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Service Charges and Sinking Funds

 

The service charge you pay is split between the day-to-day services that keep the building and communal areas clean and tidy and in good repair, and the sinking fund is used for maintenance items that arise less often than once a year.

Your lease requires you to contribute to the sinking fund in order to build up reserves for the long-term maintenance of the building. If you sell your property, the contributions you have made cannot be refunded to you. The sinking fund will, however, be an asset that will attract buyers and/or secure a better price for your property.

If your lease did not say that you must make contributions to the sinking fund, you would have to find large lump sums each time major repairs or redecorations were needed.

If you are a shared owner of your property you will pay rent and a service charge. If you own all of your property and it is a flat you will no longer pay rent, but you will still have to pay a service charge for maintenance of the communal areas. If you own all of your property and it is a house you may own the freehold, but will still be required to pay a service charge if there are communal areas such as a shared garden, or shared parking areas.

Day-to-Day Services met from the Service Charge

These include:

  • Cleaning of the communal hallways and staircases if you live in a block of flats.
  • Maintenance of communal gardens and courtyards.
  • Electricity costs for lighting of the communal areas.
  • Day-to-day repairs to the communal parts and structure of the building.
  • Communal water supply charges.
  • Buildings and public liability insurance.

Sinking Fund

This is a savings fund used to build up reserves for the planned maintenance of the building, such as:

  • External decoration.
  • Decoration of the communal halls and stairways if you live in a block of flats.
  • Roof renewal.
  • Replacement of gutters and downpipes.
  • Window replacement.
  • Renewal of entryphones, lifts or shared TV aerials.

Money for the sinking fund is accounted for separately and interest is added. The service charge audited accounts that we send to you each year (in August/September) give details of the sinking fund, including the amount in the fund, how much we have collected, interest that has been added and the amount spent during the year.

Changes to Your Rent and Service Charge

Your rent and service charge will be reviewed once a year, and any increases or changes will take effect from the beginning of April each year. We will give you written notice of changes. Your lease gives information on how any increase to the rent is calculated.

The Service Charge Budget will be set in February each year based on the anticipated expenditure for the coming financial year. As soon as possible after the end of the current financial year, we will finalise the service charge accounts and have them checked by an independent auditor. You will be sent a copy of the account.

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Hexagon Housing Association
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