Last updated - 16 July 2018
What are Service Charges?
Service charges are imposed by landlords to recover the costs they incur in providing services to a building. The way in which the service charge is organized is set out in the tenant’s lease or agreement.
The landlord, or, sometimes, a management company that is party to the lease, provides the services, while the leaseholders pay for them. The landlord will generally make no financial contribution for the services, but sometimes has to pay for the services before they can get the money back from the tenant.
Details of what can and cannot be charged by the landlord and the proportion of the charge to be paid by the individual leaseholder will be set out in the lease.
What do Service Charges cover?
Service charges include items such as cleaning, concierges/caretakers, ground maintenance repairs, lifts, pest control, management costs and any other running expenses to the block or estate. Leaseholders also pay their share of building insurance and the maintenance of the building through the service charge (tenants pay these costs within their rent).
Tenants will only be charged if their home benefits from that service.
We aim to:
- deliver value for money on services
- consult about any significant changes to services
- give clear information about how services are managed
We are continuing to improve the way we manage service charges. We hope the improvements have already been noticed. Over the next year or so we will continue to implement improvements at every opportunity.
How are Service Charges calculated?
Service charges are variable, we base them on the actual or estimated cost of the services provided to each development. This means they vary from year to year.
Every February we send all our residents who pay a service charge an estimate for the forthcoming financial year which starts on the 1st of April. This is our forecast of how much we think it will cost us to provide the services during the year from April to March.
This is based on looking at spending in previous years, estimating the increase due to inflation and adding in any increases or decreases in spending that we know about for the coming year.
At the end of every financial year we compare how much it actually cost us to provide the services with the original estimate. If we have spent more than estimated there will be a deficit and this will be added to the service charge the next year. If we have spent less than estimated there will be a surplus and it will be taken off the following year’s charges.
Description of Services
Here are some of the services provided to our residents. These are service chargeable:
- Staff costs
- Communal Utilities
- Communal grounds maintenance
- Bulk refuse
- Communal internal cleaning
- TV and aerial costs
- Door entry-phone
- Electronic gate
- Manual gate
- Managing agent communal cost
- Communal water/Communal water – Legionella testing
- Communal fire safety
- Communal car park maintenance
- Communal repairs – estate
- Personal consumption
- Management fee
- Building insurance
- Examination fee (Audit fee)
- Sinking funds
Service Charges' Calendar
|Month||What to expect|
|February/March||Letter advising of charges from April based on estimated costs|
|April||New service charge year starts at beginning of April|
|May - August||We review expenditure and compile accounts for the previous year ending 31 March
NHG arranges an audit where there are 5 or more leaseholders
We prepare sinking fund accounts
|September||Residents receive service charge accounts pack including:
Sinking fund accounts
Audit report (Leasehold only)
|October - November||Works starts on budget setting for the proposed estimates|
|December||We complete estimated budgets, taking into account feedback from residents|
|February/March||Letter advising of estimated service charge from April.|
The amount you pay may have increased because of variable service charges. Every year in February we estimate how much we'll spend providing services to your block/estate and you contribute an amount towards that each month by direct debit from April to March. Then over the summer we calculate what was actually spent to provide those services. The difference is then applied to your account in October/November. If we spent more it's a deficit, which means you then owe us additional money. If we spent less, it's a surplus which means we put money back into your service charge account.
If your service charges have increased, it’s understandable that you’d want to know why. You can get in contact with our customer services team on Live Chat or other contact channels who can ask the Service Charge Team to supply you with a breakdown of your service charges.
If you’re still unhappy with this, you can follow our complaints procedure to take this further.
This is our cost to manage the services we provide. The law requires that this charge is reasonable. The management fee covers the costs of finding a suitable contractor, ensuring they do the work properly and processing the payment of their invoices. The charge reflects our cost of doing that for all the services provided.
For renting tenants: We calculate the management fee by charging 15% of the cost of providing the services.
For leaseholders: We charge a fixed amount depending on the number of services we provide.
The management fee also covers the cost of providing accounting systems, the costs of receiving payments, credit control, providing account statements, dealing with standard enquiries, providing advice, preparing service charge estimates and accounts, managing shared ownership rents and carrying out our obligations and regulatory requirements as a registered social landlord.
Usage Charge is the cost of replacing rather than repairing equipment such as pumps, lifts, fire appliances, paved areas and private roads. We estimate the life of the equipment and make an annual charge to residents (previously known as depreciation). We do this to prevent you having to pay a large bill for the full cost when the equipment is replaced.
A Sinking Fund, or Reserve Fund, is the amount of money set aside to cover the costs of any major works needed on the building, for example, for roof or lift replacement or redecoration of the communal areas. Payments into these funds are usually part of the service charge costs payable by our leaseholders, shared owners and freeholders (on an estate) as a fixed percentage, reviewed on a regular basis.
If you’re having trouble making your payments towards your rent or service charge accounts, you should talk to your Income Officer who will be able to offer advice. To talk to your income officer, you should get in touch with our Customer Services via Live Chat or other contact channels and we will be able to arrange contact with them.
Costs are apportioned amongst the homes in the block or estate in a ‘reasonable’ way. This can be equal, floor area, or number of rooms. If you are a leaseholder, your lease will specify your apportionment share or state ‘fair and reasonable’.
As your service charge is variable it is not limited to an inflationary increase. Every February we send all residents who pay a service charge an estimate. This is our forecast of how much we think it will cost us to provide the services during the year from April to March. This estimate is based on spending in previous years, contracted costs and any increases or decreases in spending that we know about for the coming year.
If you don’t believe the contractors are turning up to undertake repairs or cleaning works, you should raise this issue with your Neighbourhood Assistant (NA) so this can be investigated. You can find out who your NA is and their contact details on the communal notice board. If you don’t have access to a communal notice board, you can contact our Customer Services through Live Chat or other contact channels and they can contact your NA for you.
If you've purchased more of your property your rent payment will be lower, but your service charge will remain the same. Your stair-casing completion statement will have the details of your revised rent and service charge total. Your Income Officer can confirm the charges on your account. You’ll need to get in contact with out Customer Services via Live Chat or other contact channels and they will get you in touch with your Income Officer.
For renting tenants: At the end of every financial year we compare how much it actually cost us to provide the services against the estimated budget. If we have spent more than estimated, this deficit will be added to the service charge in the next year as a weekly addition. If we have spent less than estimated, this surplus will be taken off the service charge in the next year as a weekly reduction.
For Leaseholders: The surplus/deficit will be applied to their account with NHG in full. Leaseholders can then request the surplus be returned to them as a cheque or left on their account to cover any arears, alternatively they can arrange to increase any direct debits to cover a deficit or alternatively pay it off in one lump sum.
The way your apportionment is calculated depends on your lease and/or tenancy agreement.
If you live in a house you may not have to pay Service Charges for the block. However, you may pay Service Charges towards the maintenance and upkeep of the Estate. This may include costs for repairs, external cleaning, gardening, or play equipment. All properties on the estate will share these costs.