Variable service charges -what are they?
Variable service charges are where we estimate the cost of services in advance for the year and collect contributions from customers either weekly or monthly. After the end of the financial year we compare the estimated costs against the actual costs. We then send out a year-end account to customers to confirm the final costs for the year. Golding Homes will either refund the balance or collect any shortfall.
A variable service charge means whilst the costs are estimated at the beginning of the financial year, on reconciling the actual cost after the end of the financial year, the final cost may be higher or lower than anticipated. This is where the variation occurs and why they are classed as variable service charges.
Our financial year begins on 1 April and ends on 31 March.
For home owners we bill out or refund the balance. For rented customers we carry forward the balance to the next financial year. We either collect the balance or refund any credit balance in weekly or monthly instalments alongside estimated service charges for that year.
How we calculate estimated service charges
Some costs occur regularly for a set amount each month or at regular intervals through the year. These are services such as lift servicing, fire alarm servicing, and grounds maintenance.
When we estimate the service charge for the year ahead for these, we check to see what we’re currently paying for the service. We then add an estimated inflationary increase to take account of rising costs and what increase the contract allows. Where we can agree the contractual increase before preparing the service charge estimates, we’ll apply that increase instead.
Some costs are not as easy to estimate. These are for services which are more reactive, such as repairs to door entry systems, fire alarms or lifts. As we won’t know what may need repairing in the future we must consider previous costs, and repairs or works we know we need to do in the year ahead. We then use all that information to arrive at the estimated cost.
Golding Homes provides some services ourselves, such as communal cleaning. These costs will include staff costs as well as overheads such as materials and equipment. We estimate the anticipated staff time and cost, and review what we spent on materials and equipment previously. We then use this information to estimate the anticipated cost of providing the service in the year ahead.
This isn't an exact science as not every service is easy to predict.
Also not every building is the same nor has the same wear and tear nor the same occupants. All these things affect the services provided as well as the cost to do so.
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Adding Charges
There may be occasions where we introduce a new service or start recovering a cost we’ve not recovered before. New services are usually due to need or legislation. For example, introducing a communal cleaning service where we’ve not had it before, or installing fire prevention equipment to ensure compliance with fire and health and safety regulations.
There may also be occasions where we need to add a charge for a service we already provide but have not previously charged for.
For home owners we’ll review leases and freehold transfers to determine if costs are recoverable. Where possible we’ll write to let you know in advance about any new charges and how much we estimate it'll be.
For rented customers we’ll consult you about adding new charges. We’ll write to you explaining the reason for the charge and how much we estimate it to be. You’ll have an opportunity to respond with your thoughts and any queries you may have.
Once we’ve considered your response and responded to any questions, we’ll decide whether to proceed with the charge. We’ll write to you to let you know our decision and our reasons, how much the initial charge will be and when it'll begin.
For most of our rented customers, we’re only able to amend service charges once a year, so new charges may not begin until the following April.