Service charges â the bare necessities
Supporting Older People Conference
PC5: Service charges and your tenants – the bare necessities Speakers:
Pascale Mezac Business Planning Services Plan2moro
Jane Harrison Finance Director, Women’s Pioneer Housing and Chair, CIPFA Panel
Chair:
John Bryant Policy Leader National Housing Federation
Service charges – the bare necessities Pascale Mézac Plan2moro Business Planning Services Jane Harrison Women’s Pioneer Housing
Outline • • • • •
Equality, choice and affordability Are you breaking even? Value for money Involving tenants and leaseholders Accounting and reporting
Equality • Tenants, leaseholders, shared owners or freeholders: all are involved! • Treat every resident the same – even though their liability might be different • Raise awareness by sharing same information with tenants and leaseholders • Use same framework for consultation (section 20 notice for leaseholders) • Raise your game
Rent £ - what for • Repairs, • Maintenance and • Insurance of the properties, as well as • Housing management, which includes the administration of tenancies - from start to finish.
Service charges • Some tenancies and lease agreements have a charge for services • This charge is for services not covered by the rent and provided in the neighbourhood • Two types of service charges: Communal – relating to shared areas Services to individual homes
Services
Housing benefit eligible charges • • • • • • • • •
Communal charges Caretaking cleaning of communal areas Laundries door entry CCTV fire alarms Grounds and gardens maintenance in communal areas Heating and lighting in communal areas Communal TV aerials Plant and specialist equipment Management and admin charge
Charges not eligible for housing benefit • Services to individual homes including: • Heating and hot water in the home • Lighting and water charges in the home • TV licences • Grounds and gardens maintenance • Off–mains sewerage and waste removal Watch out for local differences
Are you breaking even? • Identify all your chargeable services costs and income Globally Service based – is your apportionment basis right? Block level – be prepared to present your accounts to the residents Unit based – is it affordable?
• Is the service received worth the expense?
Value for Money • Compare costs between blocks or schemes: your residents do and you should too • Setting service standard: do nothing is an option for non-core services • One blanket standard doesn’t always work: basic one but vary to meet local needs Example: door entry (high rise –v- 2 flats block)
• Localised budget implies local reporting: have you got the capacity?
Benchmarking 2010/11 CHARGEABLE SERVICE COSTS - INCOME RECOVERY £5,000,000
110%
100%
100%
101%
100%
98%
£4,500,000 90% £4,000,000
£3,500,000
70% £3,000,000
£2,500,000
62%
64%
50%
53% 42%
£2,000,000
30% £1,500,000
26% £1,000,000 10% £500,000
£0
-10%
Total Service Charges Income
% overall recovery of Service Charges
Total Service Costs (excluding support costs)
Understanding Benchmarking • Understand how global figures are made up Income might include last year’s leaseholders’ improvements Expenditure might exclude ad hoc spend or staffing Mind the gap!
• Use outcomes to highlight issues and compare Reality check: would you pay £5/week for window cleaning?
£72.16
35.00
Weekly I&E per charge type 30.00
INCOME - Communal charges 25.00
EXPENDITURE - Communal charges costs INCOME - Charges for services to individual homes EXPENDITURE - service chargeable costs to individual homes
20.00
INCOME - Leaseholders' specific charges EXPENDITURE - Leaseholders' specific costs
15.00
10.00
5.00
1
2
5
6
7
8
10
11
Choices and Change
Quality of life and making choices • In your neighbourhood, how can you improve your residents’ quality of life? • In your residents’ homes, how can you improve their quality of life? • Small incremental changes make bigger impact • If it wasn’t “free”, how much would residents be prepared to pay for that? • What do you think they would rather do without? • Can they afford the services you think they need? • Designing service charges out of new development Have you asked your residents what they wanted?
Consultation • • • • • • •
Residents – tenants and leaseholders Residents’ panels and sounding board Improved democracy Meeting local needs Working with contractors Seeking feedback Action: inform residents and staff what you are doing about it
Involving tenants and leaseholders • Tenants – – – –
Consultation Expectations Information Friction with leaseholders (particularly where property sub-let by the leaseholder) – Managing arrears
• Leaseholders – – – –
Consultation Expectations Information Friction with tenants (especially repairs) – Managing arrears
Legal requirements • Information about rights of residents sent with every demand for service charge • Consultation – Changes to services – Moving fixed to variable – Major repairs (costs > £250, incl VAT) – Long term agreement (costs > £100, incl VAT)
Repairs consultation • Leaseholder responsible for: – Repairs to their own property – Their share of repairs to communal parts
• Consultation process takes about 3 months – Specification – Tender – Notification
• Beware improvements!!
What happens in an emergency? • No escape clause in the legislation • LVT dispensation under s20ZA (I) if deemed ‘reasonable to dispense with requirements’ (may be retrospective – but not guaranteed)
Making conversation .. • Variety – – – – – – – –
Letter Newsletter Website E-mail Facebook Twitter Phone Meeting
Sharing information • Service charge policy – Legal requirements – Expectations and responsibilities – Payment and debt recovery – Accessibility
Common areas of friction .. • Staffing costs • Heating and hot water – Individual dwellings – Common parts
• Cleaning, including pest control • Grounds maintenance – Gardening – Hedges and trees
.. and some suggestions to help • Consult – What do the residents want? – Are there alternatives? – Keep asking!!
Management charges • Payment for costs of administering services • Accounting • Audit • Lump sum or percentage? • Small survey in 2011 showed that of 10 associations, 6 charged 15% and 4 charged flat fee
3500 3000 2500 2000 1500 1000 500
0 A B C D E
F G H
Management fee
Size
I
J
Managing arrears • Clearly communicate arrears policy (tenants and leaseholders) • Monitor size of arrears (leaseholders may be ‘other debtors’) • Check information is issued on time and is complete (eg ground rent notice) • Communicate • Legal advice/support
Accounting and reporting • Service charge accounts – Leaseholders – Tenants
• Purpose • Preparation and certification/audit
Service charge accounts • No statutory requirement for routine preparation and content of service charge accounts • Provisions of lease/tenancy agreement are key • Sources of best practice: – ICAEW Technical Release 03/11 – Service charges: A guide for housing associations (4th edition) NHF
What information do residents want? • Service costs – How much does each service cost? – Has anything been included that shouldn’t have been? – Are the costs reasonable?
• Service charges – – – –
Do I need to pay any more for the previous year? What do I need to pay next year? Why have they gone up so much? Should I be saving for any big costs that may be just around the corner?
Tenants • Tenant service charge statement: – Current year forecast – New year estimate – New charge based on cost estimate plus under/over recovery from previous year
• Used primarily to support new service charge
Leaseholders • Two statements – Estimated service charges – Service charge statement
• Estimated service charges – Issued before the start of the year – Used as basis for monthly charges
Leaseholders • Leaseholder service charge statement: – Actual – Budget – Prior year actual
• Schedule of repair costs • Explanation of variances • Reconciliation of opening/closing balance on the individual account • Certification
Technical Release 03/11 • Issued by ICAEW in October 2011 • Brings together best practice accounting and reporting of variable service charges • Provides example service charge accounts – Income and expenditure account – Balance sheet – Notes to accounts
• Provides work programmes for auditors – Complexity depends on whether audit or factual report on service charge accounts
Sinking fund • Spreading the cost of major repairs – Lift – New roof
• Collecting the money in advance to avoid large one-off claims • Lease agreement • Establishing a new sinking fund
Way forward • Keep up to date with changes in service charge requirements, including reporting – NHF (www.housing.org.uk) – ICAEW (www.icaew.com) – CIPFA (www.tisonline.net)
• Involve tenants and leaseholders • Use variety of ways to communicate
Any questions ..
Contacts
[email protected]] [email protected]
PC5: Service charges and your tenants – the bare necessities Speakers:
Pascale Mezac Business Planning Services Plan2moro
Jane Harrison Finance Director, Women’s Pioneer Housing and Chair, CIPFA Panel
Chair:
John Bryant Policy Leader National Housing Federation
Service charges – the bare necessities Pascale Mézac Plan2moro Business Planning Services Jane Harrison Women’s Pioneer Housing
Outline • • • • •
Equality, choice and affordability Are you breaking even? Value for money Involving tenants and leaseholders Accounting and reporting
Equality • Tenants, leaseholders, shared owners or freeholders: all are involved! • Treat every resident the same – even though their liability might be different • Raise awareness by sharing same information with tenants and leaseholders • Use same framework for consultation (section 20 notice for leaseholders) • Raise your game
Rent £ - what for • Repairs, • Maintenance and • Insurance of the properties, as well as • Housing management, which includes the administration of tenancies - from start to finish.
Service charges • Some tenancies and lease agreements have a charge for services • This charge is for services not covered by the rent and provided in the neighbourhood • Two types of service charges: Communal – relating to shared areas Services to individual homes
Services
Housing benefit eligible charges • • • • • • • • •
Communal charges Caretaking cleaning of communal areas Laundries door entry CCTV fire alarms Grounds and gardens maintenance in communal areas Heating and lighting in communal areas Communal TV aerials Plant and specialist equipment Management and admin charge
Charges not eligible for housing benefit • Services to individual homes including: • Heating and hot water in the home • Lighting and water charges in the home • TV licences • Grounds and gardens maintenance • Off–mains sewerage and waste removal Watch out for local differences
Are you breaking even? • Identify all your chargeable services costs and income Globally Service based – is your apportionment basis right? Block level – be prepared to present your accounts to the residents Unit based – is it affordable?
• Is the service received worth the expense?
Value for Money • Compare costs between blocks or schemes: your residents do and you should too • Setting service standard: do nothing is an option for non-core services • One blanket standard doesn’t always work: basic one but vary to meet local needs Example: door entry (high rise –v- 2 flats block)
• Localised budget implies local reporting: have you got the capacity?
Benchmarking 2010/11 CHARGEABLE SERVICE COSTS - INCOME RECOVERY £5,000,000
110%
100%
100%
101%
100%
98%
£4,500,000 90% £4,000,000
£3,500,000
70% £3,000,000
£2,500,000
62%
64%
50%
53% 42%
£2,000,000
30% £1,500,000
26% £1,000,000 10% £500,000
£0
-10%
Total Service Charges Income
% overall recovery of Service Charges
Total Service Costs (excluding support costs)
Understanding Benchmarking • Understand how global figures are made up Income might include last year’s leaseholders’ improvements Expenditure might exclude ad hoc spend or staffing Mind the gap!
• Use outcomes to highlight issues and compare Reality check: would you pay £5/week for window cleaning?
£72.16
35.00
Weekly I&E per charge type 30.00
INCOME - Communal charges 25.00
EXPENDITURE - Communal charges costs INCOME - Charges for services to individual homes EXPENDITURE - service chargeable costs to individual homes
20.00
INCOME - Leaseholders' specific charges EXPENDITURE - Leaseholders' specific costs
15.00
10.00
5.00
1
2
5
6
7
8
10
11
Choices and Change
Quality of life and making choices • In your neighbourhood, how can you improve your residents’ quality of life? • In your residents’ homes, how can you improve their quality of life? • Small incremental changes make bigger impact • If it wasn’t “free”, how much would residents be prepared to pay for that? • What do you think they would rather do without? • Can they afford the services you think they need? • Designing service charges out of new development Have you asked your residents what they wanted?
Consultation • • • • • • •
Residents – tenants and leaseholders Residents’ panels and sounding board Improved democracy Meeting local needs Working with contractors Seeking feedback Action: inform residents and staff what you are doing about it
Involving tenants and leaseholders • Tenants – – – –
Consultation Expectations Information Friction with leaseholders (particularly where property sub-let by the leaseholder) – Managing arrears
• Leaseholders – – – –
Consultation Expectations Information Friction with tenants (especially repairs) – Managing arrears
Legal requirements • Information about rights of residents sent with every demand for service charge • Consultation – Changes to services – Moving fixed to variable – Major repairs (costs > £250, incl VAT) – Long term agreement (costs > £100, incl VAT)
Repairs consultation • Leaseholder responsible for: – Repairs to their own property – Their share of repairs to communal parts
• Consultation process takes about 3 months – Specification – Tender – Notification
• Beware improvements!!
What happens in an emergency? • No escape clause in the legislation • LVT dispensation under s20ZA (I) if deemed ‘reasonable to dispense with requirements’ (may be retrospective – but not guaranteed)
Making conversation .. • Variety – – – – – – – –
Letter Newsletter Website E-mail Facebook Twitter Phone Meeting
Sharing information • Service charge policy – Legal requirements – Expectations and responsibilities – Payment and debt recovery – Accessibility
Common areas of friction .. • Staffing costs • Heating and hot water – Individual dwellings – Common parts
• Cleaning, including pest control • Grounds maintenance – Gardening – Hedges and trees
.. and some suggestions to help • Consult – What do the residents want? – Are there alternatives? – Keep asking!!
Management charges • Payment for costs of administering services • Accounting • Audit • Lump sum or percentage? • Small survey in 2011 showed that of 10 associations, 6 charged 15% and 4 charged flat fee
3500 3000 2500 2000 1500 1000 500
0 A B C D E
F G H
Management fee
Size
I
J
Managing arrears • Clearly communicate arrears policy (tenants and leaseholders) • Monitor size of arrears (leaseholders may be ‘other debtors’) • Check information is issued on time and is complete (eg ground rent notice) • Communicate • Legal advice/support
Accounting and reporting • Service charge accounts – Leaseholders – Tenants
• Purpose • Preparation and certification/audit
Service charge accounts • No statutory requirement for routine preparation and content of service charge accounts • Provisions of lease/tenancy agreement are key • Sources of best practice: – ICAEW Technical Release 03/11 – Service charges: A guide for housing associations (4th edition) NHF
What information do residents want? • Service costs – How much does each service cost? – Has anything been included that shouldn’t have been? – Are the costs reasonable?
• Service charges – – – –
Do I need to pay any more for the previous year? What do I need to pay next year? Why have they gone up so much? Should I be saving for any big costs that may be just around the corner?
Tenants • Tenant service charge statement: – Current year forecast – New year estimate – New charge based on cost estimate plus under/over recovery from previous year
• Used primarily to support new service charge
Leaseholders • Two statements – Estimated service charges – Service charge statement
• Estimated service charges – Issued before the start of the year – Used as basis for monthly charges
Leaseholders • Leaseholder service charge statement: – Actual – Budget – Prior year actual
• Schedule of repair costs • Explanation of variances • Reconciliation of opening/closing balance on the individual account • Certification
Technical Release 03/11 • Issued by ICAEW in October 2011 • Brings together best practice accounting and reporting of variable service charges • Provides example service charge accounts – Income and expenditure account – Balance sheet – Notes to accounts
• Provides work programmes for auditors – Complexity depends on whether audit or factual report on service charge accounts
Sinking fund • Spreading the cost of major repairs – Lift – New roof
• Collecting the money in advance to avoid large one-off claims • Lease agreement • Establishing a new sinking fund
Way forward • Keep up to date with changes in service charge requirements, including reporting – NHF (www.housing.org.uk) – ICAEW (www.icaew.com) – CIPFA (www.tisonline.net)
• Involve tenants and leaseholders • Use variety of ways to communicate
Any questions ..
Contacts
[email protected]] [email protected]
