Question: I am buying a leasehold property and my Solicitor has asked the seller for a retention for service charge. I am not sure why. Please
help.
Answer: This will relate to any excess service charge there may be once the accounts for that financial year have been finalised. Basically, at the start of a financial year the Management Company will draw up a service charge budget for what they believe they will spend during that year. The total of this budget is then divided between the properties that contribute towards the service charge. This amount will be your annual service charge. At the end of the year, if the Management Company have not calculated correctly and they have overspent, the amount of excess is again divided between the properties that contribute and then requested from each owner. The retention will be used for your seller’s contribution towards any excess service charge for the period prior to your ownership.