How do you read your year-end service charge accounts?

How are the accounts different from the budget?

The budget is the plan, made before the year began: what the manager expected to spend. What you pay in advance during the year is usually your share of it.

The accounts are the record, made after the year ended: what was actually spent, and what was collected. They can only be drawn up once the year is over, so they often arrive well into the next one.

The difference between the two is settled once the accounts are ready — usually by a further demand if spending ran over the plan, or a credit if it ran under. How it is settled depends on your lease. What is in your service charge sets the demand, the budget and the accounts side by side.

Which parts of the accounts should you read?

The income and expenditure account. Every spending line for the year, with the total spent and the total charged to leaseholders. This is the heart of the document.

The comparison columns. Many accounts print the budget, or last year's figures, beside this year's. If yours do not, put the documents side by side yourself.

The notes. Where the accounts explain a large or unusual item, or a change from last year, it is usually in the notes. A line that moved with no note is a line to ask about.

The balance sheet. What was held at the end of the year: cash, money still owed by leaseholders, money still owed to suppliers, and the reserve fund.

The accountant's report, if there is one. It says what kind of check was made, and the kinds differ. An audit gives an opinion on the figures. A report of factual findings lists what the accountant checked and what they found, without an opinion. A compilation means the accountant put the accounts together from the records they were given, without verifying them. Your lease may say which kind your accounts need.

How do you read them against the budget?

Go line by line through the same year. Where spending ran above the plan, look for a note that says why. A line well above its budget is not automatically wrong — repairs are hard to predict — but it is the thing to ask about, and you only see it with both documents open.

A line in the accounts that was not in the budget at all is a question in itself.

Look at the management fee in particular. It is usually agreed in advance — often a set sum for each home, sometimes a percentage of what was spent — so where it came in above its budget, ask how it was worked out. What the management fee covers separates it from what contractors are paid.

Why might a line not match the invoices paid in the year?

Accounts are usually drawn up on what belongs to the year rather than what was paid in it. A bill for December's cleaning paid in January still counts in the year that included December, and a bill paid in advance for next year does not count in this one. So a line can differ from the invoices paid during the year; the notes or the balance sheet show the adjustments, often as accruals and prepayments.

How do you read them against last year?

Set this year's accounts beside last year's, line by line. A total that moved tells you little; what matters is which lines moved, by how much, and whether the categories are even the same as last year. Why did your service charge go up? sets out how to find the real change.

What happens to a surplus or a shortfall?

The accounts show whether more was collected over the year than was spent, or less. A shortfall usually becomes a further demand. A surplus may be credited to leaseholders, set against next year's charges or moved into the reserve fund, depending on your lease. The accounts or their notes may say which was done; if they do not, ask.

Your own part of either is your share of the whole, set by your lease. How the building's total becomes your share shows how to check it.

What does the reserve fund section show?

The reserve fund is money set aside for large future works, such as a roof or a lift. Look for three amounts: what was paid in during the year, what was spent from it, and what was left at the end. If something was spent from the reserve, the accounts may say on what; if they do not, ask.

If you are asked for a large one-off payment while the reserve holds money, that is worth a question of its own.

Which questions get useful answers?

Put them in writing, one per point, each naming the page and the line it is about. For example:

Which invoices make up the largest line, and may I see them?

Why did this line come in above its budget?

How was the management fee worked out?

What happened to last year's surplus, or how was last year's shortfall charged?

What was spent from the reserve fund, and on what?

If a question goes unanswered, what to do when your managing agent doesn't reply takes it from there.

Can you ask to see the invoices?

In England and Wales, leaseholders have rights set out in statute: to see the invoices and receipts behind the service charge, and to ask an independent body to decide whether a charge was reasonable.

This page does not explain how to use them, because that depends on your lease and is a question for someone who has read it. But it changes what a question is. You are not asking a favour.

Should you stop paying while you query a charge?

What does Synclair do?

Synclair explains each line of your service charge that your documents show, and compares it with published figures where they exist. Add earlier years and it shows how each line has changed. Where your documents show it, Synclair can also point out a management fee above its budget, or more collected than was spent. Anything you report about the building stays on record with its date. When something is worth raising, Synclair can draft a letter for you to check and send in your own name, and you can then record the reply and the outcome.

Only owners pay for Synclair: never managers, insurers or suppliers.

One document is enough to start. It is free for three months, and the three months begin when your first analysis is ready — not when you sign up.

One document is enough to start: a budget, a charge demand, a statement or year-end accounts.