Service charges: actuals for 2022 to 2023 and estimate for 2022 to 2024

Introduction

On this page you will find additional explanation on how recent service charges for Leaseholders have been calculated, to include:

  1. Summary of your service charge Account (31 March 2022 - 1 April 2023)
  2. Annual certificate and statement of affairs (31 March 2022 - 1 April 2023)
  3. Estimated service charges for (1 April 2023 - 31 March 2024)

Rents and Service Charge Review Project

Please note, following consultation with tenants and leaseholders which started in October 2022, and the setting up of a group of tenants, leaseholders, and other stakeholders to discuss how service charge changes would work, we are introducing a new scheme on 1 April 2024. As a result, changes to your service charges set out on this webpage will only apply for one year until we have finished this review. Follow this link for more information on the work of the consultation group.

Service charge account for your property

Your leasehold property has its own leasehold service charge account. This means that if you have only recently purchased your property under the Right to Buy scheme then the information shown will be for the full 2022-2023 year, but your contribution will have been prorate for the number of days you were a leaseholder in the year. If you purchased the property off a current MKCC leaseholder then the transactions shown are for the property for the year and could include transactions made by the previous leaseholder.



1. Summary of your service charge account 1 April 2022 - 31 March 2023

Please note any payments you have made after 31 March 2023 will not be included in the summary of your account that you will receive in August 2023.

The intention of us showing the table below is to breakdown your account summary, and provide additional explanations of what each of the elements mean, hence it does not include any amounts that you will find on your actual summary.


A summary of your Service Charge Account 2022-2023 (as at 31 March 2023)

(1) Balance on account as at 31 March 2022

This is your actual account balance as at Thursday 31 March 2022 taking into account all charges, payments and any accounting adjustments on your account. If you are registered for My Milton Keynes and log into your account, this is the balance you will see on screen.

(2) Deficit or surplus for 2021-2022

This is the deficit or surplus adjustment that was applied to your service charge account on either 18 or 19 October 2022 for the 2021/2022 service charge year.

Deficit is when we have spent more than what we have collected from you during the year.

Surplus is when have collected more from you than what we actually spent and is shown as a (-).
(3) Actual account balance on 31 March 2022 This is the value from Point (1) + value from Point (2)
(4) Your actual service charges This is the Actual Expenditure for period 1 April 2022 - 31 March 2023
(5) Total amount due in year This is the value from Point (3) + value from Point (4)
(6) Less payment received 2022-2023 Payment made by all methods, plus payments of housing benefit and universal credit paid to Milton Keynes City Council directly. Transactions are for the period 1 April 2022 and 31 March 2023.
(7) Account adjustment completed in 2022-2023 Any accounting adjustment made against your account for the period 1 April 2022 to 31 March 2023. An example would be a refund or adjustment to any service charge.
(8) Balance carried forward as at 31 March 2023

This is the actual account balance as at 31 March 2023 after we have applied any adjustment to show any deficit or surplus to your account for the 2022/2023 year. We have already written to you as part of our Consultation C where we have proposed how payment of service charges will be made this year and also how we will discuss the payment of any account balance on your account as at 31 March 2024.

As we mentioned, this value does not include the payments you have made after 31 March 2023.

 

2. Annual certificate & statement of affairs 1 April 2022 - 31 March 2023

After the accounting year ends, we work out what we actually spent on works and services for each block, estate and heating system and send you a statement of your contribution.  This is called the Annual Certificate. We will send the actual service charge for the previous year by 30th September annually. Your certificate is approved by the Housing Finance Manager at the council as a fair summary of costs.

The table below is a breakdown of a statement with additional explanations.

 Details about your service charges E D C B A

Each value (E-A) explained

This explains how we are getting to the final value of your share

E - Average block charges in year

it is the charge for the whole block

D - Apportionment factor

it is the % of your share from the whole block

C - Your share of the actual cost in 2022/23

it is the charge for the block multiplied by % of your share

B - Our estimate of your share in 2022/23

it is the estimate of your charge that we made last year

A - Difference between estimated cost and actual cost - deficit or surplus

it is our estimate less the actual cost

 Block charges | In this section of actual we show all charges (E-A)

- TV aerial maintenance
- Cleaning service
- Door entry systems maintenance
- Electrical maintenance
- Fire alarm system maintenance
- Fire risk assessments
- General repairs and maintenance
- Heating charges
- Communal heating system maintenance
- Communal electricity charges
- Lift servicing and maintenance
- Pest control services

Block charges explained

Please note, some of the comments here refer to both, the estimates and actuals.

  • Changes to how we estimate your service charge

Service charge estimates are generally set based on known expenditure events, such as monthly service visits and inspections and then a contingency for one off repairs that are completed is added.

When preparing this years service charges it was noted that the following items appear to be recharged on what is called a “responsive basis”, where works are completed as requires with none or limited scheduled work.

  • TV aerial maintenance
  • Door entry system maintenance
  • Fire alarm system maintenance
  • Pest control services

As a result in setting estimated service charges for this year, we have not made any direct provision for these costs, but have introduced a new “general maintenance” structure.

  • Cleaning and Caretaking Services

Our in house caretaking and cleaning services complete a number of different tasks. Historically not all leaseholders have been recharged the caretaking service even though they receive the service.  We have recharged the capped limit of £100 for both years, even though the actual cost to us is around £225 per property.

The tenant and leaseholder group have asked that both these services be reviewed and a new sub group has been established to review these services.

  • Fire risk assessments

We did not undertake any fire risk assessment inspections in 2022/2023 and to date have not completed any this year.

We will shortly be commencing a formal consultation about our repairs service and this is likely to require us to reprocure certain services from external contractors and the completion of fire risk assessments is one of these services.

It is unlikely that this will be completed in full this year and therefore we have taken the view to exclude any costs from your estimate for 2023/2024.

  • New General Maintenance arrangements

Service charges for general repairs and maintenance can be very variable as one year a block can have a lot of repairs and other years a limited number, so service charge estimates can be very hit and miss.  In order to try and reduce possible large deficits and surpluses we have come up with a simple set of bandings, details of which are shown in the table below.

We have used the actual cost of repairs recharged for each block and then apportioned for each property to place your property in one of the below bandings. Please note, the number in brackets in column 'Banding' shows number of leaseholders in each banding.

Banding Range Estimate
for
2023-24
V. LOW (800) Under £50 £50.00
LOW (200) £50-£100 £75.00
MEDIUM (350) £100-£200 £150.00
HIGH (200) £200-£300 £200.00
V. HIGH (100) Above £300 £300.00
  • Heating Charges

When setting the estimates for 2022-2023 we made a number of assumptions that were wrong. For instance, estimating that heating changes and communal electricity would rise by 6% when in fact it rose by 240%. This means a number of leaseholders will be asked to pay considerably more for their actual service charges than they would have expected.

We are very sorry for getting this so wrong and appreciate that a large and unexpected charge is very unhelpful especially in these difficult times. To help, we do not expect leaseholders to clear their balance immediately and will be in contact to discuss how payments can be made over a longer period.

  • Heating Charges – Estimates 2023/2024

As a local authority we procure our electricity and gas through a consortium called LASER.  This gives us very competitive rates for gas and electricity which for last year were around 18% lower than the rates after the governments price cap.

We are sure you are aware that energy prices spiralled out of control following the pandemic and the events in Ukraine and for us this was reflected in a 224% rise in gas prices and a 66% for electricity.

This was further compounded by the way in which we had previously set service charges for both tenants and leaseholders, in that we used to take the previous average spend and add a small percentage increase.

For 2023/2024 we have adopted a new approach which looked at the consumption in kilowatt hours and then we applied the know new contract prices.  This has resulted in service charge estimates for gas and electricity in some cases more than tripling in value.

In looking to set estimates for 2023/2024 we had to take into consideration our contracts annual price increase which takes place on 1 October 2023.  We were advised by our expert energy consultants to build in a further price increase of 55% which drove up estimates even higher.  These estimates where calculated in February 2023 and charged from April 2023.

However, recently we have seen the first reduction in wholesale energy prices, which has slowly started to flow down to domestic supplies for households.  At this time we have not been told what to expect in our commercial contract, but its likely that we will not see a 55% price increase.

Please note if you are claiming housing support under Universal Credit then this element is ineligible.

Heating charges – contact us in October

We have based your service charge estimate on the figures that were prepared in February 2023.  If in October we do not see a 55% price increase then we would be happy to agree a reduction in your service charge estimate for this year and if you pay by direct debit look to reduce your instalments.  Contact us on the details shown below

Property charges | In this section of actual we only show charges related to the property (C-A)

- Property specific repairs
- Building insurance premium - residential
- Building insurance premium - non residential
- Caretaking services
- NEW - fire door inspection & asset recording
- NEW - Major works without consultation
- Management charge
- Ground rent charge 

Property charges explained

Please note, some of the comments here relate to both, the estimates and actuals.

  • Buildings insurance premiums

Our insurance policies are arranged by Cambridgeshire County Council with renewal taking place on 1 October each year.

We have been briefed by the Insurance Team that insurers are demanding that properties have a high “sum insured” value to take account of the rising costs of building materials and labour and this therefore has the effect of increasing premiums.

In the press and social media there is evidence to suggest that premiums have risen by as much as £100 to £200, but we believe that having a corporate policy with a large number of properties covered by it, should give us some protection.

For your estimate this year we have increased the premium by only 10%.

  • New – Major Works without consultation

This is a new service charge expenditure item which was not part of our original service charge estimates for 2022/2023.

Whilst reviewing each of the works order records from Mears our repairs and maintenance contractor, details of which you can find on our web pages it was clear that during the year we had completed works which had cost more than £250 for any leaseholder and therefore under The Service Charge (Consultation Requirements) (England) Regulations 2003 we should have consulted you first before works were completed.

The consequence for us is that we can now only charge you the sum of £250 even if the cost that would have been collected from you through a Major Works Account would have been much higher.

Therefore, some leaseholders where works have been completed have a value of £250, £500 or £750.  Values greater than £250 are where we have completed more than one “set of works”, so for example we replace the emergency lighting and instal new boundary fencing.

  • Management Charge

The management charge for last year was calculated at a sum of £154.  Whilst we are in the middle of the ongoing consultations, we have not recalculated this, instead rounded it to £155 per property.  We will recalculate this once we have completed the consultations.  For garage leaseholders we have set a charge of £50 per year.

  • Ground rent

Some leaseholders are required to pay a minimal ground rent of £10 per year. Whilst the regulations require the freeholders to request it in a set way annually, most landlords now include it as a service charge component to save both time and cost.

If any leaseholder declines to pay this sum as it is not correctly demanded, we may choose to make a demand up to the time limitation as ground rents are always payable on demand even if made retrospectively.

Total charges | In this section of actual we only show your total charges (A)

Total actual service charges 2022-2023

Total estimated charge for 2022-2023

Deficit or surplus for year

£xx.xx

£xx.xx

£xx.xx

3. Service charge estimate for 1 April 2023 - 31 March 2024

Each year, between October and January, we look at the services we provide you and how much they currently cost to operate. We consider if these are likely to change during the next year, and we calculate what we think it will cost to operate for the following year. This is called ‘our estimate’. We normally send these in February, however this year we are our sending our estimates in September, and from next year onwards we will be sending them in February.

Table below is a breakdown of your statement with additional explanations.

 Details about your service charges Your estimate for
2023-2024

Your estimate for 2023-2024

Please note, in this year estimates we only show your share of the charge. If you would like to see how your share is calculated you can use the block estimate multiplied by your apportionment percentage from the 2022-2023 Actual above.

For detailed explanations of how specific elements of Our Estimates are calculated also please refer to the 2022-2023 Actual above.

Block charges

TV aerial maintenance
Cleaning service
Door entry systems maintenance
Electrical maintenance
Fire alarm system maintenance
Fire risk assessments
General repairs and maintenance
Heating charges
Communal heating system maintenance
Communal electricity charges
Lift servicing and maintenance
Pest control services

Property charges
Property specific repairs
Building insurance premium - residential
Building insurance premium - non residential
Caretaking services
NEW - fire door inspection & asset recording
NEW - Major works without consultation
Management charge
Ground rent charge 
Total charges
Total Estimated service charges 2023-2024 - AMOUNT TO PAY £xx.xx

 

Other important information

Paying for your estimates

Your estimated service covers the period 1 April 2023 to 31 March 2024. As per our proposal to shorten this year’s period so that the year ends on 31 March 2024, those of our customers that pay by direct debit on a regular basis will only have 7 months in which to make payments.

Any balance that remains on your account on 31 March 2024 we will discuss with you and agree a suitable repayment arrangement, which will be in line with the outcome of the ongoing consultation.

If you pay by direct debit, then we will not take any account of the current balance on your service charge account. This is because we need to give you a certain amount of notice under the direct debit scheme to take payments in early September, but we will not have your account balance to the end of August until 1 September.  Direct debit instalment amounts will be calculated assuming a full year, so for example is you pay monthly the amount will be divided by 12.

  • Payments by direct debit

If you pay your service charges by direct debit, we will automatically calculate your new instalments for 2023/2024.  They will only be based on your new estimate and not include any credit or debit balances on your account.

Payments for Friday 1 September and Monday 4 September will not be requested until Tuesday 5 September. This is to give you enough notification of your new payments.

If your new payments are currently unaffordable, please do not cancel your direct debit. Just call us and we can discuss reducing your payments. We can amend payments up to four days before they are due.

Summary of Tenants’ Rights and Obligations

1. This summary, which briefly sets out your rights and obligations in relation to variable service charges, must by law accompany a demand for service charges. Unless a summary is sent to you with a demand, you may withhold the service charge. The summary does not give a full interpretation of the law and if you are in any doubt about your rights and obligations you should seek independent advice.

 

2. Your lease sets out your obligations to pay service charges to your landlord in addition to your rent. Service charges are amounts payable for services, repairs, maintenance, improvements, insurance or the landlord's costs of management, to the extent that the costs have been reasonably incurred.

 

3. You have the right to ask the First-tier Tribunal to determine whether you are liable to pay service charges for services, repairs, maintenance, improvements, insurance or management. You may make a request before or after you have paid the service charge. If the tribunal determines that the service charge is payable, the tribunal may also determine -

  • who should pay the service charge and who it should be paid to;
  • the amount;
  • the date it should be paid by; and
  • how it should be paid.

However, you do not have these rights where-

  • a matter has been agreed or admitted by you;
  • a matter has already been, or is to be, referred to arbitration or has been determined by arbitration and you agreed to go to arbitration after the disagreement about the service charge or costs arose; or
  • a matter has been decided by a court.

4. If your lease allows your landlord to recover costs incurred or that may be incurred in legal proceedings as service charges, you may ask the court or tribunal, before which those proceedings were brought, to rule that your landlord may not do so.

5. Where you seek a determination from the First-tier Tribunal , you will have to pay an application fee and, where the matter proceeds to an oral hearing, a hearing fee, unless you qualify for fee remission or exemption. Making such an application may incur additional costs, such as professional fees, which you may have to pay.

6. The First-tier Tribunal and the Upper Tribunal (in determining an appeal against a decision of the First-tier Tribunal) have the power to award costs in accordance with Section 29 of the Tribunals, Courts and Enforcement Act 2007.

7. If your landlord -

  • proposes works on a building or any other premises that will cost you or any other tenant more than £250, or
  • proposes to enter into an agreement for works or services which will last for more than 12 months and will cost you or any other tenant more than £100 in any 12 month accounting period.
  • Your contribution will be limited to these amounts unless your landlord has properly consulted on the proposed works or agreement or the First-tier Tribunal has agreed that consultation is not required.

8. You have the right to apply to the First-tier Tribunal to ask it to determine whether your lease should be varied on the grounds that it does not make satisfactory provision in respect of the calculation of a service charge payable under the lease.

9. You have the right to write to your landlord to request a written summary of the costs which make up the service charges. The summary must-

  • cover the last 12 month period used for making up the accounts relating to the service charge ending no later than the date of your request, where the accounts are made up for 12 month periods; or
  • cover the 12 month period ending with the date of your request, where the accounts are not made up for 12 month periods.

The summary must be given to you within 1 month of your request or 6 months of the end of the period to which the summary relates whichever is the later.

10. You have the right, within 6 months of receiving a written summary of costs, to require the landlord to provide you with reasonable facilities to inspect the accounts, receipts and other documents supporting the summary and for taking copies or extracts from them.

11. You have the right to ask an accountant or surveyor to carry out an audit of the financial management of the premises containing your dwelling, to establish the obligations of your landlord and the extent to which the service charges you pay are being used efficiently. It will depend on your circumstances whether you can exercise this right alone or only with the support of others living in the premises. You are strongly advised to seek independent advice before exercising this right.

12. Your lease may give your landlord a right of re-entry or forfeiture where you have failed to pay charges which are properly due under the lease. However, to exercise this right, the landlord must meet all the legal requirements and obtain a court order. A court order will only be granted if you have admitted you are liable to pay the amount or it is finally determined by a court, tribunal or by arbitration that the amount is due. The court has a wide discretion in granting such an order and it will take into account all the circumstances of the case.

How to get in touch

Based on the feedback from tenants and leaseholders, in this year servicer charge letter we’ve provided more information than ever before, and this pages is to summarise the letter. We hope you find it helpful. However, if you can’t find what you need to know, you can get in touch in one of the ways listed below.

Housing - Home Ownership Team

Home Ownership Team - contact information

Civic, 1 Saxon Gate East, Milton Keynes MK9 3EJ