Service Charge Policy

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This policy outlines Agamemnon Housing Association’s (AHA) approach to setting, apportioning, recovering, reconciling and governing 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 it annually; the outcome is reported to the Board.

The aims of this policy are to ensure that:

• Service charges comply with the Landlord and Tenant Act 1985, tenancy agreements and regulatory requirements.
• Charges are reasonably incurred, payable and represent value for money.
• Tenants are charged only for services they are contractually liable to pay for.
• Variable service charges operate correctly, including annual reconciliation.
• Heat network charges comply with emerging statutory regulation.
• Tenants receive clear, transparent and timely information.
• Robust governance and assurance arrangements support Board oversight.

This policy is informed by, and operates within, the following framework:

• Landlord and Tenant Act 1985, including: Section 18 – definition of service charges, Section 19 – reasonableness of costs and standard, Sections 20–20ZA – consultation requirements, Sections 21–22 – tenant rights to information and inspection.
• Housing and Regeneration Act 2008.
• Regulator of Social Housing – Rent Standard and Consumer Standards.
• Government Policy Statement on Rents for Social Housing.
• Housing Benefit and Universal Credit regulations.
• Equality Act 2010.

A service charge is an amount payable by a tenant as part of, or in addition to, rent:

• For services, repairs, maintenance, management, or insurance; and
• The whole or part of which varies according to the actual cost incurred by AHA.
• Only services that are expressly permitted by the tenancy agreement may be charged.

For AHA, this is within Schedule 1 of the tenancy agreement.

Excluded costs include structural repairs, individual flat repairs, statutory building safety works, corporate overheads, and non-recoverable capital works.

All service charges at AHA are variable service charges, meaning:

• Charges are set annually based on estimated costs; and
• Actual expenditure is reconciled against estimates, with adjustments reflected in the tenant’s annual service charge account.

How the service charge is worked out:

AHA uses a variable system to determine the service charge because it is a term of the tenancy agreement. Every year, AHA estimates the cost of each communal service and charges tenants a share of that estimate. AHA will determine the estimate by analysing past service costs and accounting for inflation and contractors’ costs.

AHA then fully reviews all costs incurred during the financial year and sends a statement showing any differences. It shows how the actual cost of providing services from 1 January to 31 December compares with the estimated cost that AHA previously sent to tenants.

All service charges at AHA are set annually, reviewed, and calculated for all tenants. A service charge schedule listing 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 tenant’s tenancy agreement and services charges schedule will clearly indicate what service charges are eligible.

Payability and Reasonableness:

In accordance with section 19 of the Landlord and Tenant Act 1985, service charges are recoverable only where:

• Costs are reasonably incurred.
• Services or works are provided to a reasonable standard.
• The charge is payable under the tenancy agreement.

Costs failing any of these tests must not be recovered through service charges.

Annual Budgeting and Year-End Reconciliation:

Estimated service charges are issued annually.

At year-end, tenants will receive an account showing actual costs, service charges demanded, any surplus or deficit, and sinking fund balances.

Surpluses or deficits will be carried forward to the following year.

Timetable:

• Financial Year-end is 31st December.
• Actual costs for the previous year are finalised, and surpluses/deficits are calculated on each scheme by the end of February.
• Inflation applied for the forthcoming year, plus any other known changes, by the end of February.
• New service charges finalised and approved in March.
• Letters issued to allow one month’s notice.
• Service charge increases 1st May.

The tenancy agreement states that the service charge may be increased or decreased at any time with one calendar month’s written notice.

Tenant Rights to Information:

In accordance with Sections 21 and 22 of the Landlord and Tenant Act 1985, tenants have the right to:

• Receive a written summary of relevant service charge costs; and
• Inspect supporting accounts, receipts and documents relating to those costs.

The Association will proactively inform tenants of these rights in annual service charge statements and will process reasonable inspection requests promptly.

Service Charges are not regulated under the new Rent Standard; however, the 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 assess the impact of increases on gross rents and affordability and letability issues across courts, where possible.

Heating, electricity, and water:

A record of electricity used on the landlord’s supply for heating, lighting, and other uses 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 is also included.

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

Any charges for heating and water in individual tenants’ accommodation will be separately identified, as these are not eligible for housing benefit / universal credit.

Separate rules apply to Heat Networks (communal boilers that provide heating to individual properties), which are set out below.

Court costs and maintenance contracts

These would be for items such as grounds maintenance, cleaning, lifts, window cleaning, and similar services.

These are based on actual contract costs, with reasonable inflationary assumptions where re-tendering is planned.

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

Day-to-day service repairs/replacements:

Only repairs relating to communal services, equipment or plant may be charged.

This charge is based on the actual cost of repairs in the previous year and any known repairs for the budget year.

Only items listed in Schedule 1 of the tenancy agreement may be charged as service charges. These are listed in Appendix One to this policy.

Landlord’s repairing obligations must be funded from rent. Procedures will ensure accurate classification of costs between services and repairs.

Sinking Fund (provision for renewals):

Sinking funds may be operated only where permitted by the tenancy agreement and may be used solely for qualifying communal assets.

The tenancy agreement restricts the purpose of the sinking fund to:

• Costs that would otherwise fall to the service charge account.
• “Unusually heavy costs”.
• Expected in the foreseeable future.

Tenants will receive annual disclosure of sinking fund balances.

AHA builds up a provision over several years to allow for replacement of these items.

Appendix one to this policy sets out the items that can be charged to the provision.

Management charge:

Only management and administration costs directly attributable to chargeable services may be recovered. This is based on the prior year actual annual cost of providing services.

General landlord or corporate overhead costs must be funded from rent.

Insurance:

Schedule one to the tenancy agreement states the types of insurance that can be charged to services.

The remaining business insurance should be covered by the rent.

Apportionment of costs:

Service charges are apportioned in accordance with the tenancy agreement. AHA use reasonable weightings to reflect differences between dwellings (for example, between one-bedroom and two-bedroom homes). Any such weightings will be applied consistently within a court.

Apportionment methodologies are regularly reviewed to ensure they remain fair, reasonable, and consistent with legal, regulatory, and contractual requirements.

Where AHA Chooses Not to Charge:

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 courts, 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 upon introduction and to charge new tenants a minimal fee.

Where AHA supplies heat via communal systems, these are recognised as heat networks subject to statutory regulation.

Heat charges must be transparent, cost-reflective, separately identifiable and reconciled annually.

AHA will maintain appropriate records and a heat network register.

AHA’s policy:

• Explicitly recognises heat networks as a distinct, regulated service.
• Confirms that heat charges are cost-reflective, variable, and subject to annual reconciliation.
• Distinguishes fixed infrastructure costs from variable energy costs.
• Clarifies acceptable apportionment methodologies for heat.

Commits to proactive tenant disclosure; and AHA’s policy on heat networks is in Appendix

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 (see below).
• Prior to significantly reducing or modifying a service (see below)
• Prior to renewing a service which will result in considerable increased costs to the tenant (see below, statutory consultation).
• A tenant satisfaction survey.

Tenants have statutory rights to information, inspection of accounts, and to challenge service charges where appropriate.

Statutory Consultation:

Where applicable, the Association will comply fully with the statutory consultation requirements set out in Sections 20 and 20ZA of the Landlord and Tenant Act 1985.

Statutory consultation will be undertaken where:

• Qualifying works are proposed, and any tenant’s contribution exceeds £250; or
• A qualifying long-term agreement is entered into, and any tenant’s contribution exceeds £100 per year.

Where statutory consultation applies, the Association will not recover costs in excess of the statutory limits unless appropriate dispensation has been obtained.

New or Varied Services:

AHA will not introduce a new chargeable service or materially vary an existing service unless:

• The tenancy agreement permits the service; and
• Appropriate tenant consultation has been carried out.

Where statutory consultation under section 20 of the Landlord and Tenant Act 1985 applies, AHA will comply fully with those requirements.

We aim to ensure that your home remains affordable. For this reason, we may cap the total cost of your eligible service charges. If this applies, the cap amount will be shown in the service charge breakdown included with your rent change letter.

Where a service charge cap applies, any service costs incurred above the capped amount will not be recovered from the tenant and will be met by the Association.

Service charge caps will be applied at court level unless otherwise determined and approved by the Finance, Risk & Audit Committee (FRAC).

The existence and level of any cap will be clearly identified in the annual service charge breakdown issued to tenants.

The level of service will normally be increased or decreased only 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 court 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.

Chargeable services must be identified to prepare an initial cost estimate for the provision of communal services. The estimated costs will be based on a combination of initial quotations for the provision of services and comparable costs from similar developments.

The Association is committed to applying this policy fairly and consistently, in accordance with the Equality Act 2010.

When setting and reviewing service charges, the Association will have regard to:

• Affordability for tenants, particularly those on low incomes or in receipt of Housing Benefit or Universal Credit;
• The impact of service charges on vulnerable tenants; and
• The clarity and accessibility of service charge information.

Where appropriate, the Association will consider mitigation measures, support options, or phased implementation of increases, while ensuring compliance with legal and contractual obligations.

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 Regulator of Social Housing’s focus on this area, given its potential 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 Finance Manager (FM) will oversee the implementation of the service charge plan and ensure its review ahead of implementation.  The FM 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.

Notwithstanding the standard three-year review cycle, this policy will be reviewed and updated sooner where there are material changes to legislation, regulation, or sector guidance that affect service charge recovery.

• 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

Appendices to this policy form part of the formal policy framework and will be reviewed alongside the main policy document. These appendices are:

• Appendix 1 – Repairs and Maintenance Chargeable to Services
• Appendix 2 – Heat Networks and Communal Heating