Service charges explained
A service charge is a payment made by a customer towards the cost of communal services and repairs for the block/site where their property is situated. You can find a glossary here with key service charge terminology, and a summary of customers’ rights and obligations for service charges here.
There are two key documents that we’ll send you each year:
Annual statement of service charges
Towards the end of August/beginning of September, customers paying Service Charges will receive an Annual Statement of Service Charges for their property.
Homeowners (shared owners and leaseholders) will also receive an audit certificate.
Rent increase letters
At the end of February/beginning of March all customers will receive a rent increase letter. This includes a breakdown of the estimated cost of your service charges for the coming year.
During this time the Service Charge team is usually dealing with lots of customer queries, so if you have a question please firstly refer to the FAQ below.
Frequently asked questions:
We are dedicated to offering our customers the best possible service. As a result, some of our properties have associated services that you will benefit from, meaning you’re liable to contribute towards the costs.
To enable us to charge these contributions back to you, we must ensure that service charges are reasonable and that the services provided are carried out to a reasonable standard – you will only be charged a service charge if your home benefits from the service. If you are required to pay a service charge, your tenancy agreement or lease will summarise this and we will notify you of any changes via the annual cycle, which you can find at the top of this page.
It is important to keep in mind that service charges differ from estate to estate, depending on the specific services we provide there. There may also be properties that pay different amounts withing the same estate due to the individual services provided. For example, a customer living in a house may only pay for grounds maintenance and the upkeep and inspection of a car park, whereas a customer living in a flat may pay for communal services (cleaning, window cleaning, electric supply and upkeep of door entry system) as well as grounds maintenance and the upkeep and inspection of a car park.
You can find more information about all of the service charge headings and what elements they cover here. This page also indicates which tenancy type each of the charges will be recovered by.
When thinking about the elements, some of these items are specific to the location; property, communal area, block or site.
The amount of your service charges depends on where you live, the actual cost of delivering the different services that you receive and how many properties share the communal areas of your estate, block or scheme.
Each year we assess how much we expect to spend on providing the services to your property. This is based on an estimate of the costs to be charged to us by our contractors. This is because we don’t know all the precise costs in advance for the year.
Our estimate will include inflation and, where possible, will include any one-off charges in the year. Examples of these could be services such as tree pruning or deep cleaning.
We regularly review the costs of our services. We make sure that they are providing value for money and make sure that your charges remain as accurate as possible.
We compare our cost estimates to how much the services actually cost by using the invoices sent to us by our contractors. We then use this information to provide our best estimate of your service charges for next year.
Service charges are calculated based on the amount it costs us to provide the services relevant to your property.
These costs may increase due to several reasons such as inflation rate increases, or additional maintenance carried out to your property etc.
Any change of circumstance for you, or anyone else in your household, must be reported (to your local authority Housing Benefit team) within one month of notification by us. We will provide your local authority with details of rent increases upon issue of the annual rent increase letter, but you must ensure your benefit payment is updated.
Your claim might be stopped or reduced if you do not report a change of circumstances.
It is your responsibility to make sure that the Department for Work and Pensions (DWP) is aware of any change in your service charges to enable them to adjust your benefit accordingly. You need to update your online account with your new rent and service charges within the first 14 days of the new financial year beginning 1 April.
To do this, log in to your UC online account and in ‘where you live and what it costs’ input the new rent figures given to you in your letter. Then check your journal to confirm that it shows that you have done this.
If you do not do this, you risk receiving an incorrect payment and falling behind on your rent.
Sometimes charges are shared equally between all owners, and at other times it’s dependent on the size of the property, but this is always set out within the terms of the lease. For example, your neighbour may own a parking space which requires maintenance and you don’t have access to parking.
The important thing to remember is that the lease determines how the costs are divided and this does not always take into account who, in any particular site/block, receives which service. It is therefore important to understand this before buying a property with service charges attached rather than assuming that certain costs will not apply.
The total service charge you pay will depend on the type of property and tenancy that you have. We have different property and tenancy types within the same areas, and this will result in differences in service charges where the properties and tenancy types are not identical.
Items such as a lift is usually classed as a communal service. These are payable by all tenants of a building, regardless of whether you receive the benefit. This would also apply to other communal facilities, such as a garden, play equipment etc.
Reserve funds FAQs
A reserve fund, or sinking fund, is the name given to a long-term savings account that homeowners pay through their service charges and customers pay through their rent. This builds up every year and should pay for any major works that are required over a period, such as the painting of communal areas or replacement of a roof or windows.
If a reserve fund is not set up, payment for any required major works are due from a homeowner on completion of the works. This can mean that homeowners will receive large bills that they need to pay. A reserve fund will help to avoid the need for large additional payments when major works are required.
Some examples of work the reserve fund may cover include refurbishments or replacement of roofs, windows and doors in communal areas, lifts and central heating systems.
When the property is built the builder will provide us with a cost list of all component parts of the building (such as windows, roof, lifts, etc) and approximate life expectancy for these. From this information we can work out how much is needed from each property to pay for the works when required.
We won’t just replace a component because it was programmed to do so in that year. A qualified surveyor will inspect the component and report if the works are needed. This will ensure that our customers are not paying for any unnecessary works.
Yes, we must consult with you for any single item of works that will cost more than £250 per property and you will be contacted by letter. If you have any comments, wish to nominate a contractor or have a query with the costs or works you should contact us as soon as you receive your consultation letter. Further information about consultation legislation can be found at The Leasehold Advisory Service (a free Government-funded service that provides independent advice to homeowners).
We try to avoid this where possible, however unexpected works can occur. You will receive formal confirmation of the final amount of works and any likely shortfall. We will pay for the contractor’s bill, deduct the reserve fund and any amount still left will be payable by homeowners. Payment options are available depending on the amount owing.
All contributions are held by us in a separate account for the specific site.
No, you only pay for your contribution due. If you live in a block containing 10 flats, five of which are owned and five tenanted each homeowner will pay a contribution based on the apportionment set out in your lease i.e. if unit-based apportionment you will contribute 1/10th of the cost of the works. The tenants would also pay 1/10th as a contribution, which is paid for through the tenants’ rent.
No, the contributions that you make will remain in the account and be used when works are required. You may wish to make an informal arrangement with your buyer to take this into account when selling your property, but this will have to be completed through your solicitor and does not involve us.
