Service Charge and WMC

[Sally Bertram]

Hi there,

Following a great webinar a month or so ago about how we should be working out service charge and adding it to the WMC so that it is covered by Local Housing Allowance, we are now in the middle of a bit of an overhaul of how we run our almshouse charges!

I have a very useful spreadsheet that was provided by the chap who led the seminar, that shows all ‘allowable’ expenses for service charge. However, I’m not sure from it whether we can include the following items:-
– Routine maintenance within individual properties e.g. new bathrooms / kitchens / boilers / periodic decorating
– Repairs within individual properties – e.g. replacement of a broken tap or air vent

Does anyone know the answer to this?

Many thanks!

Sally Bertram
Thornbury Town Trust

[Clare Heyes]

Dear Sally,

The two maintenance items you mention are not service charges. If you download the specimen budget from the Association you will see these are separate items within the wmc . Service charge is usually things like communal or individual utilities or communal gardening/cleaning/lift servicing/warden costs. General maintenance is not a chargeable service. The basics of service charge is that you must be able to work out what it is from invoices and you can’t make a surplus. You can’t foretell maintenance issues, hence why they are not a service charge.

Hope this helps.

Kind regards,
Clare
Legacy East Almshouse Partnership

[Sally Bertram]

Hi Clare

Thank you for your reply.

I notice you say individual utilities are in service charges, but I had thought that during the webinar we were told they should not be included.

They also told us that you estimate what the year will be, and then look at actual cost at the end of the year and adjust the following year accordingly, to ensure that you don’t make profit or loss. I also thought they had said that we do include general maintenance – I just wasn’t sure if it was individual flats as well as communal areas.

So your message has left me more confused than ever!

Does anyone else know the correct situation as it seems that at least two of us have different understandings?

Many thanks.

Sally

[Clare Heyes]

Dear Sally,

Sorry to confuse the situation. With regard to “individual utilities”, I have a site with a single communal electricity meter so the residents are all charged a service charge for their electricity but it is just divided up amongst the six of them. It is still a service charge but not covered by Benefits or Universal Credit. However, the electricity used by the lift to the flats or communal lighting is a service charge that is covered by benefits or UC! Obviously with only one meter we need to take a view on this and it is a best guess.

I am absolutely sure that general maintenance is not a service charge but stand to be corrected by the Association if I am wrong.

Kind regards,
Clare

[Sally Bertram]

Hi Clare,

That makes more sense now – thank you! All our residents have their own meters, which is obviously different to your set up. It looks like we are on the same page with how that all works, which is a relief to me!

The maintenance bit I’ve no idea, so will go with your thoughts on that one.

Thank you for taking the time to answer 🙂

Kind Regards
Sally

[Tina Collins]

We are just about to start the process of looking at WMC + service charge so any template/guidance would be greatly appreciated.
Please send to clerk.feoffee.osm@gmail.com.
Thanks
Tina

[Jane Edwards]

This matter is most confusing isn’t it? I rather think local authorities each have their own way of dealing with what constitutes a service. Further, we understand a service charge can only be charged if a social rent (wmc) is in place rather than an affordable rent, the method of calculating wmc increases being different for each, of course. We would be interested to get to the bottom of this if indeed a bottom can be located!
Jane
Berkswell Charities

[Sally Bertram]

Hi Tina,

I’ve just emailed you the spreadsheet template that I was given after the webinar. I hope it helps, but do let me know if you have any other questions!

KR
Sally

[William Clemmey]

Dear Sally
As the person who ran the webinar I hope I can be of help

The webinar is on the Almshouse Association website under
Maximising the WMC through Service Charges – November 2024
webinar recording
It has the link to the paper explaining what you can include labelled as pdf
It also has our Service Charge spreadsheet showing what you can include and which you can use to calculate the service charge. It also includes worked examples for our 5 almshouses see
excel spreadsheet – referred to in webinar

I am happy to send you these papers and also to chat about implementing the Service Charge

Here is the summary of what you can include and maintenance is one of those criteria. You can put the figures from last year into the spreadsheet plus a n amount for inflation. Then for next year you check whether or not you are in deficit or surplus. If a surplus then you can reduce the next year’s budget by theat amount for residents. If in deficit then they need to be charged more

Aerials
Asbestos survey / inspections and remedial work
Audit Fees
Bins and Rubbish
Boiler Servicing
Building Insurance
Boiler Insurance
Caretaking – scheme managers = 25%
Other staff costs – Chief/Clerk/Finance officer = 15%
CCTV
Communal Areas Electric
Communal Areas Gas
Communal signage
Communal telephone (lift)
Concierge (access and monitoring)
Contract servicing – fire safety
Contract cleaning
Contracted works – paths, parking, gardening equip
Controlled door entry – costs of repair and maintainenance
Electrical maintenance – inc inspections
Gas maintenance – inc inspections
Fire alarm test and maintenance
Communal areas – furniture, white goods, décor
Gardening and Grounds Maintenance
Laundry Facilities
Lift maintenance and repairs
Lighting – communal inc lightbulbs
Management Fee (12% of WMC at 95% occupancy)
PAT testing
Pest control
Routine Maintenance
Void costs – Actual 2022/23
Water testing and hygiene
Water pump and sewerage
Window Cleaning
WIFI – Monthly charges
Stair Lifts
Health and safety –
Gardener/Handyman
Hope that helps

William Clemmey
chiefofficer@municipal-charities.org.uk 07922508913

[Sally Bertram]

Hi William,

Thank you for your reply – and thank you for a great webinar – it was so useful and informative.

I have the lists that you refer to already. I think the one aspect I am unsure about is the ‘routine maintenance’ – is this for communal areas or for individual flats?

For example, would decorating the communal hallway count as service charge as allowed by Local Housing Allowance?
And / or would decorating one individual’s flat count as service charge allowed by LHA?

After lots of consideration I am coming to the conclusion that the WMC itself is for the maintenance of the individual flats, and the routine maintenance included as part of the extra service charge is relating to communal areas. Or is that not the case?

If you could clarify this that would be absolutely wonderful!

Many thanks.

Kind Regards,

Sally

[William Clemmey]

Sally
They both count – all maintenance can be included

Repairs
Maintenance sinking fund, handyperson services, ERF and CMF and white goods depreciated over time, Wi-Fi service eligible, depreciate the capital on this
Eligible

On the worked example on the excel spreadsheet line 36 shows our expenditure for different almshouses
Routine Maintenance £3,622.40 £1,024.85 £2,597.55 £1,537.27 £2,049.70 £10,831.77

I think the easiest way to see the difference is as follows
Treat the WMC as the “rent” paid to live in the property. Treat the Service Charge as the cost to the resident of providing the maintenance and servicing cost
To quote One Vision Housing https://ovh.org.uk/understanding-service-charges/
What is a service charge?
A service charge is your contribution towards the costs of additional services which are beyond the benefit of occupying your home.

Service charges can include the provision of security (CCTV monitoring, equipment depreciation and maintenance), cleaning, heating and lighting in communal areas, as well as grounds maintenance and other services.

Hope that helps
William

[Sally Bertram]

Dear William,

Thank you so much for this reply – I am now crystal clear on all of it and really appreciate both your replies!

Thank you again!

Kind Regards,

Sally

[Tina Collins]

Thanks, William, for an extremely informative webinar and for sharing your templates, which we have now used and the trustees have adopted!
Once last question – how did you establish what could be included in the service charge in case our local HB office challenges us?

[William Clemmey]

Tina
We started by Googling other housing Associations to see what they charged in their service charges for example Clarion Housing
file:///C:/Users/Home/Dropbox/My%20PC%20(DESKTOP-7M2A18S)/Downloads/service-charge-faq-2024-25-final.pdf
and others

We then drew up the list of items as shown in our paper. We had a zoom meeting with Michael Patterson from New Thinking in Supported Housing who was recommended by the Almshouse Association . He agreed that our list was correct. His charges are 15% of the increase achieved.
Our Finance Officer then realised that she could calculate it all herself with the excel spreadsheet that we circulated.
So we did it all ourselves so saving £17,700 in fees
Our Housing Benefits officer was very happy with the result and wondered why we had not done this before!

Hope that helps
William

[Sally Bertram]

Hi William,

I have another question!

I am trying to update our Residents Handbook to reflect the changes we are making with regard to the service charge. I have previously used the Template provided by the Almshouse Association, but this makes no mention of service charge being separate.

Do you happen to have a Residents Handbook for your residents, and if so, would you be be willing to share how you have described WMC / service charges in that handbook?

My email is sallytowntrust@gmail.com if that is easier than replying on here.

For reference, the section I am referring to is on page 8 and 9 in the Almshouse Association template.

Thank you so much!

Kind Regards,

Sally

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