Find out about service charges
Service charges cover the costs of maintaining communal areas for your estate and/or block.
You can find more details about service charges and the different types you might come across by reading our frequently asked questions below.
General information about service charges
Service charges cover the costs of maintaining communal areas, including any block or estate costs. For example, grounds maintenance, cleaning or repairs in areas that are shared with others.
An estate can include a number of houses and/or one or more blocks. A block is a group of properties which share a roof (for example, a block of flats).
The service charge for your property may include costs for a particular service at both estate and block level. You’re only charged for services that are carried out on your estate or at your block, and costs are recharged in line with what it says in your tenancy agreement, lease or freehold transfer.
The headings provided can include a variety of individual services. Please read our service charges fact sheet for more information about what services are included [pdf, 387KB] 
.
All customers who have service charges will receive a statement annually, setting out the estimated costs for the year ahead. This is called an estimate service charge statement.
Variable service charge
Some of our tenancy agreements will specify that you pay service charges on a variable basis. This charge occurs when we set an estimated charge at the beginning of the financial year and then produce a final account once the year is complete.
This final account compares our actual costs in delivering services to a home against the estimate that we set. This may result in you needing to pay extra or getting some payment back as a credit. It means that you only pay the true cost of providing the service for the year. This is called an actual service charge statement.
Generally shared owners, leaseholders and freeholders will pay service charges on a variable basis, as set out in your lease.
Customers who pay on a variable basis also have the right to be consulted on substantial changes to costs for services and to refer unresolved disputes to a First-Tier Tribunal. Details of these rights are included in the Summary of Rights and Obligations which are sent to you along with both your estimate and actual service charge statement.
Fixed basis
Some customers pay a fixed service charge. The services they receive are the same, but customers on a fixed service charge aren’t credited or charged any difference between the estimated costs and actual costs.
Most tenants will pay on a fixed basis, although some of our previous tenancy agreements will specify that your service charges are variable.
If you’re not sure whether your service charges are on a variable or fixed basis, please contact us.
If you are a tenant, we will add or deduct any difference to your following year’s estimated service charge, as a service charge adjustment.
If your tenancy ends during the following year, you won’t be asked to repay any deficits, but we also won’t repay you any credit adjustments.
If you are a homeowner, we’ll make an adjustment for any under or over payment of service charges to your account. This adjustment will usually be made at the end of September, when you receive your actual service charge statement. If this puts your account in credit, you’ll be able to request this is refunded to you. If your account goes into arrears as a result, you’ll need to pay what is outstanding.
If you sell your home during the year, the new homeowner will receive the adjustment, regardless of whether you’ve over or under paid for services. Your solicitor may discuss this with you as part of your sale.
Even though you may receive the same services as your neighbour, the terms of your tenancy or lease agreement can sometimes mean you pay differently, or that you may not be able to be charged for all services.
Over the years, we’ve used many different agreements that set out how charges can be calculated. For example, some tenancy agreements may specify your annual charge is paid over 48 or 50 weeks, and others over 52 weeks.
Regardless of what your neighbours are charged, you will only ever pay a fair proportion of the service costs. If your tenancy or lease agreement specifies how the charges are split, this will be how the cost is divided. If it is not specified, then you will pay a fair share which is split between all properties receiving the service.
If you are a tenant, then your charges may also differ depending on whether the service charge is fixed or variable. This is because a variable service charge includes the adjustment from the previous year, which may increase or decrease the total amount charged.
How actual charges are calculated
All customers who pay variable service charges will receive a statement annually showing a final account once the year is complete.
This final account compares our actual costs in delivering services to a home against the estimate that we set. This may result in you needing to pay extra or getting some payment back as a credit. It means that you only pay the true cost of providing the service for the year. This is called an actual service charge statement.
Some of our tenancy agreements will specify that you pay service charges on a variable basis, and generally shared owners, leaseholders and freeholders will pay service charges on a variable basis, as set out in your lease.
If you are a tenant, we will add or deduct any difference to your following year’s estimated service charge, as a service charge adjustment.
If your tenancy ends during the following year, you won’t be asked to repay any deficits, but we also won’t repay you any credit adjustments.
If you are a homeowner, we’ll make an adjustment for any under or over payment of service charges to your account. This adjustment will usually be made at the end of September, when you receive your actual service charge statement. If this puts your account in credit, you’ll be able to request this is refunded to you. If your account goes into arrears as a result, you’ll need to pay what is outstanding.
If you sell your home during the year, the new homeowner will receive the adjustment, regardless of whether you’ve over or under paid for services. Your solicitor may discuss this with you as part of your sale.
We’re finding that some EMCs aren’t invoicing for the service annually as expected. This can result in no invoice being received some years, and then in the following year we may receive two years of invoices.
As we only pass on actual costs paid, this means your costs may not be as you expected. One year you may have no costs at all for EMC, and then the next you may have double.
We appreciate this causes frustration and anxiety and have been working with EMCs to improve this and encourage them to invoice regularly and at the same time each year. We’ve seen an improvement but there are still some cases where this isn’t happening.
We get a number of queries relating to collection of rubbish. Whenever we have to organise for someone to go and collect rubbish, this charge gets passed onto all customers within that block. Unless there is evidence of who has not disposed of their rubbish accordingly, in which case they will be billed individually.
Because of this you may see large differences between your estimated and actual costs, as it’s a responsive service so can be difficult to estimate efficiently.
If your property wasn’t brand new when purchased, you effectively take on the liabilities set out in the lease or property transfer, including to pay for any service charge amount owed for the previous financial year. Any such amount owing will be charged to your account. If the difference was a credit amount, this will also be paid to your account.
Some solicitors will hold a retention (money set aside from the seller) for a period, so that financial liability for such matters can be claimed back from the previous owner. That is a matter between yourself and the solicitors involved in the purchase of your home and you’ll need to speak to them about this. More information about this is available on The Leasehold Advisory Service website .
How estimate charges are calculated
We review estimated service charges every year.
We base estimated costs on information available at the time, to allow for expected costs and any increases. This may include:
- Anticipated inflationary changes, or changes in contract price or rates
- The previous Actual costs or use of a service in recent years
- Expected major repairs due in the next year
We apply service charges in line with the terms of each tenancy or lease agreement. We’ll share the cost of the service between those customers receiving it. If the tenancy or lease agreement specifies how it will be shared, we will follow this, otherwise we’ll split costs in a fair and reasonable way.
We use a specialist utilities broker to obtain the best possible fuel costs every year. Our fixed rate contracts are agreed on a bulk basis (including all communal utilities across our stock), to achieve the most competitive rate we can.
We calculate your utility costs by taking your average costs for the previous year and increasing these by the same amount our utility contract costs per unit have increased.
Most repairs are unplanned and take place when a customer or staff member has reported them. Due to the ad-hoc nature of these repairs, we don’t know in advance what the actual costs will be.
Therefore, repair costs are estimated based on the last three years’ actual costs. This is also the same for any estate costs (such as fly-tipping) or tree works.
There will often be changes to service charges on a scheme or block basis, as many charges are calculated on previous years’ actual costs.
This factsheet [pdf, 69KB] provides information on any substantial changes to our approach in calculating estimated service charges for this year, as well as informing about any significant changes to specific service charge headings.
Information specific to tenants only
The administration charge covers the cost of things like:
- tendering for a new contractor
- managing the contracts for work and services (such as cleaning and grounds maintenance)
- dealing with queries and complaints
- checking and paying invoices
- preparing, calculating and issuing service charge statements
The administration charge is 15% of the total cost of eligible services. Eligible service charges are costs for services that are eligible for Housing Benefit and/or Universal Credit – but please note that eligibility for either of these may vary.
Some customers may pay towards the cost of replacing items in a scheme, such as a washing machine or furniture provided in communal areas. This can also be referred to as Depreciation costs.
The cost of the replacement item is divided over the number of years it is anticipated to last until it is replaced again.
Information specific to homeowners only
The management charge covers the cost of things like:
- tendering for a new contractor
- managing the contracts for work and services (such as cleaning and grounds maintenance)
- leasehold management, administration and billing
- dealing with queries and complaints
- checking and paying invoices
- preparing, calculating and issuing service charge statements
- collecting rent and/or service charges
If services are provided to you by an external management company, they may also include a management charge in their costs.
Since April 2015, many of our homeowners have paid a set management fee, which reflects a more accurate cost of managing your home and the services we provide you with. This approach was agreed for those properties whose lease allow it, by First Tier Tribunal.
These management fees don’t apply to properties that were originally managed by Spectrum or Hyde Housing Association, or where the lease does not allow for it. These properties pay a management charge based on 15% of total service charges instead (or as set in your lease, if specified).
Every year we have the final year-end charges to schemes independently verified and the cost of this is included in the charge for Fees. Currently the charges are validated and reported on by Chartered Accountants Beever and Struthers. You’ll receive a copy of the report for the scheme you live in when you are sent your final year-end account statement.
Please note the scheme balance (surplus or deficit) given on the report from Beever and Struthers is only for the properties occupied by shared owners, leaseholders and freeholders who pay a service charge.
For some shared ownership and leasehold properties Sovereign Network Group remains the freeholder of the property. Under the terms of your lease, we are obliged to provide buildings insurance, and you’re not able to opt out of the SNG policy.
Find more information on buildings insurance, including policy and cover.
If you are a leaseholder, and in some cases a shared owner, you may be charged a ground rent, if permitted by your lease. The rent amount can change, depending on how many years the lease has been in place.
Although the total annual ground rent is usually due on a particular date, we spread the charge out over the year, so that you pay it along with your service charges.
In accordance with Section 166 of the Commonhold and Leasehold Reform Act 2002, you will be provided with a notice demanding payment of the ground rent annually.
Reserves and provision funds, also known as sinking funds, are used to save money towards offsetting the future costs of major repairs that may be required (such as replacement roofs, windows, or lifts), to avoid unexpected and large repair bills for homeowners.
If a major repair is required and there are funds available to either pay the cost in full or in part, the fund will be used. If there aren’t sufficient funds then any outstanding costs will be passed on through service charges.
If you contribute to a reserves and provisions fund, you’ll receive an annual statement showing the balance and any transactions.
Querying and paying my service charges
If you’re unable to find the answer to your question here, then please contact us. Your query will be forwarded to the appropriate team who will get in touch with you directly. The more information you can provide about your query will help us route it to the right team for a quicker response. If you need a more immediate answer, please call our customer contact team on 0300 5000 926.
Please contact us at the time the service is provided, so that our team responsible for providing the service can work with you to resolve the issue. We’re less likely to be able to investigate and resolve this if it’s reported to us much later on.
If you’re receiving Housing Benefit (whether this is paid directly to us or to you), or Universal Credit and your service charges or your rent amount changes, you’ll need to let them know straightaway.
They’ll then re-assess your entitlement and there may be a delay while they change your payments, but don’t worry, this is normal. You can find more information on claiming Housing Benefit, or information about Universal Credit.
Please contact us if you are struggling or concerned about paying your charges, as there are many ways that we may be able to help you. This includes advice on debt management, benefits, and employment, as well as financial support. Find more information on our Cost of living support page.
You may also like to use the Better off calculator, where you can check if you’re receiving everything you’re entitled to or may qualify for additional benefits or lower tariffs.
As long as you work with us to manage any arrears you have, you will not lose your home if you cannot pay your rent or service charges.