Tuesday, 12 June 2012

On Her Majesty's Secret Service Charge

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A certain minefield if ever there was one for most housing associations and UK housing groups. We have the ‘Iron Lady’ Mrs Thatcher to thank for most of our service charge woes, with her governments instigation of RTB (Right To Buy) legislation in the 1980’s.  The aim of creating a home-owning Britain was pretty much achieved with very high levels of home ownership, while on the downside decimating quality housing stock.

Eligible residents in attractive and stable areas, (or often their sons and daughters stumping up the deposits after generous discounts) were fools not to take the leap of faith and purchase their own homes. Many of these properties are now in the hands of their second, third or fourth leaseholder, with many original social housing tenants having moved further upward in the housing ladder.

The majority of these properties would have been in communal blocks or at the very least, houses in terraced blocks. Very few are unconnected with a wider neighbourhood or RSL community. Hence at least external repair commitments should still form part of the lease, grass cutting, grounds maintenance, communal door entry etc also often feature. One of the reoccurring themes is that early RTB sales often had incomplete or badly detailed leasehold agreements, possibly omitting responsibility for certain types of service charges.

Systems long since gone failed to record many of these details, leading to many years of charges not levied and disagreements in the current day from recent leaseholders, challenging why they should pay service charges that their neighbours are avoiding (and have been avoiding for decades). Often it’s a long and fruitless battle in many cases to try to claw these back using old records.

Two main areas seem to cause problems for RSL’s in the service charge area are the way customer service staff deal with leaseholders and the whole calculation area, taking far too long and involving too many staff. Leaseholders are a different animal to general residents and they do like to be treated in a special way. Statements for example need to refer to ‘Charges’ not ‘Rent’. Not a big change, but important if you are a leaseholder. A simple change too for IT to manage for you effortlessly.

As soon as a leaseholder calls, the customer service team need to be aware of the fact and precisely what the repair responsibilities of the organisation are. Examples are; Just external repairs, responsive work in shared areas, repairs under a limit everywhere or only after consent after an already agreed limit. This is not information that should be blue-tacked to a wall or buried in a tray somewhere. Intelligent scripting software should be enforcing these rules, whether per leaseholder, the scheme they live in, owning body or area served. This reduces any expectation issues or any future difficulty with expenditure recovery.

A recent story I heard of was where a responsive repair was mistakenly done internally for a leaseholder, which should never had been offered or completed. A satisfaction survey was issued and customer service asked “is there anything else we can help you with”? The answer was another internal repair which could not be recovered. This all cost in excess of £674 plus VAT. Two of these each month could make scripting software to prevent it quite a bargain, not counting other benefits.

Calculation of service charges can often take a whole section of a finance team. If you work like this, ask yourself the methods they use. Excel spreadsheets by any chance, looked after by key personnel? This can make the task of calculation very expensive. Even more so when leaseholders query their bill and would like to know (as they legally can ask) where that charge for £8.71 every month for grass cutting comes from?

Your housing system may have a perfectly adequate service charge module that might satisfy your needs. Do you use it, does it fit your needs? Many do have modules, some are so prescriptive, they are unlikely to fit your needs until seriously tested. If you have the one that requires you to record how many windows each of your properties have, for example, it’s unlikely you are using it. I won’t embarrass anyone by naming it, however if you are in a province where you still have the window tax, it’s probably working pretty well for you!

Alternatives are out there that could more than likely reduce your service charge calculation and management team to a ¼. Look at some of the independents such as Blockwise from Systemwise. You may be able to increase your efficiency at minimal cost. Using your main HMS (Housing Management System) service charge module or having a good interface to a specialist like Systemwise, can also keep your customer service staff and others, plugged into this information. This helps better and consistent decision making to occur all-round. Good for your budgets to be spent in the right ways and for leaseholders to receive better and reliable service.


The propeller heads may have encountered service charges, maybe not quite as we know it.



(c) Tony Smith, Acutance Consulting www.acutanceconsulting.co.uk

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