Service charges

Content owner : Last updated : 21/01/16

Why do I pay service charges?

When you bought your lease, in effect you became a 'stakeholder' in the building your flat is in. The service charge represents the cost to the landlord for providing services to you in your block.

As a landlord we have a legal duty to maintain the building and charge you your share of the cost. We also have to pay our share.

The costs are shared equally among all the flats in the block (unless a cost belongs only to one flat or to part of a block). For example, if there are four flats in your block and three of them are rented to council tenants and the other is a leaseholder, the leaseholder will pay 25% (1/4) of the cost and we will pay 75% (3/4) for our tenants. The rent that council tenants pay covers the cost of repairs and services to council homes.

Because we are a social landlord we have to maintain our blocks of flats to a good standard. This means that we have to spend money on keeping them in a good state of repair. If we did not, the flats would deteriorate and your flat would be worth less if you wanted to sell it.

We bear in mind that when we have leaseholders, a fair proportion of repair costs are paid by them. Some leaseholders would rather we did not spend any money at all, but if we did this we would not be doing our duty to our tenants, and your investment in your home would suffer.

Because we maintain more than 24,000 homes, we have large, professional repairs contracts with a team of surveyors and architects to look after your home. Government regulations covering contracts make sure that our contractors give us and you value for money.

In 2014 we changed the way we will be bill. All leaseholders are now billed annually instead of quarterly.

How service charges are made up

Service charges are based on estimates of the previous year. We charge on estimates as the actual costs of the services provided are not known until the end of the financial year. Once we have these costs, we work on preparing this information to send out to leaseholders. In the summer, we will issue leaseholders with a statement of account. This will show the estimated cost of the service for that period and the actual cost. This will determine whether we over or underestimated and determine whether leaseholders owe an additional amount (which you will be invoiced for) or whether they are owed a refund.

Your service charges are mainly made up of the following costs:

  • Ground rent. This is set at £10 a year under the Housing Act 1985.
  • Maintenance of your block and your share of electricity bills for any lighting, replacement bulbs.
  • Building insurance for damage to the structure or fabric of the building. Contents insurance is the responsibility of the leaseholder.
  • Repair of the block and repairs to any part of the communal area, including work to the shared structure, the roof and walls, and foundations. These will be responsive repairs that are ordered through Kirklees Direct.
  • An estimate of any planned works to your block due to take place within the year.
  • A 10% management charge, which covers the administration of the service charge and the other elements of the lease.

Please note this is not an exhaustive list; other services could include communal cleaning, communal electric and lift maintenance.

These costs will be listed on your service charge invoice. When it is necessary to carry out a repair in your block you will be notified in writing. However, if the repair is urgent you may not receive notification until after the repair has been carried out.

Your right to be consulted

Under Section 20 of the Landlord and Tenant Act 1985 and the Commonhold and Leasehold Reform Act 2002 you have a right to be consulted:

  • about works which will cost you more than £250;
  • when we are tendering for a new contract;
  • when we are making a long term agreement with a contractor or company.

We will

  • tell you what type of work is involved;
  • tell you why the work is required;
  • ask you for your comments;
  • give you the opportunity to nominate a contractor (the contractor must meet Kirklees Council's approved contractor requirements);
  • tell you who the contract has been awarded to if it is not the cheapest contractor that provided quotes.

If contract prices exceed the Public Notice Liability threshold we cannot give you the opportunity to nominate a contractor.

If we are using an existing contractor (agreed prior to 31 October 2002) we will not be able to give you the opportunity to nominate another contractor.

First five years after Right To Buy (Reference period)

Before you buy your flat under the Right to Buy scheme, you will be provided with details of your likely service charge contribution.

Within the reference period of the lease (first five years), we can only add an inflation allowance to the figures quoted during this period.

Once we have estimated your repair and improvement costs for the first five years, we cannot charge you more than this (except for an allowance for inflation) unless this involves the cost of insurance. If the insurance provider increases their costs to us, this will then be passed onto you. If we find we have overestimated, we will only charge you what it actually cost.

This five-year reference period applies from the date the first buyer purchases the lease. If you sell the lease within this time the next buyer is entitled to what is left of the five-year reference period.

How you get your bill

We send out bills annually. Invoices are issued in the Spring for the upcoming year. Service charge periods run from 1 April until 31 March.

In addition, we will provide an annual statement of account at the end of the year. This will show you the estimated and the actual costs of services provided to your block. This information will determine whether you owe an additional amount (which you will be invoiced for) or whether you are owed a refund.

Paying your bill

There are two options for paying your bill:

  • You can pay the full amount within 21 days. Contact the Support and Information Team on 01484 414886; they will take payment over the phone providing you have an invoice number.
  • You can pay by instalments. The period of time we can give you to pay off a bill will depend on the amount. Please contact HD-One on 01484 456900 to set up an instalment plan or for further information.

There are other ways to pay your bill, which are listed on the back of your invoice.

Unless you choose to pay the invoice in full, we recommend you pay by instalments. The payment is made automatically by your bank on a fixed day every month. This reduces the costs of management to you and to us.

If you have problems paying service charges

If you cannot pay your service charge bill straight away, don't ignore it! It will not go away and you could end up losing your home if you don't try to pay it.

We do understand that bills for major repairs and improvements can cause difficulties for your budget. However, here are some ways to make payments easier.

A savings account

You can set up a bank, building society or credit union account and regularly set aside as much as you can to pay for any big repairs. You can also earn interest on the savings. If you want to do this, you need to start saving as soon as possible.

Extending your mortgage

You can add additional amounts to your existing mortgage. You should speak to your mortgage lender about this. The works we do will be about maintaining or increasing the value of your home.

Voluntary Legal Charge

If you are unable to make any payment at all, we may consider securing the debt by way of a Voluntary Legal Charge on your property. The charge would be repaid when you sell the property. The ability to take out a voluntary charge may depend on the amount of equity available in the property. Legal costs will be incurred but can be paid separately or included in the charge. Interest will be added annually.

Claiming benefit

If you are receiving Income Support, you may be able to get some help with the costs of major repairs. You should contact the Benefits Agency for help making a claim.

Money advice

If you are having financial problems and require help, you can contact one of our Money Advisers. They offer free, impartial and confidential debt advice to all KNH customers.

If the service charge bill causes you financial difficulties you should contact us as soon as possible.

Service charge loans you can get from the council

There are two main types of loans we can give and they are controlled by government regulations:

1. Loans under the Housing (Service Charge Loans) Regulations 1992 - Mandatory Loans

You have a right to a loan under these regulations if:

  • your lease is not more than ten years old;
  • the charges made since the start of the lease are at least £2,000 (but not more than £20,000);
  • you owe at least £500.

If you qualify for one of these loans, there are several conditions:

  • You can get a loan for maintenance charges (which includes window replacements and any improvements to existing features) but not improvement work (which means new features such as door entry systems), and not for ground rent, management charges, insurance and other regular yearly charges.
  • The loan must be for at least £500.
  • The loan must be secured against your property (like a mortgage).
  • You still have a right to a loan even if you have negative equity on your mortgage. (Negative equity is where the money you could get from selling your flat is less than the amount you owe on your mortgage)
  • cannot get a loan under these regulations if your lease is more than 10 years old.

The regulations also set an upper limit on the time the loan can be repaid over:

  • three years for a loan between £500 and £1,500;
  • five years for a loan from £1,500 up to £5,000;
  • ten years for a loan over £5,000 (the limit is £20,000).

You can take out a loan for a shorter period if you want. Interest is charged on the loan and there is an administration charge, which is added to the cost of the loan. Ask us for the current interest rates.

2. Loans under the Housing Act 1985 - Discretionary Loans

Where you are not entitled to a loan under the regulations, the council may give a discretionary loan.

This might cover the following situations:

  • You can still get a loan if your lease is more than 10 years old.
  • You can get a loan for improvement work as well as maintenance work.

However, you cannot get a loan under these regulations if you have negative equity on your mortgage. (Negative equity is where the money you could get from selling your flat is less than the amount you owe on your mortgage)

Loans under the Housing Act 1985 are discretionary. This means you don't have an automatic right to a loan and the council can choose whether to give you a loan or not. We will normally give you a loan if we think it will help you.

The law does not set a lower limit for the amount of loan, and it does not give a repayment period. However, because of the administrative costs that you would have to pay, we would not normally give a 'Housing Act' loan for less than £500 or for a period of more than five years.

What if I don't agree with my charges?

If you do not agree with your service charges you can telephone our Finance team, stating your reasons why. We will put your account on hold until we have fully investigated and notified you of the outcome. If you are not satisfied with the outcome you can make an application to the First Tier Tribunal. This is an independent body set up to resolve leaseholder disputes.

If your query is disputing the cost of responsive repairs to your block, you should contact Building Services on 01484 221000.

What happens if I don't pay my charges?

If you do not pay your service charges we follow a stringent debt recovery process. If we are still unable to recover the debt, we can apply to the First Tier Tribunal for a for a determination order. This is the first stage in applying for forfeiture on the grounds of breach of your lease for non-payment of service charges.