This section covers our overall approach to service charges. Service charge estimates are sent out by the end of March each year. Actual spend statements for the previous year are sent out by the end of September.
Procurement of services
The services delivered to you are carried out either by SARH or by a contractor on our behalf. Before we employ contractors to work on our behalf, we carryout a competitive tendering process. This involves comparing the quality and cost of delivering services and consulting with residents. For more information on resident consultation please see the Section 20 section.
Service charge obligations
If you receive any service to any part of your property, you will have to pay service charges. Your lease will set out your service charge obligations in terms of what you must pay for and whether the service charges are fixed or variable.
- Fixed service charges are based on the service offered. Customers with fixed service charges will only receive an estimate each year.
- Variable service charges are changed according to the actual costs.
Your service charge estimate is a calculation of how much we think we’re going to spend during the upcoming year based on the services you receive. Whilst some contract values are fixed, other costs are variable. For example, we do not know how much we might spend on bulk rubbish removal. Therefore, we ask you to pay an estimated charge throughout the year.
Following the end of the financial year, we add up how much we’ve spent. During the year, we may have charged you more (surplus) or less (deficit) than we spent.
For customers with variable service charges, we will then send you a service charge statement with the actual costs that September.
Homeowners are expected to pay any deficit once they’ve received their statement or can have a refund for any surplus.
For customers on fixed service charges, we can only charge what we budgeted, so you will not receive a statement. If you see an increase in your service charges the following year, it is likely that we spent more than anticipated during the previous year and have increased our budget accordingly.
What is a sinking fund?
To try and avoid unexpected and expensive bills being charged to leaseholders, many lease agreements for leasehold properties include the requirement for the landlord to collect a contribution from leaseholders at the scheme. The contribution collected is used to build up a pot of money to fund major repairs, renewals and replacements at the scheme. This fund is sometimes referred to as a Sinking Fund, Long Term Maintenance Fund or Reserve Fund.
A sinking fund ensures that the cost of major repairs and replacements is paid for fairly by all generations of leaseholders who benefit from them. A sinking fund also helps maintain the value of your property, and potential buyers’ solicitors will enquire about monies in the sinking fund. It is in all leaseholders’ interests that enough money is set aside to cover the cost of future repairs and renewals.
What is the sinking fund money used for?
The money collected into the Sinking Fund for each block/scheme is used to pay for major works such as a new roof, or replacement lift, and external and internal decorations required at the scheme. In most cases a full consultation will take place prior to major work being ordered in line with the requirements of the Commonhold and Leasehold Reform Act 2002.
Depending on your lease and property, the sinking fund is used to pay towards major repairs or replacing such things as:
- External doors, windows, roofs, guttering, walls
- External drains and plumbing systems
- Footpaths, parking areas, fencing, signboards
- Communal electrical systems, TV aerials and lighting
- Door entry phone systems
- Communal carpets
The lease will set out the arrangements for this as well as when regular, cyclical, maintenance works are due. If there is insufficient money in the sinking fund to deal with major works the costs will be shared between owners in the proportions set out in the individual leases.
The money in the sinking fund is held in ‘trust’ on your scheme’s behalf, in an interest-bearing bank account. SARH does not receive any benefit, or retain any money from the sinking fund. We manage this money on behalf of residents. Contributions to the sinking fund are not repayable to you when the flat is sold.
When do I pay?
The sinking fund collected for each scheme is used solely for work at that scheme. We do not pool together all the sinking funds we collect from different schemes and then use these to fund work at other schemes.
Where a sinking fund contribution is required, the method of collecting contributions to the sinking fund will vary according to the terms of the lease.
In most cases the lease may state that the landlord will collect a sinking fund contribution from leaseholders at the schemes as an annual charge. In this case, the contribution is normally included in the service charge contribution.
In other cases, the contribution to the sinking fund is collected when a leaseholder re-sells the property. The amount to pay is defined by the terms of your lease agreement. Your solicitor should have informed you of any liability to pay when you purchased your property.
As the method of collection and the amount paid into the sinking fund varies from scheme to scheme depending on the terms of the lease, please check your lease for further information about this. Alternatively, please contact your Leasehold Officer for your scheme who will be able to check the terms of your lease agreement and clarify this for you.
Ground rent is a payment made by the leaseholder to the freeholder, SARH under the terms of your lease. We will send you a ground rent demand and an invoice for your ground rent contributions in accordance with the terms of your lease.
How can I pay my service charges?
You can pay your service charges and ground rent in a number of ways as follows:
Direct Debit is a convenient way to pay. You can set up a Direct Debit by calling us on 0800 111 4554. Payments are adjusted automatically if your rent amount changes, you don’t need to do anything.
Set up a Standing Order with your bank. You will need to adjust the payment if your rent amount changes.
Pay your rent by phone. Call us on 0800 111 4554. We accept or major credit and debit cards.
What will happen if I don’t pay?
Under the terms of the lease, it is the leaseholder’s obligation to pay service charges and ground rent promptly. If they are not paid and SARH is able to show that the charges are reasonable, we can begin forfeiture proceedings. If approved by a Court, this can lead to SARH repossessing your property.