Service charge estimate and spend not adding up?

One of my queries is over the reserve fund; if this is depleted then the agent may be (rightly) trying to build it up, there may be some significant expenditure on the horizon that needs funding.

The agent should be providing you with details of income and expenditure.

The benefit of building up and dipping into a large reserve fund is that it spreads the cost o repairs over many years and across past, present and future owners.

Without it, say your block needs a new roof this year, the guy who sold his flat last year pays nothing towards it but his buyer pays the whole amount even though he was not in situ when the old roof was deteriorating.
And the guy who sells up next year pays all his share even though he may only benefit from the new roof for a few months but his buyer pays nothing towards it.

So long as the reserve fund is capped and not allowed to grow and grow.

Does the spend include their own management fee?

If so, presumably they are allowing contingency, although 20% seems quite high.

Do they not return the surplus at the end of the period once the accounts have been audited? There might be something to that effect stated in your lease.

What does your lease say about service charges?
Is there an obligation by the management company to provide accounts and annual summaries of actual costs to be either audited by the man. Co. Or certified by the Man. Agent? Auditing or MA certification must be by auditors who are independent of either company.
Directors of Man Co. or the MA must provide a report to leaseholders accounting for the £12,000 and also justification for keeping service charge at same level. It is good to let them know you are keeping an eye on what they are doing with your money and whether what they are spending the money on is what your lease says the money is to be spent on.

TBH, £12k in reserve for a building with a budget of £55k spend is quite reasonable, you would be complaining if something unforeseen needed fixed and you had to wait a year for money to be available.

Seems like they’ve just cut & pasted last year’s estimates? It isn’t an exact science and some are better at it than others. Also, what with current price inflation, I would rather over estimate than under; allowing for reconciliation with actuals to take care of the difference.

So what have they done with the 12K – returned it to you, used it to reduce your current years contribution, or something else?

Generally since Man. Companies are dormant for tax purposes so in order to ensure the service charge protected in a s 42 client/trust account in name of man. Co and is not repeat NOT company money otherwise would not be tax exempt.
So in order to have no profit a budget for the following year produced passed by the shareholders based on audited/certified accounts.