The design of a multi-unit residential scheme and the way in which it is constructed, delivered and marketed for sale must be considered by developers from the outset in order to reduce void service charges.
The building itself should be self contained, preferably with common services such as landlord utilities on a per building basis. We’ve seen cases where a developer has been stung by void costs across the whole of a four-block residential development despite only the first phase of one block being built.This was because as phase one shared a communal central heating plant system, the service charge for maintenance and consumption charges commenced in line with completion of the first phase.
Another example was a site-wide gym that became available for first phase users but the developer had to pick up void costs for the remaining units under construction.
It’s not always possible to avoid phased handovers and developers should be mindful of this and plan to come to an arrangement with the principal contractor to cover or share charges while phases remain under construction. If services cannot operate on a block-by-block basis developers could consider limiting the availability of the service until final completion.
Another way to reduce void service charges is methodically phasing construction. Developers should aim to complete blocks as a whole, rather than on a floor-by-floor basis, and developments with many blocks should come online in short succession.This can reduce the service charge void that exists on areas that form part of an estate but are not completed and/or occupied by residents.
This would have helped one development we know of where the first phase of a two-year build programme was situated in the middle of the estate, creating more maintenance and temporary access requirements than if it had been positioned on a corner of the site.
In these situations a good relationship with the principal contractor and sub-contractors is essential to ensure that residents are kept up to date with the construction programme and any changes that may affect them such as access, fire routes and assistance with moving in.
The sales strategy can also help reduce void service charges. Ideally, entire blocks should be sold in succession, rather than one floor being filled in one block then another elsewhere, and the focus should be on the units that become available first otherwise momentum can be lost.
Of course, if there isn’t reasonableness in the service charges and the apportionment then the developer can find themselves in First Tier Tribunal with a dispute which can be costly and time consuming. Getting the right parts paid for by the right people at the right percentage is therefore essential.
Void service charges are not uncommon in residential block management but developers can significantly reduce their exposure to any voids by addressing these factors at the start. Early involvement of management advice in the planning, design and delivery stages of a development is key.