Variable service charges -what are they?

Person cleaning stair way

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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Year-end balances

As previously explained, variable service charges are only an estimate. While we take every care in calculating these estimates, there's usually a balance owed or a credit to return due to the nature of some of the services or because contractual increases weren't confirmed before the estimates were prepared.

For rented customers, any balance in the year-end account will be collected or refunded in weekly or monthly instalments alongside the estimated service charge the following year. For example, for the financial year ending 31 March 2025 we’ll provide the account by 30 September 2025. The balance will either be collected or refunded from April 2026 with the next years’ service charge estimates.

For home owners, any balance in the year-end account will be applied to your rent and/or service charge account. You’ll be expected to settle any balance owed straight away in line with the terms of your lease or freehold transfer. If there’s a credit due to you and you're not in arrears you can ask us to refund this to you or we can reduce your Direct Debit to make sure we get the credit back to you. If you want us to amend your Direct Debit to refund your credit you’ll need to let us know. For customers in arrears any credit will reduce what you owe and we’ll expect you to continue with any instalment agreement we’ve agreed with you.

Due to Financial Conduct Authority regulations, we're not able to offer instalment arrangements to pay any sums owed if the arrangement would last longer than 12 months or would have more than 12 instalments.