Service Charge Policy

Policy Statement

We will set service charges transparently and fairly, ensuring customers understand what they are paying for.  We will only recover the costs of providing the service and always seek to ensure that charges remain affordable and provide value for money. 

1. Scope 

This policy sets out the principles by which we set service charges. 
Separate policies deal with the recovery of charges and arrears and 
with the way in which estate services are provided. 

The policy covers charges made to tenants’, leaseholders and 
freehold owners but excludes services which we provide but do not 
charge for due to the contractual relationship with the customer. 

The policy includes charges to homeowners for planned works, 
whether recovered through a service charge, a separate sinking 
fund, or ad-hoc payments. 

The policy covers property related services only – personal charges, 
such as support charges, are subject to separate policies and 
procedures. 

2. Responsibilities

The Board and Executive, through the Policy Owner, ensure that the 
policy delivers our strategic objectives and reflects corporate 
values. 

The Accountable Lead is accountable to the Executive for the 
effective implementation of the policy in Curo, so that the principles 
are achieved through appropriate team plans and objectives, and 
procedures – with appropriate RACIs – translate the policy 
objectives into practice. 

The table below summarises the key tasks and identifies who owns 
each step:

3. Definitions

A service charge is a payment for services provided to shared areas 
and (for leaseholders) maintaining buildings within our estates and 
blocks. Services provided are defined by the occupancy agreements 
we have with our customers. 

The terms of the agreement will define the basis of the charge, but 
this will differ significantly between tenants (where we have 
statutory and other tenancy obligations) and owners (where such 
obligations do not exist and we have no rental income). 

The services provided will be specified in the occupancy agreement 
or covenant, except in some older agreements where a separate 
list, or historic accounts, set out those details. 

4. Principles

We use variable service charges which are set and managed in 
accordance with the Landlord and Tenant Act 1985 (as amended): 
this legislation ensures the reasonableness of the charge and the 
extent of consultation that is required. 

We use variable service charges for all tenures except for the 
following: 

• Market rent, affordable and intermediate – rental charges are inclusive of service charges.
• Supported / temporary accommodation – where we apply fixed service charges to provide certainty of charges due to the high frequency of customer turnover.

With a variable service charge, residents pay based on an 
estimated cost. At the end of the financial year we compare the 
actual cost of delivering the service against this estimate. 
If the actual cost is lower, we’ll refund any difference. If it’s higher, 
we’ll charge extra. 

For tenants and shared owners, we carry forward any difference to 
the next year’s estimate and add it on or take it off from those 
charges. 

For leaseholders we refund or charge the difference six months 
after the end of their financial year. 

We seek to recover the full costs of the services we provide, whilst 
ensuring that those costs are fair and reasonable. At the same 
time, we are mindful of the affordability of service charges; we 
review increases in service charges against CPI to identify 
potentially unaffordable increases. Where this is the case we may 
review the proposed charge and consider a cap or change the 
services.

We will apportion costs and apply charges consistently, fairly and in 
a timely manner to customers. One customer’s service charge will 
never subsidise another customers charge. 

The basis of charges will be clear: customers should understand 
who is paying for what and how service charges have been 
calculated. 

Where service charges are not eligible for subsidy (e.g. through 
Housing Benefit or Universal Credit) we will not subsidise the cost 
and will continue to charge the full service charge. 

Where the costs of administering a service charge are likely to 
exceed the income from the charge then we will not make a service 
charge. 

Wherever possible we maintain sinking funds for leaseholders and 
other owners that anticipate and budget for the cost of major 
works. 

Services will be provided in consultation with customers. We will be 
accountable to customers, who should know what services are 
being provided, by whom, at what cost, and be able to make 
choices about the services they pay for.

5. Application

Rented and shared ownership homes 
To ensure affordability of charges, we will have in place procedures 
which will achieve the following:

• For new developments, we assess potential service charges as part of the feasibility process. This determines whether a charge will be set up. Along with rents, we will consider the affordability of service charges by looking at their cost as a proportion of income for potential tenants.
• For existing homes, we review any increases to service charges each year for all customers. We will endeavour to keep increases for like-for-like services provided affordable and not exceed CPI +1%.
• We recognise that external factors outside of our control may result in increases above this threshold (for example, energy price inflation or changes to minimum wage levels can impact disproportionately on service costs).
• Where increases above CPI +1% result from factors within our control we will consider options to mitigate the impact to residents including the use of caps (which may be temporary and recovered in future years) or changes to the nature of the services we provide, in consultation with customers.
• In some circumstances we will co-operate with Local Authorities in establishing an affordable level of charge and will cap anything above that level.

We send tenants details of service charge expenditure annually.

Leaseholders and freeholders 
By maintaining sinking funds for owners we seek to spread the cost 
of major works. Where a sinking fund is not possible, or has 
insufficient funds, we will recover costs through one off charges in 
line with the principles of this policy and individual agreements, or 
defer works. 

We have transparent procedures for setting and apportioning 
charges where this is not specified in the lease. 

We will review on a case-by-case basis any one-off charges 
following major works and consider, where it is reasonable, 
spreading the recovery over a maximum of 2 years. 

We send details of expenditure, including any sinking fund 
statements, to leaseholders annually. 

General 
Information about service charges is provided in customer leaflets, 
handbooks, newsletters and online. Information about individual 
service charges is also provided clearly in tenancy agreements and 
leases. 

All information, including consultation (from S20 to annual 
consultation) and annual statements of expenditure, are provided in 
a format which is clear and understandable. We will actively seek 
feedback from customers to identify ways to communicate complex 
information in the most effective way. 

We charge a management fee as part of the service charge. The 
fee covers the costs we incur to manage, monitor and administer 
the service provided. We do not make any surplus from 
management fees. Costs are charged to customers on a banded 
mechanism based on the number of services received, recognising 
the additional costs required for managing multiple services. 

Management fees are reviewed and updated annually to ensure 
they accurately reflect the resources invested to effectively 
manage these services and deliver value for money. 

The large majority of service charges are applied using the variable 
cost approach, considered as best practice across the industry. We 
believe that this best achieves the accountability for service charges 
that residents have told us they consider important. 

Our procedures ensure that we comply with statutory requirements 
for consultation with customers. We will also consult affected 
customers about major works or proposed changes to service 
provision even where statutory consultation is not required. Our 
estate inspection procedures ensure that we seek and respond to 
the views of customers about the standards of services that we 
provide. 

We provide customers with choice about the services they receive: 

• Through annual consultation; this accompanies the information we provide about service charge expenditure and will range from written consultation to face to face and scheme meetings.
• Our contracts for the provision of services include flexible 
  options which will allow us to vary the nature and quality of work in response to customer feedback.
• Our “customer led services” commitment allows customers to take on the running of some or all of their services.

Our feedback and compensation policies allow residents to make 
complaints about services and charges and set out how we will 
resolve these. 

Where we fail to provide a service we will not make a charge, and 
this is not considered ‘compensation’. In addition, where there is a 
significant service failure we will consider compensation by means 
of reductions in the management fee and ex-gratia payments.

6. Procedures

The following procedures support and ensure the implementation of 
this policy: 

• Service charge setting procedure 
• Service charge recovery procedures 
• Sinking fund setting procedures 
• Section 20 consultation procedures 
• Service charge definitions document 
• Estate inspection procedures 
• Affordability assessment tool for new developments 
• Major Works recovery procedure 
• Compensation policy and procedure 
• Customer led services procedures and criteria

7. Equalities analysis

Those parts of this policy that deal with affordability and with 
definitions of what we will make charges far are intended, in part, 
to address the potential for those tenants who are disabled and/or 
require significant support in order not to suffer particular financial 
disadvantage. We consider that the provisions of this policy address 
those issues. 

No other potential for inequality has been identified in the 
production of this policy.