SEDGEMOOR DISTRICT COUNCIL
SERVICE CHARGE POLICY
Introduction
Serviceandotherchargesaremadeforadditionalserviceswhichwe provide to tenants and leaseholders andthat are inadditionto our normal landlord services,andwhicharenotincludedwithinyour rent.
We provide these services because we believe theyare:
• Necessary for the good management of our homes.
• Provided at the request of our tenants and leaseholders.
• Required to meet our legal obligations.
• Represent best practice.
• Services of the highest quality.
• Value for money.
• Transparent.
Our Policy will enable us to recover fully the costs we incur delivering our services to our tenants and leaseholders.
Summary
At Sedgemoor we aim to deliver fair and transparent chargeable services, to high standards and good value for money.
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Residents should pay for all the services they receive, and we aim to recover no more than all relevant costs through the service charges. We may make a strategic decision to subsidise an element of service to protect our assets and vulnerable customers.
This policy is the framework to support how we meet all contractual, regulatory, and legal requirements relating to service charges and to apply best practice.
Scope and definitions
The policy applies to all tenants, leaseholders (including shared owners), licensees and freeholders receiving services and paying service charges. Unless included in the tenancy agreement for a property, a garage is usually subject to a licence.
A service charge is a payment made by residents for services received in connection with the occupation of their home and, for the purpose of this policy, includes estate rent charges payable by freeholders.
For tenants, their rent covers the costs of repairs, maintenance, and insurance of the properties, as well as housing management / tenancy sustainability that includes the administration of tenancies from start to finish. Service charges are for services provided in addition to the rent and usually reflect additional services which may not be provided to every tenant, or which may be connected with communal facilities rather than being particular to the occupation of a dwelling. Service charges are subject to separate legal requirements and are limited to covering the cost of providing the services.
Leaseholders receive and pay for the same services as tenants and pay for their proportion towards the upkeep, repairs, improvements, and maintenance of buildings, including building insurance. They may also contribute to a sinking fund for these services.
Some residents also benefit from support services, those are the delivery of person-centered services to support residents to occupy and sustain their homes. Those services are provided by the landlord under a separate agreement. This policy does not cover support services provided under the Silver / Gold service provision of the new Independent Living Service
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Additional personal charges which are not normally part of service charges can also be collected.
If there is any difference between this policy and the terms of an occupancy agreement, any terms in the agreement they have signed takes priority over this policy.
This service charges policy enables us to recover fully (where possible) the costs we incur delivering services to our residents.
Fixed Service Charge – most of our agreements with tenants have fixed service charges. The charge is set according to the landlord’s own estimates and costs. This means that we bear responsibility for:
• any shortfall between the cost of services and the amount of money collected in charges; or
• any amounts that accrue if we collect charges more than the cost of providing the services
Variable Service Charge – most of our agreements with leaseholders have a variable service charge as defined by Section 18 of the Landlord and Tenant Act 1985 which states:
“Service charge” means an amount payable by a tenant of a dwelling as part of or in addition to the rent –
(a) which is payable, directly, or indirectly, for services, repairs, maintenance improvements or insurance or the landlord’s costs of management, and
(b) the whole or part of which varies or may vary according to the relevant costs.”
Reference to ‘tenant’ in Section 18 means tenants or leaseholders but excludes freeholders and licensees.
The charge can be changed, increased, or decreased, in accordance with the provisions of the (lease) agreement. The main effects of variable service charges are that it:
• allows shortfall or additional amounts to carry forward to the next accounting year; and
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• requires compliance with the statutory obligations set out in Sections 18 – 30 of the Landlord and Tenant Act 1985. However, tenants of local authorities are expressly excluded from these provisions.
Sinking Fund – by adding an annual contribution to the service charge, a fund is built up to pay for the future replacement of equipment or for a large item of planned expenditure such as internal redecorations, windows, or a roof.
PolicyStatement
• We provide services in accordance with the needs of our tenantsand leaseholders and consider the characteristics, age, and condition of our properties along with the local environment.
• The services to be delivered to tenants and leaseholders at the commencement of a tenancy or the grant of a lease are clearly stated.
• We will provide services and charge service charges in accordance with the provisions of the occupancy agreements in operation.
• We provide service charges information in respect of eligibility for housing and other welfare benefits.
• Staff are trained to provide advice for those finding payment difficult
• Service charges consider the full cost of chargeable services provided, value for money, the provision for maintenance and replacement of equipment used to deliver services and the administration to manage them.
• In our charges, we aim to recover no more than the actual cost of chargeable services provided as set out above.
• Any subsidy is clearly reported.
• Service charge costs are reviewed annually, and residents receive a notice of the charges annually, in accordance with the terms of our tenancy and/or lease agreements.
• We calculate the estimated costs for the forthcoming year based on costs incurred in the previous year and provide to our residents appropriate accounting details.
• For variable service charges, we carry forward the difference between the costs incurred and the income paid each year and we certify the difference in accounts to our residents
• We shall consider guidance from the Regulator of Social Housing on service charge reviews for tenants.
PolicyAims
We seek to:
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• Ensure service charges are sufficient to meet the cost of delivering and administering the services
• Ensure services are appropriate and charges affordable to meet the need and demands of our residents.
• Provide new services (when required) and after consultation.
• Provide clear information to our tenants and leaseholders aboutthe chargeable services we deliver.
• Maintain chargeable services assets to an appropriate standard for the future.
• Ensure charges are maintained at an appropriate and fair level and that the cost is borne fairly between tenants and leaseholders alike.
• Review charges annually usinga fair,consistent, and transparent approach.
• Ensure appropriate consultation takes place with tenants andleaseholders inrespect of services provided or services to be varied.
Service charges annual cycle
The service charge year starts on 1 April and ends on 31 March.
We should not make a profit from the delivery of chargeable services. The service charge and the administration fee levied and collected represent the estimated costs we incur.
By 30 September, for variable service charges, we review the previous year’s estimates against actual costs, certify the difference to be carried forward to the following year and send notice to residents.
We would normally only expect to change service charges once a year to take effect from April of each year, at the same time as the annual rent review takes effect.
By February, we calculate the service charges budget estimates for the coming year, based on expectations and costs incurred in the previous year.
No less than 28 days before the service charges are due to change – usually by March, we notify residents of the cost of service charge for the forthcoming year with the new charge taking effect from April. Tenants pay their service charges weekly with their rent. Leaseholders are liable to make payments on receipt of their invoice, although we will allow monthly payments.
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We also operate a loans scheme for leaseholders: that loan scheme falls outside the scope of this policy.
Rent Standard
We are bound by the Regulator of Social Housing’s Rent Standard in respect of our tenants, which requires us to comply with Ministry of Levelling Up, Housing Communities and Policy Statement (February 2019). The Policy Statement provides in respect of tenants of social rented properties:
• We are expected to set reasonable and transparent service charges which reflect the service being provided to tenants.
• We should supply clear information on how service charges are set to tenants.
• We are expected to identify service charges separately from the rent charge.
• We shall endeavor to keep increases for service charges within the limit on rent changes.
Services offered.
The services we provide in the neighbourhoods will vary depending on the property and the estate, examples are shown in Appendix A. They are split between communal services and individual services: some services only apply to leaseholders.
Not all services are provided to all tenants and leaseholders: they are detailed in the terms of the tenancy or lease agreements, or in subsequent variations as allowed in the agreements. We will only charge for services provided for in the occupancy agreements.
Equipment
The services may include the provision of equipment such as:
• Communal lighting
• Door entry or alarm call systems
• Assistive technology
• Communal technology including TV aerials and broadband connections
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• CCTV monitoring equipment
• Lifts
• Communal laundry equipment
We maintain that equipment to an appropriate standard (fair wear and tear excepted) and charge a usage charge as part of the service charge to ensure the equipment remains fit for purpose. This charge represents the equipment’s annual value over its anticipated lifetime, adjusted for price inflation, and may include equipment insurance. When the equipment requires replacement, it can be replaced without an additional charge being levied against residents.
Sinking Fund
Some service charges may include a contribution to a sinking fund where it is thought the one-off charge for substantial works would be significant and more affordable if paid for over several years.
We aim to provide a yearly account of costs incurred, service charge due and any amount remaining in the sinking fund.
Management Fee
In addition to the costs incurred by way of service charge we also charge a management fee that includes the costs of running a service charges team, including the IT system, invoice / statement / correspondence production, communication, accounting, general overheads, debt recovery, consultation and tendering for services (where appropriate). For third party management fees, there are additional costs to manage the thirdparty contract and manage the accounts.
Variation
We have a statutory right to vary the services provided under our tenancy agreements after consultation with affected residents. For leaseholders and freeholders, powers to vary services depend upon the terms of their agreements and (for leaseholders) may include an application to the First-tier Tribunal (Property Chamber).
Apportionment basis
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Service charges for leaseholders are calculated using the method specified in the terms and conditions set out in their lease, usually “shared in proportion” on an area basis.
Likewise, some service charges for tenants are calculated using an area basis. We reserve the right to use an alternative method of calculating some services if we believe this would be fairer and after consultation with residents.
Consultation
The services provided will be reviewed in consultation with you and by way of:
• Regular discussions with representative groups and resident associations.
• Random surveys including questionnaires.
• Inviting comments at public meetings.
All tenants and leaseholders will be consulted in respect of proposed changes to:
• The type of services to be provided.
• Additional services to be added.
• Services to be taken away.
• Quality.
For residents on variable service charges, formal consultation needs to take place under section 20 of the Landlord and Tenant Act 1985 for some long-term contracts or one off spends:
• Prior to the commencement of any long-term contract agreement (deemed to be more than 12 months) for the provision of a service included in service charges, and where this cost is likely to exceed £100 (including VAT) a year for any one unit
• The section 20 consultation is only carried out before the start of the contract and lasts the length of the contract. It does not need to be repeated each financial year, except a further notice is required if any works proposed under that contract will exceed £250 (including VAT) for any one unit.
• Where works undertaken are expected to exceed £250 (including VAT) per home, section 20 consultation will also apply. In the case of emergency repairs, retrospective dispensation from the requirements may be sought if consultation cannot take place in the time allocated.
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A copy of the section 20 notice should also be sent to any relevant registered tenants’ association.
The consultation is done so that residents are informed of the future changes and additional cost to them, to give them opportunity to comment and so that Sedgemoor can be reimbursed for the full cost of the service.
Our consultation policy is shown at [ ] and can be found in [ ].
Review
It is intended this policy will be reviewed in three years’ time or at such time as there is a change in relevant legislation.
Dated 5th October 2021
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Appendix A List of Services
• Grounds maintenance and landscaping
• Door entry systems
• Alarm call systems
• Cleaning and Caretaking services
• Repairs and maintenance to communal facilities
• Laundry Facilities
• Independent Living Service
The bronze level of tenancy sustainment / support is provided to all tenants who are receive the service via a service charge. We continue to promote the take up of Attendance Allowance to ensure that any additional support costs are affordable. The tenancy suitably element is covered by Housing Benefit (if eligible).
BRONZE
Low-level support includes wellbeing checks.
plus, activities and use of hubs - this will be charged to all customers who are part of the service.
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• Leaseholders building insurance.
• Leaseholders repairs and maintenance.
• Lifts
• Fire safety
• Electrical testing – emergency and routine
• Furniture and fittings in communal areas
• Heating
• Sewerage services
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