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A guide to the service charge

The service charge, also known as estate management cost, helps pay for services and repairs that apply to the whole development – buildings and grounds. It does not include services and repairs inside your home.

 

What is a service charge?

A service charge is a payment made by a tenant, leaseholder and some freeholders towards the cost of services and repairs beyond the occupation of their own property. For some freeholders this charge is known as an estate management cost.

The charges will vary depending on the amount of services provided and the amount of costs incurred for those services. The charges to individual residents may also vary; for example where there is an estate that has both flats and houses, only residents in the flats would pay for services that are provided within their block but all residents would make a contribution towards general estate costs, such as grounds maintenance, if provided.

 

How much will I have to pay?

Charges vary according to how much it costs to provide services and repairs – and on some estates, not all residents pay the same. Say you live on an estate that has both flats and houses. Only people living in the flats pay for services in their block, but all the residents would pay towards general estate costs, such as grounds maintenance.

There are two types of service charge rates; fixed or variable. Your tenancy agreement or lease sets out which one you pay.

 

Variable

This is how most residents pay their service charges, based on actual costs of providing services and repairs. We send you an annual statement showing whether the scheme has under or over spent its service budget.

  • If we spend less, the surplus will be allowed for in next year’s budget. So your service charge will be reduced for that year.
  • If we spend more, the deficit is will need to be added to next year’s budget. So your service charge will increase for that year.

 

Fixed

Some Sovereign residents pay a fixed service charge which is based on our calculation of the scheme’s cost for a particular year. Fixed rate service charges cannot be varied, which means that residents will not see an under or over spend on their statements.

 

Whether your service charge is fixed or variable, Sovereign does not aim to make a profit from service charges. If you are a tenant and have a variable service charge, any surplus will be carried states that your service charge is fixed, then we would still aim for a balanced budget and if we establish that we have overestimated or under estimated our budget, we will adjust payments for the following year.

 

What does the service charge pay for?

The service charge includes:

  • Utilities
  • Communal services
  • Renewal and replacement
  • Other charges
  • Additional charges to Leaseholders

For more information on what the service charge includes, please click here for more details (Link to leaflet)

 

How is the service charge calculated?

The service charge is based on what we budget for services, repairs and replacement for next year, taking into account what was spent last year. We send you a copy of our draft budget, along with our year-end accounts, to give time for you to raise any concerns. You’ll receive a copy of the final budget at the end of February for services planned for the year, starting in April.

You have the right to inspect accounts, receipts and other supporting invoices related to the collection and administration of service charge accounts.

 

Is the service charge eligible for Housing Benefit?

There are some service charges you can claim with your rent for Housing Benefit. These are known as ‘eligible’ service charges. Charges that you can’t claim with your rent are known as ‘ineligible’ service charges.

Examples of eligible service charges would be cleaning, communal gardening, door entry systems, lifts and the cost of scheme staff.

Service charges that are ineligible will be costs such as utility charges, water costs, sewerage and anything for your own personal use.

 

Local offers and service charges

Residents have the right under our local offer commitment to agree a different level of service for their scheme, which could mean extra visits from contractors or the appointment of a different contractor to carry out a specific service.

This could mean that the cost of the service charge may increase; therefore all residents would need to be consulted about any changes. If this is something that you would like to consider, please contact your Neighbourhood Housing Officer who can give you further details.

 

What can I do if I am not happy with my service charge?

If you have any questions or disagree with any of the costs on your service charges; you should contact your Neighbourhood Housing Officer in the first instance

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  • Spectrum House, Grange Road,
    Christchurch, Dorset, BH23 4GE
  • 0300 777 7837
  • contact@sovereign.org.uk
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