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 what we’ve charged against what it’s cost. We then send out a year-end account to customers to confirm what the final costs were for the year. We 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 spend 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 called 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 the credit 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. We then add an estimated inflation increase to take account of the contractor’s rising costs and what increase the contract allows. Where we can agree the contractual increase before we set the service charge budget we’ll apply that increase instead.
Some costs are not as easy to estimate. These are for services which are more reactive such as repairing a door entry system, fire alarm or a lift. As we won’t know what may need repairing in the future we have to look at what we’ve spent previously and what we know may need to be done in the year ahead. We then estimate what we think it’ll cost.
We also provide some services ourselves such as communal cleaning. These include staff costs as well as overheads like materials and equipment we use. We estimate the anticipated staff time and cost. We then review what we spent on materials and equipment previously. We then use both to estimate what we think it’ll cost to provide the service in the year ahead.
It's never 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.
Back to the list
Collecting or refunding year-end balances
As we’ve already explained variable service charges are not an exact science although we are careful when estimating the charges to try to avoid over or underspends. However there is usually a balance owed or a credit to pass back due to the reactive nature of some of the services or because contractual increases were not confirmed before the budget was set.
For rented customers, any balance in the year-end account will be collected or refunded in weekly or monthly instalments alongside your estimated service charge the following year. So 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.
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 clear any balance owed straight away as your lease or freehold transfer requires. 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’re 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.
Please note 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.