G15 landlords ‘urgently’ tackle service charge improvements after MPs’ criticism

Ms Fletcher-Smith said G15 members were “deeply concerned” to read service charge issues being described in this way and, as charitable organisations, housing associations do not make a profit from service charges.

She said social landlords provide estimates to residents about their service charges and try to make these estimates “as realistic as possible”.

In addition, G15 members only recharge residents for the actual costs of services provided, Ms Fletcher-Smith added.

However, she said the group’s members appreciated that “increases, errors and inconsistencies are unwelcome and incredibly frustrating for residents.

“We do all we can to ensure charges are both accurate and reasonable,” the letter said. 

G15 members “accept that improvements need to be made to the way service charges are set, collected and how they respond to queries about them”, Ms Fletcher-Smith’s letter said. 

Ms Fletcher-Smith said improvement plans were being “urgently implemented” to address this.

“At the start of each year, we provide residents with an estimate of their service charges, based on the most recent costs available from our own organisations or, in many cases, the external managing agent,” she said.

“We try to make these estimates as realistic as possible, to avoid the need to recover higher amounts at the end of the year. If charges are overestimated, then residents will be refunded at the end of the year.

“Housing associations only recharge residents for the actual costs of services which are provided, and all our suppliers are procured using government-approved procurement processes and follow government legislation.”

She added: “G15 members accept that improvements need to be made to the way service charges are set, collected and how we respond to queries about them, and improvement plans are being urgently implemented to address this. Members are recruiting additional resource to tackle this too.”

Rising costs

Ms Fletcher-Smith said G15 members were committed to providing services that were “good quality and good value for money, with service charges that accurately reflect day-to-day running costs”.

She cited research by The Property Institute that showed service charges have risen by 41 per cent since 2019, nearly double the rate of inflation.

Ms Fletcher-Smith said this had been driven by several specific increases that were “beyond the control of housing associations”.

These include building costs rising by 92 per cent, utilities costs by 73 per cent and professional fees paid to various organisations by 69 per cent. In addition, “important” new building safety legislation added an average of £177 a year to each resident’s service charge, Ms Fletcher-Smith said.

The G15 was reviewing how it can carry out affordability checks for new residents to reflect the rising cost of many services, the letter said. 

Ms Fletcher-Smith said the G15 was looking at how it can simplify the way members work with building owners and managing agents on new developments where they are not the freeholder, so that they have more control over the services to which residents must contribute.

She said G15 members’ leases committed them to providing residents with an estimated cost of service charge expenditure at the beginning of each year.

Ms Fletcher-Smith said members provided invoices for service charges every year, “clearly stating” the services that had been charged for.

She said members provided major-works account statements and service charge account statements “upon request”.

G15 landlords contacted residents within 28 days if their service charge account fell into arrears, Ms Fletcher-Smith added.

“Service charges are subject to our formal published complaint procedures and there are clear paths for recourse where our customers are not satisfied with explanations or evidence we provide,” she said.

“This sets us apart from the vast majority of private freeholders, where often the only path for dispute resolution is the first-tier tribunal.”