A service charge is a payment made by a leaseholder/shared owner or tenant towards the costs of providing services such as:
- Grounds maintenance
- Building insurance
- Service contracts for lifts and door entry systems for example
- Management costs
- Communal repairs (leaseholders only)
These charges will vary according to the services you receive and are raised in line with the conditions of your tenancy or the requirements of your lease.
How do we calculate service charges?
Your service charges are set every year to cover the cost of services that Housing Solutions provides to the common parts of your block or estate.
Leaseholders/shared owners and the majority of our tenants pay a variable service charge. This means that each year we will give you an estimate of what we think the cost will be for providing these services.
At the beginning of each year we will send you estimated service charges which are based on the amount spent in the previous year, including inflation.
After the close of accounts on 31 March each year, the actual service charges are calculated by collating all the invoices relating to what was actually spent on the block/estate during that year.
How has my contribution to the service charge been calculated?
The portion that you contribute to the service charges has been calculated according to the terms of your lease or conditions of tenancy. Charges are typically apportioned based on either the relative floor area of your property, split evenly across all properties or by rateable value.
When do Housing Solutions send the service charge bills?
It is a legal requirement that we provide you with at least 30 days’ notice of the service charge bill. For the estimated service charges, you will receive notification by the end of February each year for the charges for the year commencing 1 April.
We will send you a statement six months (by the end of September) after the end of the financial year letting you know how much we have actually spent on services provided to you.
How are variations between the estimates and actual service charges managed?
The actual service charge statement will show you how the actual expenditure compares to that year’s estimate. If the amount is higher than the estimate (an underpayment), we will ask you to pay the difference. If it is lower (an over payment) we will refund you.
Housing Solutions is responsible for the maintenance and repair of the structure and fabric of the building and any expenditure will be reflected in the service charge.
- Managing agents: some of our blocks are managed by a third party property company (managing agent) and we add your proportion of their charges for managing the block and estate in your service charges. They usually invoice us to a similar timetable to our estimated and actual service charge timetable.
- Sinking fund: your lease may allow Housing Solutions to collect sums in advance from you to create a reserve or “sinking fund” by way of your service charge. The purpose of such funds is to build up a sum of money to cover the cost of planned works such as external decorations, structural repairs or lift replacement. The main aim of collecting a sinking fund is to avoid leaseholders having to pay large one off bills.
- Section 20 consultation: this is the process whereby Housing Solutions as your landlord will consult with its leaseholders about planned or cyclical works that it intends to carry out to the block in which you live. Landlords have a legal obligation to consult with leaseholders prior to starting the works. Housing Solutions is required to follow this process when any major works are planned that we estimate will cost you over £250 or it is intending to enter into a long term service agreement that will cost you more than £100 every year.
- Building insurance: Housing Solutions has a policy that covers all its stock irrespective of the tenure. Building insurance covers the cost of repairing damage to the structure of the property and will cover loss or damage caused by such incidents as fire and flood. There is always an excess and the amount is dependent upon the type of claim being made. If you want to make a claim against this policy you should first of all read the Insurance Summary that can be found here
How do I pay my service charges?
If you are a leaseholder: you are invoiced for the first 6 months of the estimated service charge in April and the second 6 months in September. You are legally required to pay these invoices within 30 days of the invoice being received.
If you are a shared owner: your service charge is spread over the next 12 months’ period.
If you are a tenant: your service charge is spread over the 52 weeks in the year.
Our preferred method of payment is by direct debit. Please contact us if you wish to set up this way of paying.
If you are experiencing difficulties in paying, please contact us without delay so that we can support and advise you so that you keep your arrears to a minimum and set up a repayment plan where necessary.
If you think you are paying an unreasonable amount for your service charge you have the right to challenge this. In the first instance please contact Anil Kaushal, Service Charge Accountant via email firstname.lastname@example.org to discuss your concerns.
For further advice and information about service charges visit https://www.lease-advice.org/advice-guide/service-charges-other-issues/