Block management fees explained: a leaseholder’s guide to the full cost

1. Look beyond the headline management fee

A low annual management fee does not necessarily mean a lower overall cost. Compare the complete written scope and fee schedule, not just the first figure on a proposal.

The managing agent's remuneration is different from the wider service-charge budget. That budget also pays for contractors, utilities, insurance, repairs and other building expenses. A management fee does not normally mean those external costs are included.

Look at management, company administration, accounts, banking, sale and transfer charges, major works and any commissions or connected-business income. Additional services are not automatically unreasonable, but you should understand what they cover, who pays and who approves them.

For leasehold variable service charges, the lease and applicable statutory rules matter. A management agreement alone does not make every charge recoverable from leaseholders. Section 19 of the Landlord and Tenant Act 1985 limits relevant costs to those reasonably incurred and, for services or works, requires a reasonable standard. Estate documents and the legal basis for estate charges may differ; do not assume the same rules apply to every freehold estate.

2. Annual management fees

Routine management commonly includes:

• Preparing budgets and collecting service charges.
• Maintaining financial records and monitoring arrears.
• Arranging routine repairs and coordinating contractors.
• Communicating with residents and directors.
• Coordinating compliance and maintaining management records.

The scope varies between agents. Ask how often the property is inspected, how many meetings are included and what reporting you receive. Clarify handover work, emergency arrangements and whether arrears work beyond routine reminders attracts another fee. Coordinating compliance is not the same as including every specialist assessment or carrying out the directors' responsibilities for them.

Check whether the quote is for the whole development or per flat, whether VAT applies, and how annual increases are agreed. Ask whether the stated scope is realistic for your building's facilities and workload.

If you are comparing a new appointment, our guide to choosing a block managing agent and changing managing agent page explain what else to check.

3. Company secretarial services

These services support the administration of an RTM company, residents' management company or freehold company. Depending on the agreement, they may include confirmation statements, company records and statutory registers where required, director appointments and resignations, registered-office services and routine Companies House administration.

Company administration is distinct from managing the building, preparing accounts and giving legal advice. Companies House filing fees may be separate. Ask which filings are covered, who supplies the information and who checks it before submission.

Directors retain their responsibilities even when an agent or accountant helps. The company must meet its applicable obligations; outsourcing the work does not remove directors' duties. For readers considering an RTM company, see the Right to Manage process.

4. Service-charge accounts and company accounts are different

Service-charge accounts record and report on the building's income, expenditure, contributions and fund balances. They concern the money used to manage the building or estate.

Company statutory accounts concern the RTM, residents' management or freehold company's own accounts and filing obligations. Holding service-charge funds does not mean the service-charge report can simply replace the company's statutory accounts.

Paying for one does not automatically include the other. Preparation, independent accountant's examination, certification and audit are different services, not interchangeable labels. Requirements depend on the company, lease and applicable rules; not every company needs an audit and not every service-charge report has the same certification requirements.

Ask exactly what the quoted accounts fee includes, who prepares and examines the accounts, what report is produced and which accountant's fees are additional. Check whether the company is being treated as dormant and whether that treatment is appropriate, rather than assuming every RTM or residents' management company is dormant.

Our guides explain how to request service-charge information, balancing charges and service-charge disputes.

5. Bank charges: who pays?

Banking costs are another part of the comparison. Depending on the banking arrangements and management agreement, they may be absorbed within the management fee or charged separately to the development.

Distinguish three things:

• The agent's own business banking costs: costs of operating its business accounts. These are not automatically a development's client-account costs.
• Charges directly attributable to the development's designated client account: for example, the bank's agreed account maintenance or transaction charges for that account.
• A separate banking administration fee charged by the agent: remuneration for an agreed service, rather than necessarily a charge levied by the bank.

Do not assume every banking cost can be deducted from service-charge funds. A charge passed to the development should have an appropriate contractual basis, be recoverable under the lease or relevant estate documents, and be clearly disclosed. Where costs are shared between developments, ask for an explanation of the allocation and check that your development is not paying another development's costs.

Directors should ask:

• Are account maintenance and transaction charges included in the management fee?
• Which charges will be paid from the service-charge account?
• Are charges passed through at cost, or is there an additional administration fee?
• How are shared banking costs allocated between developments?
• Who receives interest earned on the client account?

East Valley's confirmed bank charge

At East Valley, the bank charge is £3 per month for each designated client account, equivalent to £36 per year per account. This is paid from the development’s service-charge account and is separate from our management fee.

This is per account, not per flat. If a development holds more than one designated client account, the charge applies to each account; £36 per year does not cover multiple accounts. The treatment must be included in the agreed appointment and checked against the development's lease or relevant estate documents. It is not a statement that this charge is legally recoverable in every development.

East Valley's separate business banking costs are not added to the development's charges described here. No additional transaction fees or banking administration charges are stated in this guide. For the available arrangements, see service-charge bank accounts, and ask for the full banking terms, including interest treatment, in writing.

6. Charges when a flat is sold or transferred

Common transaction charges include:

• LPE1 or management information packs.
• Notices of transfer and charge.
• Deeds of covenant.
• Certificates of compliance.
• Licences or consents where applicable.
• Updated information and additional enquiries.

The seller often arranges and pays for the management information pack. Other charges may fall to the buyer or another party depending on the lease and transaction. Do not assume every charge is payable by the seller or is part of the annual management fee.

Obtain the complete schedule, VAT position and expected turnaround times early. Ask whether updates or further enquiries cost extra and who is entitled to charge for each item.

The contractual basis and reasonableness may need checking. Some charges fall within the administration-charge provisions of Schedule 11 to the Commonhold and Leasehold Reform Act 2002; variable administration charges within that regime are payable only to the extent they are reasonable. Not every transaction charge necessarily falls within that definition. Ask your conveyancer to check the particular charge rather than assuming a quoted fee is either automatically payable or automatically invalid.

7. Major works and additional professional fees

Consultation and major-works administration may attract extra fees, expressed as a fixed amount, hourly rate or percentage. Compare the work included, not just the charging method.

The agent's administration is distinct from surveying, design, engineering, contract administration and legal services. A fee for arranging consultation does not necessarily include writing a technical specification, supervising the works or certifying the contractor's payments.

Agree the scope, charging basis and approval process before work starts. Ask which tasks belong to the agent and which to the specialist, so overlapping descriptions do not result in paying twice for the same task. Clarify how changes, abandoned projects and additional visits are charged.

Section 20 consultation requirements depend on the legal arrangements, the type of expenditure and the circumstances. They do not apply identically to every estate or project. See our Section 20 guide and professional fees explanation for more detail.

8. Commissions, referral payments and mark-ups

Some agents or connected businesses receive income linked to insurance, utilities or contractors. Ask:

• Who receives the payment?
• How much is received and how is it calculated?
• Is it already included in the quoted price?
• What service is provided in return?
• Has the arrangement been disclosed and appropriately authorised?

Hypothetical example - not a claim about a particular agent:

“If the building is charged £2,000 for gardening and the underlying contractor receives £500, directors should understand what the remaining £1,500 represents, who receives it, and whether it was disclosed and authorised.”

That difference alone does not establish wrongdoing: it may include an agreed service, overheads or margin. Undisclosed or unexplained remuneration warrants investigation, including checking the contract, invoices and approval records.

Insurance has specific regulatory requirements. For qualifying multi-occupancy buildings insurance contracts and leaseholders within the FCA's definitions, ICOBS 6A.7 requires prescribed disclosures, including relevant commission and remuneration in cash terms, and sets conditions for responding to leaseholder queries and providing information directly. It is not a rule covering every policy or occupant. Disclosure alone does not establish that every payment is lawful or recoverable through a service charge.

Check the applicable rules and the particular payment, rather than assuming a general answer about commissions settles the position. Our buildings insurance: cover and claims guide explains the FCA scope and disclosure arrangements in more detail.

9. In-house and connected contractors

Using the agent's own maintenance business or a connected contractor creates a potential conflict of interest that should be disclosed and managed. Such an arrangement is not automatically unlawful, and every contractor does not have to be a separate company.

A different company name does not prove independence. Directors should consider:

• Ownership and financial connections.
• Clear specifications and comparable quotations where appropriate.
• Value for money.
• Invoice transparency.
• Who approves appointments and payments.
• How conflicts are recorded and managed.

Where the agent invoices for works itself, ask whether it acts as the contractor, agent or reseller, and what margin or administration charge applies. Request an explanation of the respective responsibilities, including who is responsible for the quality of the work and dealing with defects.

10. A practical comparison checklist

Use the same questions for each proposal and request a written scope and complete fee schedule before appointing an agent.

11. East Valley's approach

East Valley publishes its management scope and fee schedule. Routine maintenance coordination is included in the annual management fee; contractors' charges remain separate building expenses. East Valley does not currently charge VAT.

We do not take commissions or add mark-ups to buildings insurance, communal utilities or contractors' invoices. This includes no undisclosed contractor mark-ups. Optional services and additional charges are identified separately, including company secretarial services, annual service-charge accounts and listed transaction services.

Section 20 consultation administration uses the published fixed works-value bands rather than a percentage, subject to the agreed appointment and scope. This is distinct from wider major-works project management. Specialist surveying, specification, project management, engineering or legal work should be separately clarified; the consultation administration fee is not a promise that all professional services are included.

At East Valley, the bank charge is £3 per month for each designated client account, equivalent to £36 per year per account. This is paid from the development’s service-charge account and is separate from our management fee.

The bank charge is per account, not per flat, and multiple designated accounts each attract their own charge. Recovery from service-charge funds remains subject to the appropriate contractual basis and lease or relevant estate documents, as explained above.

View East Valley's published block management scope and fees. Read the appointment alongside the fee schedule and request written confirmation of the services and charges for your particular development.

If you are considering an appointment, you can request a written proposal or discuss the building's requirements with us.

Sources and further reading

The authoritative sources below support the legal and regulatory explanations. They do not confirm recoverability of a particular development's charges. East Valley's per-account bank charge was confirmed by East Valley for this guide; other management scope and fee details were checked against the published fee schedule.

This guide does not assume the insurance-remuneration reforms in the 2024 Act have commenced. Check the current rules and obtain advice on a particular payment. No commencement date is asserted.