monthly service charge before settling on a house to buy. This is something you must, by all means, as a buyer, find out. Sometimes you may be lucky to have it indicated on the sale agreement.

Take time to read and comprehend on whether the service cost indicated will make sense in view of your monthly finances. I am aware of rooted malpractices of indicating a lower service charge in the sale agreement to dupe gullible buyers.

Do not fall for anything. Remember most developers will fully exit after handing over the project. Uncover any anchors of malice that could be added to what you will ultimately pay as service charge. This has to be your initiative, not the developer’s.

- The writer is chair of Association of Construction Managers of Kenya. [email protected]