Understanding service charges
What is a service charge?
A service charge is your contribution towards the costs of additional services which are beyond the benefit of occupying your home.
Service charges can include the provision of security (including door entry and CCTV), cleaning, heating and lighting in communal areas, as well as grounds maintenance and other services. See the list of different service charges here.
Details of your service charges will be confirmed to you annually in your rent and service charge notification letter.
Service charges must be reasonable and the services provided must be 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 will summarise how we will consult with you and notify you of any changes in services and/or costs.
Calculating service charges
The service charges you pay depend on where you live, the actual cost of the services that you receive, and whether your tenancy agreement is fixed or variable.
Each year we assess how much we expect to spend on providing services to your property. This is based on an estimate of costs and it includes inflation and reflects the costs charged by our contractors.
These costs are then apportioned (divided) by either:
- those customers who receive the service, or
- the number of properties in each block of flats, or
- the number of properties within each specialist/specified accommodation unit.
We regularly review our service costs to ensure that they deliver value for money, and to ensure that our charges remain as accurate as possible.
Fixed and variable service charges
Your tenancy agreement confirms if your service charge is fixed or variable.
The difference between the two types of service charge is summarised here:
Fixed Service Charge: This charge is fixed at the start of the year, based on an estimate of the service cost.
If the actual cost of the service at the end of the year is higher or lower than the estimate, the charge cannot be changed. However, the charge may be changed the following year to ensure that the full cost of the service is recovered from customers.
Variable Service Charge: This charge can vary and is set at the start of the year, based on an estimate of the service cost.
Unlike a fixed service charge, if the cost of the service increases or decreases, the charge can be changed accordingly to ensure that customers pay the true cost of the service. In these cases, surpluses/deficits will be dealt with in accordance with your tenancy agreement.
What is depreciation?
Some services require significant capital investment, e.g. door entry systems. These can be expensive, and once installed can have a lifespan of 15 years.
Depreciation is a method used to recover high value service costs over the assessed life of an item. By charging depreciation we spread the cost annually to make these services more affordable, e.g. in the case of a door entry system we would spread the cost over 15 years and recover one year’s contribution per annum until the full cost is recovered.
Will Housing Benefit or Universal Credit help me to meet these costs?
If you are in receipt of Housing Benefit or Universal Credit most service charges will be covered through your benefits.
You are, however, liable to pay for any personal heating or water charges, as these are not covered by Housing Benefit or Universal Credit.
How do I know what to pay?
The rent and service charges that you are required to pay will be detailed in your annual rent and service charges notification letter, which you will receive in February each year.
If you are in receipt of benefits we will contact your Local Authority and inform them of any increase or decrease in your rent and service charges. If you pay by Direct Debit we will also make the arrangements to increase or decrease your regular payment.
If you pay by alternative means, you should continue to pay your rent/service charges in this way. Find information about payment methods here.