Service charge period
Our customers have told us in the past that they are not happy with the fact that the rent and service charge period are not aligned. Rents are reviewed in April and service charges in July each year. We are therefore considering a change to bring the service charge period in line with the rent period – from April to the following March.
All affected residents will have received or will shortly be receiving a letter in the post giving details of the proposed changes and consultation.
Please be assured no decision has yet been made on this and the feedback we receive from the customer consultation will be a key factor in the decision-making process.
To take part in the consultation, please complete this survey: https://www.surveymonkey.co.uk/r/servicechargeperiod
If you have any questions, please email us at CustomerConsultation@paradigmhousing.co.uk
If you would like to view our FAQs regarding this proposal, please view these below.
What is the financial year?
The financial year runs from 1 April to 31 March of the following year.
For example, 1 April 2021 to 3 March 2022.
What is the service charge charging period?
The period in which you pay the service charges for a financial year.
For example, you receive a notification of change to service charge costs in June 2021 for payment in the period July 2021 to June 2022.
What are actual costs?
These are the actual costs for the services you received in the previous financial year.
What are estimated service charges?
Estimated service charges are the expected level of costs that we budget for to provide services to our customers during the financial year. We estimate service charges for the next financial year by basing them on the last known actual costs, contracts in place and any allowance for inflation.
When do I pay estimated service charges?
You pay estimated service charges for the financial year in the period July of the financial year to June of the following financial year, known as the service charge charging period.
For example, the estimated service charge for the financial year 1 April 2021 to 3 March 2022 is charged to and paid in service charge charging period July 2021 to June 2022.
What are over recoveries?
Over recoveries occur when the actual costs of providing the services are less than the budgeted costs.
What are under recoveries?
Under recoveries occur when the actual costs of providing the services are greater than the budgeted costs.
When do we assess the over and under recoveries?
Our current process is for a review of the previous financial year to be undertaken in April and May of the following financial year.
For example, for the financial year ended 3 March 2021 we review the actual costs for the period 1 April 2020 to 31 March 2021 in April 2021 and May 2021.
When do Paradigm make an adjustment for under and over recoveries?
The under/over recoveries are added/deducted from the estimated service charge for the following financial year.
For example, the under and over recoveries for financial year ended 31 March 2021 are calculated in April 2021 to May 2021and are added to or deducted from the estimated service charge which is charged to customers in the period July 2021 to June 2022.
Why I am being consulted on the proposed change to the service charge charging period?
It is really important to us that customers are consulted – after all, you are the ones who have to pay the service charge, and you should have the opportunity to express a view on the proposal to align rent and service charge charging periods. The law requires that everyone paying variable service charges should be consulted before a landlord carries out such a change and we are happy to ensure this happens.
What is the proposed change?
We are proposing to align the service charge charging period with the rent charging period, which is in line with the financial year, 1 April to 31 March of the following year.
Why is the change being proposed?
Our customers have told us in the past that they are not happy with the fact that the rent and service charge period are not aligned. Rents are reviewed in April and service charges in July each year. We are therefore considering a change to bring the service charge period in line with the rent period – April to following March.
What are the benefits to me of the proposed change to service charge charging period?
- Simplify the communications in relation to your rent and service charges
- If you receive benefits, the process for updating the Department of Work and Pension in relation to the change will be more straightforward and reduce duplication of effort
- Provide you with the ability to manage your housing budget more efficiently and only once a year in relation to rent and service charges
- Allow more time for the service charge team to review and ensure service charge over and under recovery analysis is robust and accurate prior to communicating this to you
- Allow you extra time to review and challenge the under and over recoveries ahead of budget setting for the following year
- Will improve the budget setting as prior year costs are reviewed in more detail and reduce the year-on-year movements in costs arising from under and over recoveries adjustments
Would that impact me financially?
For the current financial year April 2021 to March 2022.
Rent is charged April 2021 to March 2022
Service charge charging period is July 2021 to June 2022.
You are currently paying estimated service charge for financial year 2021/2022 and under and over recoveries from 2020/2021 in the period July 2021 to June 2022.
For the first year following change to the service charge charging period.
Rent will remain as is it now, charged from 1 April 2022 to 31 March 2023.
Estimated service charge
Service charge charging period will be 1 April 2022 to 31 March 2023 – not July 2022 to June 2023 based on the current process.
By changing the service charge period to align with the rent charge there will be a three-month period, April 2022 to June 2022 when customers would be paying both 2021/2022 current amounts payable and 2022/2023 budget.
We will lessen this financial burden on you by recovering the last three months (April, May and June 2022) of the current service charge charging period (July 2021 to June 2022), in the period April 2022 to March 2023. This means we will recover three months of charges across a 12- month period.
Under and over recoveries
Any under or over recoveries arising in the current financial year 2021/2022 will not be charged in financial year 2022/2023 but pushed forward to 2023/2024.
Going forward there will always be a 12-month gap between the end of the financial year end and adjustments being made to customers statements in respect of under and over recoveries.
This allows for greater scrutiny of the actual costs by ourselves and our customers, with details of the under and over recoveries being published to our customers in September commencing in 2022.
For example, we will review financial year 2021/2022 in April 2022 to August 2022 and advise our customers of the actual costs versus budgeted costs in September 2022. The final over and under adjustment will be included in the service charge statement published in February 2023, with the service charge charging period being April 2023 to 2024.
Please note that we will not be able to advise on budget levels for 2022/2023 until January 2022.
Please note that we will not be able to advise on under and over recoveries in relation to 2021/2022 until September 2022.