Service Charge Policy

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This policy outlines Agamemnon Housing Associations (AHA) approach to setting service charges and applies to all our homes. Please note that the setting and monitoring of rent charges are not part of this policy.

AHA ensures compliance and reviews this annually, and the outcome is reported to the Board.

The aims of this policy are to ensure that:
• We meet all legal and regulatory requirements;
• The income from service charges covers the cost of provision;
• Services are provided that are essential to the intended tenants of schemes;
• Where non-essential services are provided these are services that tenants have requested and AHA has approved;
• Any services provided are of good quality, well maintained and represent good value for money to tenants; and
• We are open and transparent about these charges with tenants.

Service charges cover the costs of maintaining communal areas within our schemes. The way your service charge is organised, including what it covers and how it is worked out, is set out in the (your) tenancy agreement. The charge normally covers the cost of services such as grounds maintenance, window cleaning, lifts, lighting, cleaning communal areas etc.

You have a variable service charge.

This means the amount you pay changes every year, depending on how much your services cost. This is why we send you a final account statement annually.

How do you work out my service charge?

We use a variable system to work out your service charge because this is a term of your tenancy agreement. This means that every year we estimate the cost of each communal service and charge you for your share of that estimation. We work out your estimate by analysing past costs for your services and taking both inflation and the contractors’ costs into account.

We then fully review all costs incurred during the financial year and send a statement showing any differences. It shows how the actual cost of providing your services from 1 January to 31 December compares with the estimated cost we would have sent you previously.

All service charges at AHA are set annually, these are reviewed and calculated once a year for all tenants. A service charge schedule with a list of all service charges and their descriptions is included in the annual rent change letter and is also issued with all new tenancies.

Some service charges will be eligible for assistance should a tenant receive housing benefit or universal credit.  Where this is the case a tenants tenancy agreement and services charges schedule will clearly indicate what service charges are eligible.

Service Charges are not regulated under the new Rent Standard however, Government’s “Policy Statement on Rents for Social Housing” currently requires that Registered Providers of social housing endeavour to keep increases within the limit on rent changes of CPI +1% and that clear information be provided to tenants on how the services are set.

Costs associated with service charges are influenced by some factors outside the Association’s control such as fuel prices and government policy on issues such as VAT. We will, therefore, consider the impact of increases on gross rents and consider affordability and letability issues on schemes and where possible, will limit service charge increases to within the CPI + 1% limit on rent changes.

Heating, electricity, and water

A record of electricity used on the landlords’ supply for heating, electricity and lighting is maintained and monitored.

The charge made to tenants is based on the actual units consumed in the previous year. The cost of any standing charges and VAT are also included.

Tenants are informed on how the cost is calculated, should they request this information.

Any charge for heating and water to individual tenants’ accommodation will be separately identified as this is not eligible for housing benefit / universal credit.

Scheme costs and maintenance contracts

These charges are based on the actual cost.

Where contracts are due for re-tender, an allowance is made for an inflationary increase.

One-off costs i.e. tree works, and one-off cleans planned for the current year are included in the service charge calculation.

There are times when we may choose not to pass on a charge to existing tenants and only charge new tenants for a service. An example could be, if we install Wi-Fi at our schemes, we may feel that tenants would benefit from the service and that it was right that this service be introduced even though tenants had not requested it. We may choose not to charge existing tenants at the time of introduction and to make a minimal charge for new tenants.

Day to day service repairs / replacements

This charge is based on the actual cost of repairs in the previous year for items such as laundry equipment, repairs, and replacement.

Depreciation (provision for renewals)

This charge provides for the renewal of items such as carpets, laundry equipment, communal cookers etc. AHA builds up a provision over several years to allow for replacement of these items.

Management charge

A management charge is made to cover a proportion of the cost of administering the services provided, the remainder being subsidised by AHA. This is based on the prior year actual annual cost of providing services.

Service charges are apportioned equally between all homes in a scheme where tenants have use or access to services regardless of whether they choose to use them.

Consultation with tenants in respect of service charges is undertaken, at the same time the rent is reviewed, for the following reasons:

• To ensure that tenant’s views are considered on the quality, cost and extent of services provided
• To ensure that AHA legal obligations to consult are met.

All tenants will be consulted in respect of service charges as follows:

• Prior to the introduction of an extra service
• Prior to significantly reducing or modifying a service
• Prior to renewing a service which will result in considerable increased costs to the tenant
• A tenant satisfaction survey.

We aim to ensure that your home remains affordable. For this reason, we may put a cap on the total cost of your eligible service charges. If this applies, you will be able to see the amount of the cap in the service charge breakdown included with your annual rent change letter. Any service charge caps are agreed by the Finance, Risk & Audit Committee (FRAC).

The level of service provided will normally only be increased or decreased if most tenants, following consultation, are in favour of the changes. For example, there was an increase in the number of times windows in a scheme were cleaned following feedback.

Where equipment has broken down or the health and safety of tenants is at risk, the service provided may have to be varied as a matter of urgency and without time available for consultation. If this occurs tenants will be advised of the action taken and the reason for the urgency.

Service charges for new homes are agreed by the FRAC in discussion with the Development & Asset Committee (DAC), which is responsible for the new homes prior to their formal handover.

Services that are rechargeable must be identified so that an initial estimate of costs for the provision of communal services can be prepared. The estimated costs will be based on a combination of initial quotations for the provision of services and comparable costs from similar developments.

AHA is committed to applying its equal opportunities policy through its policies in accordance with the Equality Act.

AHA is committed to understanding any potential impacts of our policy on our tenants and stakeholders. AHA will engage with tenants as part of the work carried out by the People and Culture Committee (PAC) to discuss service charge adjustments ensuring their views are considered particularly in how the adjustments are communicated to all tenants. AHA’s Board considers feedback gained when making any decisions. AHA is committed to understanding any potential impacts of our policy on our tenants and stakeholders.

The Senior Leadership Team (SLT) recommends to the FRAC the increase (or decrease) to be applied to service charges from May for all tenants.

The FRAC recommend approval of the service charge policy for the coming year to the Board.

The FRAC reviews and signs off on the calculation of the May service charge increase (or decrease).

The AHA Board approves the annual service charge increase (or decrease).

The SLT ensures that the increases are applied correctly and communicated in accordance with legislative guidelines.

AHA recognises the importance of a robust approach to service charge setting and the importance the Regulator of Social Housing places on service charge setting due to its potentially detrimental impact on our business plan and viability, sector reputation and importantly, the financial status of our tenants.

A three lines of defence model is adopted to provide assurance with the FRAC responsible for the implementation of the policy:

First Line

The SLT is responsible for service charge setting.  This includes ensuring controls are in place and following government guidelines. The chair of the FRAC will ensure that the team are suitably trained to follow legislative and regulatory requirements.

Second line

The Business Support Manager (BSM) will oversee the implementation of the service charge plan and ensure its review ahead of implementation.  The BSM will report to the CEO monthly in line with the management accounts report.

Third line

AHA’s internal controls audit programme will, at least every three years, consider the application of the annual service charge review process.

Whilst the scope always considers the initial review will be correct, AHA will use independent support to provide additional assurance that service charges for all its homes have been set correctly.

This policy will be reviewed, following the internal control audit programme, by the FRAC every three years having taken into consideration the PAC’s views, or where there have been changes to regulation or legislation to warrant a further policy review.

• Housing and Regeneration Act 2008
• RSH Rent Standard and associated guidance
• The Government’s Policy Statement on Rents for Social Housing
• Equality Act 2010
• Housing Act legislation
• Landlord and Tenant Act 1985
• Social Housing Rents (Exceptions and Miscellaneous Provisions) Regulations 2016.

• Rent Setting Policy
• Repairs & Maintenance Policy
• Asset Management Policy
• Allocations & Lettings Policy
• Tenancy Management Policy
• Complaints Policy