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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Newly built homes
All our new homes have variable service charges.
The service charges for new homes are estimated during construction of the properties. This means when preparing the first year’s estimates we won’t have information on some costs, ranging from servicing lifts and fire alarms to grounds maintenance.
We ask our contractors to give us estimated costs based on information provided by the builder. As contractors might not have visited the site at that time, the installation of the equipment may be incomplete, or the grounds unfinished, the cost may change between setting estimates and the start of providing those services.
Once the site is completed by the builder and we've taken ownership, we then ask our contractors to confirm their costs.
For other services which are more reactive or based on usage, like door entry maintenance, communal electricity, lift repairs, or fire alarm repairs we’ll use our knowledge of similar sites to estimate what we’ll need in the first year. We also consider guarantees and defects periods which usually last one year after completion. This provides us with a clearer grasp of costs once the second year has ended.
All of this can mean charges vary from year to year during the first three years for new homes.