What Is a Service Charge in Apartments? Meaning and Example

If you rent or own a flat in Dhaka, Chattogram or any modern apartment building in Bangladesh, you have almost certainly seen the words "service charge" on a bill or in a rental agreement. It is also one of the most common sources of confusion and argument between tenants, landlords and building committees. A service charge in apartments is the regular amount each flat pays towards the cost of running and maintaining the shared parts of the building: the guards, caretaker, cleaning, lift, generator, common electricity, water pump and so on.

This glossary entry explains the meaning of service charge in plain English, what it usually covers, how it is calculated, who pays it (owner or tenant), how it differs from rent and maintenance fund, a worked example with numbers, and practical tips to keep it fair and transparent. Whether you are a landlord, a flat owner, a member of an owners' association or a tenant, it will help you understand exactly what you are paying for.

Service Charge: A Simple Definition

Service charge is a recurring (usually monthly) payment made by each unit in a building to cover the shared operating costs of common services and common areas.

Think of it as each flat's share of the building's "household expenses". The flat's own electricity, gas and internet are separate, but anything that serves everyone together is paid from the pooled service charge.

In Bangladesh it may also be called maintenance charge, common charge, building charge or, in markets and shopping centres, service and maintenance charge. For commercial buildings the concept is similar but usually larger in scale; see service charge in commercial buildings for that context.

What Does a Service Charge Usually Cover?

Every building is different, but these are the most common items included in an apartment service charge in Bangladesh:

What is usually NOT covered

• Rent itself
• Each flat's own electricity meter bill
• Each flat's own gas bill or LPG cylinder
• Repairs inside an individual flat
• Major capital works (like full exterior painting or lift replacement), which are often funded separately through a reserve or special collection
• Holding tax, which is the owner's responsibility (confirm the arrangement for your building)

Service Charge vs Rent vs Maintenance Fund

In practice many buildings blur these lines, for example by collecting one monthly amount that includes a small reserve. That is acceptable as long as it is clearly explained and recorded.

How Is the Service Charge Calculated?

There are three common methods in Bangladeshi buildings:

1. Equal share per flat

The total monthly cost is divided equally among all flats. It is simple and common in buildings where flats are of similar size.

2. Based on floor area (per square foot)

Each flat pays according to its size, for example a fixed rate per square foot. This is fairer when flat sizes differ significantly, such as a building with both 1,100 and 1,800 square foot flats.

3. Fixed amount set by the committee or landlord

A fixed monthly amount per flat is set based on a budget and reviewed once a year. Any surplus or shortfall is adjusted in the next budget.

Some buildings add special rules, for example a lower charge for ground-floor flats that do not use the lift, or a higher charge for commercial units. Any rule is fine as long as it is agreed and applied consistently.

Worked Example: Calculating Service Charge

For example (illustrative)

Consider a 10-storey building in Dhanmondi with 18 flats: 9 flats of 1,200 square feet and 9 flats of 1,600 square feet, totalling (9 x 1,200) + (9 x 1,600) = 10,800 + 14,400 = 25,200 square feet. Suppose the monthly costs (illustrative only) are:

• Three guards at Tk 14,000 each: Tk 42,000
• Caretaker: Tk 16,000
• Two cleaners at Tk 9,000 each: Tk 18,000
• Common electricity (lift, pump, lights): Tk 22,000
• Generator fuel and service (averaged): Tk 15,000
• Lift maintenance contract (averaged monthly): Tk 6,000
• Miscellaneous repairs and supplies: Tk 7,000
• Monthly reserve contribution: Tk 10,000

Total monthly cost: 42,000 + 16,000 + 18,000 + 22,000 + 15,000 + 6,000 + 7,000 + 10,000 = Tk 1,36,000.

Method 1 (equal share): 1,36,000 / 18 = Tk 7,556 per flat (rounded).

Method 2 (per square foot): 1,36,000 / 25,200 = about Tk 5.40 per square foot. A 1,200 sq ft flat pays 1,200 x 5.40 = Tk 6,480; a 1,600 sq ft flat pays 1,600 x 5.40 = Tk 8,640. Check: (9 x 6,480) + (9 x 8,640) = 58,320 + 77,760 = Tk 1,36,080, which covers the budget with a small rounding surplus.

The owners of larger flats pay more under Method 2, which many consider fairer because larger households tend to use more common services. The right method is whatever the owners agree and write down.

Who Pays the Service Charge: Owner or Tenant?

This is the most common question. The answer depends on your agreement.

• Between owner and building committee: the flat owner is generally responsible to the owners' association or building management for paying the service charge.
• Between owner and tenant: in Bangladesh it is very common for landlords to pass the service charge on to the tenant, either as a separate line on the monthly bill or included in the rent. It must be clearly stated in the rental agreement.

If the rent is quoted as "Tk 25,000 plus service charge", ask for the exact service charge amount and what it covers before agreeing. If it is "Tk 28,000 including service charge", the landlord bears any future increase unless the agreement says otherwise. Tenants may find our list of questions to ask a landlord before renting useful.

Why Service Charges Change

Service charges are not fixed forever. Common reasons for increases include:

• Salary increases for guards, caretakers and cleaners
• Higher electricity tariffs or fuel prices for the generator
• Older lifts and pumps needing more repairs
• New services, such as CCTV or intercom systems
• Rebuilding a depleted reserve after a major repair

Good practice is to review the budget once a year, share the reasons for any change in writing, and give at least a month's notice before a new amount applies. For tenants, the rental agreement should say whether the landlord can pass on increases.

Transparency: How to Avoid Disputes

Most service charge disputes come from a lack of information rather than the amount itself. Building committees and landlords can prevent most of them by:

1. Publishing a simple annual budget showing expected costs by category.
2. Sharing a monthly or quarterly statement of income collected and expenses paid.
3. Keeping receipts for every expense and making them available to owners on request.
4. Using a separate bank account for service charge funds, not a personal account.
5. Issuing receipts for every payment received.
6. Following up dues fairly, with the same process for everyone.

Tip: A one-page monthly summary on the notice board, showing "collected", "spent" and "balance", answers most questions before anyone asks them.

What Happens If Someone Does Not Pay?

Unpaid service charges mean the building cannot pay guards or fuel on time, and other residents effectively subsidise the defaulter. Common steps include polite reminders, written notices, discussion at the owners' association meeting and, as a last resort, legal advice. Cutting off a flat's essential services such as water is not a good idea and may cause legal problems; take advice before any drastic step. If a tenant is responsible under the rental agreement but does not pay, the landlord usually remains responsible to the building and should recover it from the tenant under their agreement.

How Tenants Can Check Whether a Service Charge Is Reasonable

Tenants cannot see the building's accounts, but they can still judge whether a service charge makes sense. Before signing, or when an increase is announced, consider:

• What you actually get: count the guards, check whether the lift and generator work reliably, and see whether stairs and corridors are clean. A higher charge for a well-run building can be better value than a low charge for a neglected one.
• Generator coverage: a generator that powers lights and fans in each flat costs far more to run than one that only runs the lift and pump.
• Building size: smaller buildings often have higher per-flat charges because fixed costs such as guards are shared among fewer flats.
• Written breakdown: politely ask the landlord for a rough breakdown. Most reasonable landlords can explain the main items.
• Comparable buildings: ask friends or colleagues in similar buildings nearby what they pay and what is included.

If an increase seems very large, ask for the reason in writing. A clear explanation, such as a new salary scale for guards or a rise in fuel prices, usually settles the matter.

Service Charge for Probashi and Absentee Owners

Many flats in Bangladeshi cities are owned by people living abroad or in another city. Service charge is often where problems start for absentee owners: the tenant was supposed to pay it, did not, and the owners' association now asks the owner for several months of arrears. To avoid this:

1. State clearly in the rental agreement whether the tenant pays the service charge to the landlord or directly to the building committee.
2. Ask the committee to send you, or your local representative, a copy of each month's statement or payment confirmation.
3. If the tenant pays you, pay the committee promptly and keep the receipts.
4. Appoint a trusted local contact who can attend association meetings or at least receive notices on your behalf.
5. Review dues every month rather than discovering them at the end of a tenancy.

Common Mistakes With Service Charges

• Not writing it in the rental agreement. Leads to "I thought it was included" arguments.
• Mixing service charge with rent in one unexplained number. Makes increases hard to justify.
• No reserve fund. Then a lift or pump breakdown causes a sudden large special collection.
• Cash-only collection without receipts. Invites suspicion and makes records unreliable.
• Increasing without explanation. Even a fair increase feels unfair when it arrives without reasons.
• Treating defaulters differently. Inconsistent follow-up damages trust among owners.

Service Charge Checklist

• Is the amount per flat clearly stated and in writing?
• Is the calculation method (equal, per square foot, fixed) agreed?
• Is there a list of what is and is not covered?
• Is there a separate bank account and regular statement?
• Does the rental agreement say whether the tenant pays it?
• Is there a reserve fund for major repairs?
• Is there a fair, written process for late payments?

Final Thoughts

A service charge is simply each flat's share of running the building together. When it is calculated fairly, written into agreements and reported transparently, it keeps guards paid, lifts running and stairs clean without drama. When it is vague, it becomes a monthly argument.

Landlords who bill tenants for rent, service charge and electricity every month can save time by generating these as one invoice. Bariwala ERP creates monthly invoices in bulk with separate lines for rent, service charge and sub-meter electricity, records expenses for the building, and tracks dues, which makes the whole service charge cycle easier to explain to tenants and owners alike. For the Bangla version of this term, see our service charge glossary entry.