Service charge in Nairobi apartments: what you're really paying for

Service charge is the single most opaque cost in Nairobi apartment ownership. Two identical-looking 2 bed apartments in Kilimani can have monthly service charges of KES 12,000 and KES 38,000 with no explanation that ever reaches the diaspora owner. Both numbers can be reasonable. Both can also hide problems. Here is what service charge actually covers, what to look for in the ledger, and the four red flags that mean the building’s management committee is in trouble.

What service charge actually pays for

Service charge is the apartment-by-apartment contribution to the running of the building’s common areas, services, and reserve fund. A typical Nairobi mid-tier apartment service charge breaks down roughly like this:

• Security: 30 to 40% of total. Manned guards, gate operations, CCTV, alarm response.
• Cleaning and gardens: 10 to 15%. Common area cleaning, lift cleaning, landscaping, drainage clearing.
• Utilities for common areas: 8 to 12%. Common area lighting, water for gardens and pools, generator fuel for backups.
• Maintenance and repairs: 10 to 15%. Lift servicing, water pump servicing, generator servicing, painting, plumbing in common areas.
• Pool and gym (if any): 5 to 10%. Chemicals, equipment servicing, pool attendant.
• Insurance: 3 to 6%. Building cover, public liability, common area assets.
• Management committee or managing agent fee: 5 to 10%. The cost of running the governance and finances of the building itself.
• Reserve fund: 5 to 15%. The pot for major works (lift replacement, pump replacement, structural repairs). The most under-funded line in most Nairobi buildings.

Why two similar buildings differ by 3x

The single biggest driver of service charge variance is amenity load. A building with a swimming pool, rooftop garden, gym, generator, manned reception, and full landscaping will run KES 30,000 to KES 50,000 a month for a 2 bed. A no-frills building with a guard, a basic generator, no pool, and no gym will run KES 8,000 to KES 15,000.

After amenity load, the next biggest factor is whether the management committee runs a real reserve fund or not. Buildings that consistently underfund the reserve have artificially low service charge for years, until the lift fails or the roof leaks. Then residents face a special assessment of KES 100,000 to KES 500,000 per unit, which is the worst-case version of cheap service charge in disguise.

Cheap service charge is sometimes a bargain and sometimes a bill being deferred to the day the lift fails.

How to read a service charge ledger

Every apartment should have an annual service charge budget approved by the AGM and a quarterly or half-yearly statement of actuals. Both documents are the landlord’s right to request, and the landlord should ask for both before buying or before signing on for management.

What to check:

1. Does total income match total expenditure roughly, with reserve contribution as the residual? If income and expenditure match exactly with no reserve contribution, the building is hand-to-mouth.
2. Are arrears (other unit owners not paying) flagged separately? In a well-run building, arrears are listed by unit and chased actively. In a badly-run building, the management committee just charges the paying owners more to cover the gap.
3. Is the reserve fund a real bank balance or an accounting fiction? Ask for the bank statement of the reserve account. A real reserve fund has cash; a paper reserve has only entries in a spreadsheet.
4. Is the management committee or managing agent fee listed separately? Bundling it into “admin” obscures what the governance is actually costing.

Four red flags that mean trouble

1. Service charge unchanged for three or more years

Costs in Nairobi (security, fuel, parts, labour) have risen materially every year for a decade. A management committee that has not raised service charge in three years is either operating an unusually well-run building or, far more commonly, is deferring decisions and burning the reserve.

2. No AGM in the last 18 months

AGMs are the only mechanism by which residents approve budgets and elect the committee. A building without recent AGM minutes is a building without functional governance. Decisions are being made by whoever is loudest, not by majority.

3. Special assessments more than once in two years

Special assessments (one-off levies for major works) are normal and sometimes necessary. Multiple special assessments in quick succession suggest chronic underfunding of the reserve, and you should expect more.

4. Persistent arrears above 15% of billable

If 15% or more of unit owners are not paying their service charge and the committee has not taken legal action, the paying owners are subsidising the non-paying ones. This is often the start of a slow building decline.

How a manager handles service charge for you

Goldstay pays service charge from collected rent each month, on time, and itemises every payment on the monthly statement. Where the management committee proposes a special assessment, we flag it to you, get your approval, and pay from collected rent (or top up if needed). We attend AGMs as your proxy by default, vote in your interest, and minute the outcomes for you.

For new purchases, the service charge ledger and AGM minutes are part of the standard pre-purchase report we run on every property we source. Read more in the piece on why a physical property viewing still matters.