Service charges set out the amount you are expected to pay in return for the services the landlord (the Council) provides, as outlined in your lease agreement. This is, in effect, your contract with your landlord.
There are various service charge elements, and they should relate either to your building, to your flat or to your estate.
You will also hear about major works. These relate to separate major repair schemes which are consulted with residents before they take place, but also result in charges being made to leaseholders. Those charges are still legally service charges, however, they are generally referred to as “major works” as opposed to “service charges”, which cover the costs of day-to-day service provision.
The service charge is based on actual cost to the Council in delivering the services to your block and/or estate.
Every year, we estimate the following year’s service charge. You will receive this estimate for the financial year in February or March. (A financial year runs from 1 April to 31 March.) Your service charge is due every three months, on 25 March, 24 June, 29 September and 25 December.
The estimated service charge breakdown sets out the charge we are making for each service you receive. The invoice will tell you your payment due every three months.
The back of the invoice details the payment options available.
Estimated service charges summary
Descriptions of charges may appear on your estimated service charge summary beside your estimated contribution towards the costs expected during the financial year.
The estimated charges are individual to each property, and not everyone will have the same items listed in their accounts. It is unlikely you will have all items in your summary.
Remember that costs stated are estimated for the year ahead, but that the amount shown as your share of the costs will be invoiced to you throughout the year, then balanced when the final (actual) accounts are calculated.
How to read the estimates summary
Each item that makes up the quarterly service charge invoice is listed on the left of the summary, under titles Building costs; Estate costs; or Other costs.
Building costs include any expected repairs or services to your building. Estate costs include any expected repairs or services to the outside areas of your building or to your estate, if your property is located within an estate. Other costs relate to buildings insurance, the Council’s management fee, and/or any ground rent rechargeable to you.
There are also three columns of figures listed in the summary. The first column shows the total estimated costs for each element, towards which you will be asked to pay a share. The next two columns show that share for your property, with the total amount for the year listed in the yearly column. The amounts listed in the final column show the quarterly charge.
Beneath all of these the total charge is listed for your annual estimated service charge and the amount you will be expected to pay quarterly.
Note: On your quarterly service charge invoice/statement any ground rent, buildings insurance, and the total of any heating charge elements (if you are connected to a district heating system) will be listed separately from the remaining service charge elements. Added together, those costs will match the quarterly total shown on your estimated service charges summary.
When the financial year has ended, the actual costs incurred are calculated and audited independently at the Council. Once agreed, the costs relating to every building, estate or heating system that are rechargeable are calculated. Each leaseholder (and freeholder for some costs) share is then calculated and we will let you know your final account.
An adjustment reflecting the difference in estimated service charge, compared to your share of the final accounts, will be applied to your account. Details of how this has been calculated will be sent to you. You can view the accounts in more detail, and inspect the actual invoices if you wish.
The final account will be issued to you no later than 18 months after the costs have been incurred. You have the right to inspect the accounts for up to six months after the final accounts have been issued or until the end of the financial year, whichever period is the longer. You must request this in writing. After that date, there is no obligation to provide this information to you.
The final account summaries you receive meet the requirements of the legislation and the lease agreement. However, they may change over time if we can provide better or clearer information for you.
Service charge final account statement
Descriptions of work may appear on your service charge final account statement, as well as your contribution towards the costs incurred for your block or estate during the financial year.
Definitions of the service charge descriptions are sent with your final account statement, and of some of the other terminology used in the accounts.
The final account charges are individual to each property, and not everyone will have the same items listed in their accounts. It is unlikely that all items will be listed your final account statement.
How to read your service charge final account statement
The summary provides a breakdown by element of the costs related to your flat, separated into building, estate and other costs.
It identifies your property together with administrative and property references, and a note of your weighted room value. Weighted room values for each item of service charge are also shown. The amount due is calculated by taking the total expenditure figures, multiplying them by your flat’s weighted-room value, and then dividing that figure by the total weighted-room value for the block/sub-block/estate (each in turn as necessary).
The total expenditure for your block/sub-block/estate is then shown under the heading actual share scheme, followed by the share allocated to your flat under the heading actual property share. This is followed by the amount originally recharged to you as part of the estimates, and then the difference between your share of the actual costs and these estimated charges.
All of these amounts have been totalled so the overall difference between the estimated charges and your share of the actual costs incurred is shown. This is the amount that will be credited or debited to your account as the final account adjustment.
How your share is calculated
For most leaseholders, unless the lease agreement states a particular percentage share, the Council’s weighted-room formula is used to calculate the share of the costs rechargeable to each individual property. That formula allocates one weighted-room for each bedroom in the property, one for each general living-room/lounge, half a weighted-room for each bathroom, and half a weighted-room for each kitchen.
The total weighted-rooms for every flat within a block is then calculated, whether they are sold or not, and used to make a fraction showing each individual flat’s share. For instance, if there are a total of 40 weighted-rooms on a building, a three bedroom flat will have 5/40ths share of any costs relating to that building.
The same calculation is done with regard to any areas of a building (or block) that only serve some flats, rather than all flats in the building. Such an area is known as a sub-block, and only the flats served by that area will contribute towards its costs. For instance, only six flats may have access through a communal hallway which is separately defined by the lease agreement, so only their values will be added together to give a total weighted-rooms for that sub-block. If, in our example, this added to 30 weighted-rooms, the same three bedroom flat may be asked to contribute 5/30ths of costs to the sub-block.
Similarly, all estate-based areas have a total weighted-room value calculated by adding together all of the weighted-room values of all flats within the estate. If the building in the example is located in an estate and the total weighted-rooms for the estate add up to 150, the flat will be asked to contribute 5/150ths of the estate-based costs.
This formula is shown at the bottom of your summary, together with your property’s weighted-room value, entitled “Apportionment of costs”.
Note: Though houses are sold freehold, if they are located within any estate they may still be liable to contribute service charges towards the external areas they share usage of in common with other residents of the estate. However, they should not be charged buildings insurance premiums or ground rent.
Most common charges
The descriptions provided for most of the elements included in your service charge summary should be self explanatory. However, they will not necessarily be calculated in the same way.
If you need more information, please speak to your Homeownership Officer who will be able to help you.
Building or estate costs
Your service charge will tell you whether these costs relate to your building or estate.
Repairs to building
Services provided that are specific to an individual property being a block, unit, flat, or house.
Caretaking and supervision
The share of costs associated with providing a caretaking service. The caretaking service monitors that building and any works, services or repairs that are carried out there. This also includes the cost of supervisors that manage the service.
Porterage and supervision
The provision of a porter service where expected under the terms and conditions of the lease agreement.
Internal communal repairs
Minor repairs to the parts of the building that you share in common with other residents (usually these are internal areas). This includes items such as internal communal doors and communal windows.
The provision of a concierge security system or CCTV.
External site works
Minor repairs carried out to the external areas that you share in common with other residents. This includes items such as boundary walls or fences and footpaths.
Maintenance of any communal garden areas, such as planting flower beds, pruning trees or soft landscaping.
Health and safety: pest control
Costs associated with the removal or eradication of pests or vermin and administered under the guidance of the block infestation procedures.
The costs associated with providing standard and regular contract cleaning to the communal areas.
Common parts: electricity consumption
Costs attributable to the consumption of electricity for communal lighting. This includes the costs of providing mains electrical power to the building itself and up to (but not within) individual flats and across the estate.
Common parts: electricity repairs
The cost of maintaining lighting for communal areas.
The costs of providing a digital service for television reception.
Bulk refuse clearance
Removal costs relating to refuse that has been dumped in bulk at or around your building or estate that cannot be traced to any particular individuals.
Insurance premiums for any lifts at your block.
Lift repairs and maintenance
Repairs and maintenance of any lifts that exist in your building.
Repair and maintenance of the communal refuse paladins.
Management fee: leaseholders
The share of costs of providing services (other than caretakers and supervisors) relating to leaseholders, such as enquiry management, invoicing and arrears control, surgeries etc. This is separate from the Management Fee associated with any major works schemes, which relate specifically to those schemes.
Management fee: freeholders
The share of costs of providing services (other than caretakers and supervisors) relating to freeholders, such as enquiry management, invoicing and arrears control, surgeries etc. This is separate from the Management Fee associated with any major works schemes, which relate specifically to those schemes.
Your annual ground rent, charged in accordance with the terms and conditions of your lease agreement.
Your share of the insurance premiums relating to your building.
Cyclo controlled heating
Provision of the cylco-control system associated with the district heating system.
Maintenance, heating, ventilation and pump systems
The annual planned maintenance of the district heating system and/or planned maintenance of ventilation and pump systems.
Heating – electrical
Electricity usage associated with the heating system.
Heating - gas
Gas usage associated with the heating system.
The repair, renewal and maintenance of the district heating system to which you may be connected, calculated on the basis of previous accounts and planned major works schemes.
Insurance premiums relating to the heating system.