Every month, apartment residents pay for a swimming pool they rarely use, a generator that needs servicing whether or not there is an outage, and guards at every entrance. Those costs reach them through service charges, and some homeowners say they are paying to sustain a lifestyle they do not fully use.
‘I pay close to Sh80,00 a month in service charges, and the figure keeps soaring,’ said a resident who owns a three-bedroom apartment in the South Coast.
This frustration has prompted homeowners to wonder whether the charges should be capped.
However, experts argue that a blanket limit would not work, and that homeowners have more power over the bill than they realise.
‘Service charge is a direct function of the services that are provided. When choosing a house, one needs to consider what kind of amenities and services are provided, because then you’ll end up paying for them,’ says Johnson Denge, a real estate expert.
Mr Denge says most modern residential developments have advanced amenities that come with operating and maintenance costs.
‘While we want a lifestyle where we have features like a backup generator, a modern children’s play area, security around the clock, corridors lit up throughout, and lifts, which make the lifestyle better, those services need to be paid for in terms of maintenance, daily running and fuel, for instance, for generators, which translates to the amount you will pay.’
Some costs are less visible. A development with separate entry and exit gates needs security personnel at both points. Electric fencing consumes power and must stay operational, while swimming pools and clubhouses require regular upkeep.
These differences complicate proposals to impose a blanket ceiling on service charges. A property with a generator, lifts, a swimming pool and extensive security infrastructure will have a different operating budget from one with fewer shared facilities.
Mr Denge adds that the cost of providing these services rises over time, regardless of the amount residents were initially expected to pay.
‘For instance, the security bill will always go up, either through taxation, inflation or through the revision of minimum wage,’ he says.
He estimates that a good service charge should generally amount to about 10 to 15 percent of a property’s rental value, though he stresses this is a benchmark rather than a universal formula.
A higher property price does not automatically mean a higher service charge either.
‘It just depends on the number of services that are provided,’ he says.
Higher-priced properties often come with more services and amenities, which can push up operating costs.
Two properties may have similar purchase prices or sizes but different service charges because one offers more facilities, employs more staff or has more expensive systems to maintain.
Rather than imposing a uniform ceiling without considering the facilities offered, Mr Denge argues that developers and property managers should look for ways to reduce the cost of running residential developments.
‘I would say it should be capped innovatively,’ he says.
One approach is to invest in systems that cut recurring expenses. ‘Developers could, for instance, use solar power to light common areas instead of relying entirely on mains electricity, which will lower the running costs over time,’ he says.
The design of shared facilities also matters. Instead of providing every house with its own swimming pool, he says, a development could have a common pool serving several residents. Automated entry and exit systems could also reduce the number of security personnel needed at access points, depending on the property’s security needs.
‘Property managers can also automate requests for services so that they do not have to employ many caretakers and are able to serve residents electronically or through an automated system.’
Service charges are also notably high at upmarket coastal properties. Mr Denge attributes this to the use of many of these developments for hospitality, which requires a wider range of services than a conventional residential property.
‘Most properties along the coast are used for hospitality. And you find that they are functionally, or at least on a service basis, providing extra services,’ he says.
Developers and property managers may argue that charges must reflect operating costs, but property lawyer Prudence Mugambi says homeowners have a role in ensuring that the amounts collected are justified and properly accounted for.
Under Section 20 of the Sectional Properties Act, she says, the corporation is responsible for determining the contributions required to manage and administer common property. The corporation is made up of the apartment owners, which gives them a say in decisions affecting their development’s running costs.
Ms Mugambi says residents should ask for a detailed breakdown of charges, the approved budget, the basis used to apportion costs among units, and an account of how the money collected is spent.
Section 36 of the Act also provides a mechanism through which owners and other specified parties can request relevant information, including budgets, financial statements and by-laws.
However, she says, homeowners must take part in management meetings and vote for the people who run the corporation.
‘You’ll find that most property owners might complain of the service charge, but they never show up for the corporation meeting,’ she says.
Because the corporation is made up of the owners themselves, Ms Mugambi says disputes should begin there, where residents can seek explanations and challenge decisions through the available governance mechanisms.
This does not undercut legal remedies where decisions have been made improperly, depending on the circumstances and the applicable law.
She does not consider a blanket cap practical, given the differences in facilities, security arrangements and operating costs across developments.
‘An apartment in Westlands will not be the same as an apartment in Kitengela. The facilities, the security, the type of security they want to hire, and the operating costs will vary from apartment to apartment,’ she says.
Mr Denge says developers and property managers should plan for major repairs and unexpected events through a sinking fund. Under this arrangement, part of the service charge is set aside for future capital expenditure rather than consumed by routine operations.
‘One of the good service charge models should also have what we call a sinking fund, where you set aside part of it, probably 2.5 to 5 per cent of the service charge being paid, for capital developments in the future,’ he says.
The money should be ring-fenced for its intended purpose and not be available for management to reinvest elsewhere, he adds.
Insurance is another consideration in managing long-term costs. ‘A good service charge proposal should also have some level of insurance,’ he says, noting that incidents such as fires or the failure of major equipment can create substantial bills when the affected systems are not insured.
‘Water is a further cost driver, particularly in developments where an inadequate public supply forces owners to rely on boreholes,’ Mr Denge says.