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Service charges, sinking funds and ground rent

Service charges

What is a service charge?

If you receive any service to any part of your property, you will have to pay service charges. Your lease will set out your service charge obligations in terms of what you must pay for and whether the service charges are fixed or variable.

  • Fixed service charges are based on the service offered. Customers with fixed service charges will only receive an estimate each year. 
  • Variable service charges are changed according to the actual costs.

You must pay your service charge, as well as the rent.

You may be charged a service charge for some, or all, of the following:

Communal area cleaning: This is a charge for any internal communal area cleaning the landlord is required to provide, typically within apartment blocks with shared communal areas.

Ground maintenance: This is for the maintenance of any external communal areas, grassed or otherwise, that the Landlord is responsible for.

Building Insurance: This covers the cost of insuring your home (buildings insurance only). This charge will not apply if you own your own home 100% and have become a freeholder.

Management Charge: This is a contribution to our costs in managing the estate and the cost of services to leaseholders. This could include:

  • To allow you quiet enjoyment of your home
  • Local housing management, inspections, repairs and dealing with nuisance.
  • Meetings with residents
  • Maintaining records of leaseholders
  • Calculating estimated service charges
  • Billing service charges and ground rent
  • Collecting payments
  • Arranging buildings insurance and making claims for the structure and communal areas.
  • Providing newsletters and handbooks
  • Responding to enquiries

Procurement of services

The services delivered to you are carried out either the landlord or by a contractor on our behalf. Before we employ contractors to work on our behalf, we carry out a competitive tendering process. This involves comparing the quality and cost of delivering services and consulting residents. For more information on resident consultation please see the Section 20 section.

The Service Charge Year

The service charge year is a financial year which runs from 1st April to 31st March. We will send you a proposed scheme budget for the expected costs during the coming financial year in around February/March of each year. This budget estimates the amount of money we will need for the following year and sets out how much service charge you will pay.

Within six months of the end of March (by 30th September) we will send you a statement of the service charge accounts for your scheme for the previous year.

January to March: Service charge estimates are sent out. April to September: Actual service charge statements for previous years are prepared and sent out by the end of Sept. Throughout the year: investigating and responding to resident enquiries. October to December: Estimated service charges for following year are prepared.

Estimated service charges

Before the beginning of each financial year, we estimate the costs for providing works and services to your building and communal areas (if applicable) during the coming year. Whilst some contract values are fixed, other costs are variable. For example, we don’t not know how much we might spend on bulk rubbish removal. Therefore, we ask you to pay an estimated charge throughout the year. We base the estimates on costs in previous years, plus an amount for inflation. We will then send you details of the contribution you have to pay before the end of March each year.

Actual service charges

These are calculated once the financial year has ended.  We use records, invoices and information about services to work out how much was spent on your building and communal areas (if applicable). Within six months of the end of the financial year, our accounts are audited by independent auditors and a statement of actual expenditure is produced.  This statement is sent to customers with variable charges by the 30th of September each year.

The statement will include details of the actual costs and tell you the difference between the actual cost and the estimated charges we sent you at the start of the financial year. We will put the difference onto your service charge account.  If there is an additional charge, you should pay it when you receive the details.

For customers on fixed service charges, we can only charge what we budgeted, so you will not receive a statement. If you see an increase in your service charges the following year, it is likely that we spent more than anticipated during the previous year and have increased our budget accordingly.

Management companies

Some estates are not managed by SSHA but are instead managed by a private management company. Details of the Management Company service charge budgets and administration costs will be issued at sale where relevant.

Sinking funds

Ground rent

Ground Rent is a payment made by the leaseholder to the freeholder under the terms of your lease. We will send you a ground rent demand and an invoice for your ground rent contributions in accordance with the terms of your lease each year. 

Falling into arrears with your rent, service charges or ground rent

Under the terms of the lease, it is the leaseholder's obligation to pay service charges and ground rent promptly. Without regular and prompt payments from leaseholders your landlord may not be able to provide services and carry out our obligations as a landlord.

If you get into rent or service charge arrears it is important that you discuss with us how you will pay the debt. You have a dedicated officer responsible for dealing with your account, please use the contact us form to get in touch.  We also have a dedicated money advice team that are here to help, please contact your Landlord’s Customer Service Centre for further details.

We will monitor your payments and we will begin immediate action if amounts are not paid regularly or in full. If you do not, we will take action to get the debt paid – this could mean:

Contacting your mortgage lender to ask them to pay off your arrears. If they do this, they will add your service charge/rent debt to your mortgage and you will end up paying a lot of interest on it.

We will take legal action against you if you fail to clear your arrears and if approved by a Court, this can lead to the landlord repossessing your property.

 

Your home, and the equity you have invested into it, may be at risk if you do not keep up with your rent and service charge payments. Therefore, if you start to get into difficulties, please talk to us straight away so we can agree a plan of action.