How we set service charges
You pay a service charge to cover a number of expenses, including the costs of managing and maintaining internal and external common areas at your scheme.
Your service charge is set out in your tenancy, and detailed in the service charge schedules sent to you each year. Services will vary from scheme to scheme and may include (this is not an exhaustive list): internal cleaning; external cleaning; caretaking costs; grounds maintenance; equipment (such as any lift or entry phone) and utilities.
Our aims in service charging are to ensure:
- Our approach is fair, open and transparent, and reflects best practice.
- Our policy on service charge setting is understood by tenants and staff.
- Our procedures are efficient; each step has clear responsibilities and timescales.
- The information we provide to residents is quality checked and accurate.
- We cover our costs and aim to secure the best value for money when procuring services.
- We meet contractual, regulatory and legal requirements.
What we mean by ‘fixed’ service charges
The ‘fixed’ service charge system is used for setting service charges to tenants. An estimate is made each year of the cost of providing the services to a scheme and this cost is then split between the individual properties in the scheme. Once the charge has been set, any variation between the actual cost and the estimate is absorbed by Octavia Housing in the financial year.
What you can expect from our service
Information to you
Changes in service charges are applied at the same time as changes in rent which generally will not be more than once a year.
Every year, no later than 14 February, you can expect to receive the following information:
- A notification letter (Assured tenants also receive the Section 13 Form as required by the Housing Act 1988).
- A schedule of services to be delivered.
- A service charge information sheet.
Value for money
We want to secure the best value for money when procuring services:
- We tender for services above OJEU (Official Journal of the European Union) limits at least every 5 years.
- New or changed contracts above £50,000 are approved by Senior Management.
- The costs of providing electricity and gas for use in communal areas are tendered every year.
- We use in house service providers only where these are clearly better value than external providers.
- We review managing agents’ costs and challenge those costs if they appear unreasonable.
- Our salaries are regularly assessed against market levels.
- We benchmark on costs against other peers through Housemark (the social housing sector’s main benchmarking club).
How does this apply to you?
How service charges are shared between individual homes
Depending on the tenancy, we generally apportion service charges between individual properties in one of the following ways:
- An equal split between the individual homes in the scheme for all the services received, or split by the historical rateable value of the property.
- On the basis of the maximum design occupancy of each property as advised by the local authority and a fixed element of 4 (this fixed value represents a kitchen, bathroom, hall and living room that are provided in most properties):
- The maximum occupancy is added to the fixed element of 4, for example a flat for 3 people will attract 7 ‘shares’ of the total for the scheme;
- The sum as a percentage of total shares of all the units in the scheme determines the apportionment for all services received by the residents.
The second method above based on maximum design occupancy aims to make payments as fair as possible, but it can be difficult to understand. If your service charge is split in this way, we will:
- Show the apportionments in service charge schedules as percentages for ease of viewing.
- Hold consultation meetings with identified schemes to review proposed scheme service charges, for example where substantial changes to charges are proposed.
If an apportionment method is specified in your tenancy which is different to the above methods, the method specified in your tenancy is followed.
- Once the scheme service charges are apportioned, a management fee is added.
- For ‘fixed’ service charges a 15% management fee is added.
- In some schemes where Octavia does not own the freehold to the property you are renting from us, certain services can be provided by a separate managing agent. The managing agent charges Octavia for the costs of providing these services. Where this occurs we will recharge you and other residents for these costs using the same apportionment principles as set out above.
Exclusion from service charge
If you do not benefit from a service provided, then the service charge will not include the costs of that service, for example if you have direct access to your property from external areas without accessing internal common parts, you will not share the costs of internal communal cleaning, lighting and other similar costs.
How to contact us about service charges
Please contact your Income Officer if you would like more information about your service charges.
If you are experiencing affordability problems with paying your service charges we can refer you to or tell you about agencies that can provide free independent advice.