Service charge configuration management overview
A service charge is an amount payable towards the cost of services or benefits provided for the resident of a property that fall outside of the charges specifically for their house or flat. So, if the dwelling is, say, a flat with a communal garden which the tenant may use, their share of the cost of maintaining the garden is included in the service charge. In general terms, the cost of each service is divided by the number of properties that use or benefit from that service. For example, if a property is situated within a block of ten flats, it will be responsible for one tenth of the costs incurred in providing services to the estate/building in which the flat is situated. i.e. one tenth of the cost for communal lighting, grounds maintenance, door entry system, lift maintenance, concierge, etc. Conversely, where the costs apply to an individual property, the whole cost would be charged back to the tenant or leaseholder. The services received vary according to location and the type of property; hence, a high rise block would require many more services than a property above a shop or ground floor flat.
The process of service charge management has a number of contributory factors that need to be configured at the outset in order to inform calculations, apportionment rules and itemised billing. These configuration components enable the housing organisation to define specific parameters in line with their own procedures and charging policy. Additional values and attributes can be appended to the records at any time, as required, although maintaining comprehensive information from the start will reap its own rewards. There are several key areas that fall under the category of service charge configuration management: cost centre maintenance, administration charge maintenance, service charge capping rules, service charge groups and service charge calendars.
Cost Centre Maintenance - A service charge cost centre is a collection of properties for which a given list of services is available. Whilst a cost centre is not linked directly to an asset, each record is connected to a functional unit, which in turn relates to an asset hierarchy. This direct relationship between a cost centre and a functional unit determines the level at which costs are incurred. Costs that are assigned at a high level functional unit can then be cascaded down to those beneath. A cost centre can hold any number of cost elements, which provide the individual breakdown of fees that combine to give the overall service charge, and the same cost element can appear in multiple cost centres, either as a direct link or via association to a parent cost centre.
Administration Charge Maintenance - An administration (or management) fee is usually included within the overall service charge to cover the administrative cost of managing the service charge itself. The specific fee is calculated as a percentage of the total service charge applicable, which in turn is derived from the inherent cost elements. Where one or more cost elements are exempt from an administration fee, they may easily be excluded from the calculation. Multiple management fees, each covering different service charge thresholds, are maintained through the creation of administration rules.
Service Charge Capping Rules - Under the terms of a tenancy agreement, service charges levied to a tenant may be capped in order to uphold regard for the affordability of the total housing expenditure bill, and therefore limit the amount they are expected to pay. For each service charge capping rule in operation, a maximum threshold value is set, representing the combined service charge fee above which the capping rule is triggered. As well as specifying the cost elements that are applicable to the capping rule, the configuration settings permit the end user to determine which components can be reduced by a portion of any capped excess value.
Service Charge Groups - The creation of service charge groups provides a housing organisation with the greatest flexibility in controlling how service charge costs are channelled to the right tenants. The extensive range of service charges in operation, and also the many varied choice-based combinations that might be appropriate for different assets and tenants is managed most effectively through user defined groups. These are employed to combine costs into subsets, with each subset applicable to a particular charging scenario, and therefore cost variations between the subsets constitutes a separate group in each case.
Service Charge Calendars - The calculation and collection of service charges is controlled through the creation of calendars. Once created, a calendar is then linked to one or more periods, each with a specific start and end point, setting out the duration over which service charge activities take place, whether that be a whole year, a quarter, individual months or even weeks.
Separate help articles have been created for each key aspect of service charge configuration management, including: