We often receive queries from leaseholders, shared owners and freeholders about service charges. So below, we’ve answered some of these frequently asked questions ahead of you getting your service charge statement for the year 2019/20 in September:
What’s a service charge?
A service charge is a payment towards the cost of managing, maintaining, repairing or providing services to your home, that isn’t specifically for your individual house or flat. For example, if you live in a block of flats with a communal garden, the cost of maintaining that garden is covered by a service charge.
What do my service charges cover?
The specific services you pay for will be set out in your tenancy agreement or lease, but could include:
How are my service charges calculated?
A variable service charge is set on your account from 1 April (although there are a couple of blocks that are set from January each year), following an estimate made in February of the expected cost of delivering services over the next financial year (from 1 April 2020 to 31 March 2021). This is then broken down to monthly payments throughout the year.
At the end of the financial year, a comparison is made between the actual cost of delivering services and the estimated cost charged. Where the actual cost is higher than the estimate, there’s an additional charge to you. Where the actual cost is lower than the estimate, there’s credit to your service charge account. We’re currently reviewing the charges incurred for the 2019/20 financial year. You’ll receive your balancing statement in September, which will detail any shortfalls or refunds due.
Why have my new build service charges changed from what was quoted when I bought my property?
When we set an estimated service charge for our new builds, it’s based on average charges incurred on other homes or buildings. Estimates are usually set on previous years accounts, however for our new builds there won’t have been any accounts to use for the estimation. This means that it is common to see increases or decreases in areas within the service charges over the first couple of years. Until we have at least 2 years of accounts it’s very hard to provide accurate estimates. Once we have 2 years of accounts, we can set more accurate service charges based on actual charges that have been incurred in previous years.