Service Charge Policy
Part of our Leasehold and Freehold Framework - Level 1 policy approval
1. Introduction
1.1. The purpose of this document is to present our general policy on service charges, setting out our aims, principles and values that we will follow in our operation of them.
1.2. Service charges are payable by assured tenants and by leaseholders. In the rest of this document assured tenants are referred to as ‘tenants’, and ‘leaseholders’ shall be taken to include residential, shared ownership and non-residential occupiers.
1.3. This policy has been written having regard to our agreed vision and values and to reference material from Homes England and the Regulator of Social Housing, National Housing Federation (NHF) guidance, relevant legislation, leases and tenancy agreements, and industry-wide best practice. The policy is underpinned by our operational procedures which have been formulated and developed in consultation with solicitors, tenants, leaseholders and employees as appropriate.
2. Policy Statement
2.1. We are committed to meeting our responsibilities to all residents under the terms of their tenancy agreements or leases and to providing them with value-for-money services in the management and maintenance of their homes and estates.
2.2. We are bound by the terms of the tenancy agreements and leases issued either by us or by Aylesbury Vale District Council before stock transfer (in 2006) and by relevant legislation.
2.3. Service charge items are defined by the lease or tenancy agreement. If the lease or tenancy agreement does not provide that a charge for a particular service can be recovered by us then the cost cannot form part of the service charge until there has been a formal variation of the tenancy or lease.
2.4. Our variable service charges are for the recovery of costs which do not necessarily fluctuate in line with inflation or the rent formula, however we will aim to obtain value for money at all times.
2.5. We will seek to recover all reasonable service charges to which we are entitled.
3. Definition of Service Charges
3.1. Residential service charges can be either fixed or variable. We operate variable service charges but there are former Buckinghamshire Housing Association (BHA) properties which operate a fixed service charge.
3.2. Service charges are costs payable directly or indirectly for services, repairs, maintenance, insurance or our costs of management in respect of a dwelling where the amount of the charge varies in accordance with the costs incurred by us and which are required to be paid by the tenancy agreement or in addition to the rent. We will aim to set service charges at a level which covers the full cost of providing the required services and/or goods to the communal area.
4. Calculation and Recovery of Service Charges
4.1. Service charges to tenants will be made in accordance with the tenancy agreement and with relevant legislation.
4.2. Service charges to leaseholders will be made in accordance with the lease and with relevant legislation.
4.3. Where any apportionment of costs is undefined by the lease or by the tenancy agreement, we will calculate the share to be paid based on reasonable assumptions. The exact benefit that each individual property derives from a global grounds maintenance contract, for example, is impossible to calculate and approximations have to be made.
4.4. In accordance with our tenancy agreements and leases, we will issue an estimated service charge for the financial year (1st April to 31st March) so that it is received at least 28 days before 1st April in each year. The estimated service charge will be based on existing cost data and on known cost projections for the year to come.
4.5. In accordance with our tenancy agreements and leases, we will issue a service charge statement in sufficient time for it to be received by service charge payers no later than the end of September following the end of the financial year. This will show actual costs incurred by the property and, prior to issue, the service charge statement will be independently audited.
In line with legislation and upon request, tenants and leaseholders will be entitled to see supporting evidence of the information contained in their service charge statement. This request must be made within six months from the date that the statement was issued. After that time, it is a matter for our discretion whether to grant or deny such a request.
4.6. Credits or debits arising from the statement (i.e. the difference between the estimate and the statement for the same year) will, although due, be by default carried over to the financial year following the statement issue. If, after taking into account the current year’s estimated charges raised, there is still a credit, then the leaseholder or tenant will be offered a refund.
4.7. In accordance with legislation, we consider the charge to belong to the property, not to the tenant or leaseholder. Credits or debits arising from the service charge statement will be issued in accordance with the respective tenancy agreement or lease.
4.8. For tenants we may, after consultation, introduce, modify or withdraw services and adjust the service charge accordingly.
4.9. For leaseholders the services provided and the accompanying service charge will be defined solely by the lease. Any deviation from this will require a Deed of Variation(s), the enactment of which is to be paid entirely by the requesting/requiring party.
4.10. Legislation generally requires service charges to be demanded within 18 months of the cost being incurred. The point at which a service cost is considered to have been incurred is the date on which we made the associated payment or received the demand for which payment should be made, whichever comes first.
5. Major Works (Section 20)
5.1. We will comply with the Landlord and Tenant Act 1985 (as amended) and the Commonhold and Leasehold Reform Act 2002, in consulting with individual leaseholders and/or tenants on any service charge costs which exceed certain prescribed amounts. This applies to Qualifying Works such as repairs and some improvements (‘Major Works’), or to contracts known as Qualifying Long Term Agreements, (‘QLTA’s’) which exceed 12 months.
5.2. Where a service charge item will be greater than a certain amount per dwelling (at the time of writing, £250 for a one-off cost or £100 for a contract of more than 12 months), we will carry out the statutory (or ‘Section 20’) consultation procedures. The leaseholder and/or tenant is provided with a notice that we intend to carry out works or enter into a contract and then given the estimated cost and a proposed contractor before the work is carried out. The leaseholder and/or tenant may comment on our intentions and the proposed costs and we will give due consideration to the comments received in line with its statutory obligation. In certain circumstances the leaseholders and tenants have the right to nominate a contractor or supplier from whom we are obliged to try and obtain a cost estimate. The consultation process takes a minimum of three months.
5.3. Major Works (S.20) costs to leaseholders, where statutory consultation has been carried out, will be billed separately from the annual service charge bills. QLTA costs however will be included in the annual service charge.
5.4. We will begin to seek payment of all leasehold Major Works bills after one month of issue, with the aim of achieving full settlement within 12 months of issue.
5.5. Major Works costs to tenants (this will mostly be for QLTAs such as security contracts), where statutory consultation has been carried out, will be included in the annual service charge. They will not receive a separate bill.
5.6. Major Works bills will be issued to leaseholders as soon as we are able to verify the costs with an acceptable audit trail, but no later than 18 months after the costs were incurred.
5.7. If it is not possible for an accurate Major Works bill to be issued within 18 months of the cost being incurred, service charge payers will be formally advised via a S.20B Notice and the bill will be issued as soon as possible after that.
6. New Developments
6.1. Leases in new developments are not bound by leases already in existence. We will draft leases for new developments that allow us to recover costs fairly according to the services enjoyed by individual leaseholders.
6.2. Where possible new developments will be designed to make service charges affordable to leaseholders and tenants, and to provide value for money.
7. Sinking Funds
7.1. Leases in new developments where we are not subject to a superior agreement may, at our discretion, include a sinking (or ‘reserve’) fund.
7.2. The introduction of sinking funds to leases in blocks where they do not already exist is not straightforward. Where there is sufficient agreement among the leaseholders in a block, we will assist in preparing the necessary Deeds of Variation and/or First Tier Tribunal application to vary the leases. We must have a contractual right to hold a sinking fund. However we will not pay leaseholders’ legal costs for either of these processes.
7.3. Sinking fund contributions will be calculated as realistically as possible to cover projected relevant life cycle costs, but if at any time the sinking fund has insufficient resources to effect a repair we consider necessary, the difference will be levied as a separate charge.
7.4. We will not operate informal or voluntary sinking funds. It will only operate sinking funds which have been included in the lease or in a Deed of Variation.
7.5. Where we are subject to a superior agreement, as in many new build developments, our share and the individual property’s share of sinking fund contributions will be as per that agreement. (Though tenants will not be liable for our repairs contributions).
8. Budget Monitoring
8.1. Spending is monitored by the relevant budget-holding managers, depending on the service being provided. The finance department provides monthly spend-to-date information to all budget-holders.
8.2. The Service Charge Team is responsible for estimating service charge information for each scheme and block.
9. Disputes over the Service Charge
9.1. Challenges to the service charge will be dealt with by us according to the lease or tenancy agreement and according to legislation.
9.2. Challenges to service charges will not be dealt with via our complaints policy.
9.3. Leaseholders and tenants have the statutory right to challenge our service charge in the First Tier Property Tribunal.
10. Performance Measures and Monitoring
10.1. The following service charge information is monitored by us:
- Leasehold service charge recovery percentage
- Leasehold service charge arrears
- Total Rent arrears (including tenant service charges)
10.2. The Leasehold and Service Charge Manager is responsible for monitoring this performance.
11. Review
11.1. The Leasehold and Service Charge Manager will review this policy after three years or before if required by legislation or by best practice.
12. Impacts
Resident/Staff Implications -
We will consult with tenants and leaseholders about the development of service charge practices which affect them.
We will follow statutory Major Works (S.20) consultation procedures where required.
Equality, Diversity & Inclusion -
This policy will conform to all Equality and Diversity legislation and requirements set out by the Group’s Equality and Diversity Policy.
If information is required in different formats e.g. large print or as a recording, or in an alternative language or a translator is required, this can be provided as long as the cost is reasonable.
Value for Money -
We will benchmark performance against similar organisations to monitor quality, performance and cost effectiveness. We will also strive to deliver best practice and achieve top quartile performance.
Data Protection -
All due care is taken to protect data held by us and in particular, we ensure we keep all resident data secure and meet with data protection requirements.
Accountability -
The Service Charge Team is responsible for ensuring the implementation and operation of this policy.
Quality -
We look to ensure that our residents are safe in their homes by supporting the provision of well-maintained homes which are in line with legislative and regulatory requirements.
When things go wrong -
Residents can communicate concerns through our formal channels.
13. Related Legislation and other Documents
Commonhold and Leasehold Reform Act 2002
Housing Act 1985
Housing Act 1996
Housing Act 2004
Landlord and Tenant Act 1985
Leasehold Reform Act 1967
The Service Charges (Consultation Requirements)(England) Regulations 2003 (as amended)
Equality, Diversity and Inclusion Policy 
| Author | David Goss |
| Job title | Leasehold & Service Charge Manager |
| Date approved | March 2024 |
| Review due date | March 2027 |
