We know that service charges can sometimes feel complicated, so we’ve put together handy guides to explain what they are, how they’re calculated and what they cover.

Below, you’ll find clear answers to common questions, along with step-by-step resources to help you understand your service charge letters and budget summary. 

FAQs

What is a service charge?

A service charge is a fee residents pay for the maintenance of communal areas in your building or development. It covers services such as:

• Cleaning, gardening, and repairs to communal areas, e.g hallways, lobbies and gardens
• Communal utilities e.g. lighting and heating
• Building insurance (not contents insurance)
• Property management services

How are service charges and budgets calculated?

The majority of costs are fixed costs based on procured contracts including window cleaning, fire safety checks and lift servicing etc. Some costs are unknown when we set the budget as they are variable, such as utilities and repairs, so we base the predicted costs on previous years spends.

What is a variable service charge?

A variable service charge means costs may change based on actual expenses incurred throughout the year. We estimate costs at the start of the year and adjust them in line with the actual expenditure of your year-end accounts. If your account is in surplus, you will receive a refund. If your account is in a deficit, you will be asked to pay an additional amount to cover the difference. 

How is my service charge calculated?

Your lease determines the share you pay. This may be based on:

• A fixed percentage
• Property size or number of rooms
• Split equally among residents

If your lease states that costs should be based on a ‘fair proportion’, this usually means they will be divided equally amongst all properties in the building. For leases where your service charge is based on a percentage linked to property size, or number of bedroom, you may pay a higher or lower service charge than your neighbours.  

If you’re unsure how your service charges are calculated, check your lease or contact our friendly team. 

Are there any additional fees?

Redwing does not add any extra fees or mark-ups to the services we provide. At the end of each financial year, we review all costs incurred to make sure they are accurate and we have the accounts externally audited (for buildings with more than three properties). 

Why are some budgets externally audited?

If you live in a building of more than three properties, your service charges will be audited externally. This should give you assurance that the cost are aligned with the requirements of your lease agreement.

The year end accounts will be shared with you no later than 6 months after the accounting period closed (usually September but can vary depending on the accounting year). 

What happens if the actual service charge costs are higher or lower than estimated?

We always welcome feedback and are happy to discuss any service charge queries with you. If you are unhappy about service, you can make a formal complaint here:

 https://www.redwing.co.uk/feedback

If you think your service charge is unreasonable you can refer to the First Tier Tribunal (FTT) for an independent decision here: https://www.lease-advice.org/advice-guide/application-first-tier-tribunal-property-chamber/

You can also find more information about service charges on the lease advisory website here: https://www.lease-advice.org/fact-sheet/service-charges 

How does Redwing ensure value for money?

We take several steps to make sure service charges are fair and competitive:

•    Tendering for services – We put contracts out for tender to get the best price and quality for our leaseholders. If a contract lasts more than 12 months or costs over £100 per property, we consult with leaseholders so you can have your say. This is part of the Section 20 consultation and means that you can nominate contractors as well as influence who the contract is awarded to. 

•    Benchmarking – For in-house services (like repairs from M&Y and our management fees), we compare costs with similar organisations every three years to ensure they are competitive.

•    Regular cost reviews – Our teams review service charges monthly to find ways to reduce costs without compromising quality, this includes energy-saving measures, bulk purchasing or streamlining our processes. 

•    Performance monitoring – We regularly meet with our contractors and visit our buildings to monitor standards and hold contractors accountable for delivering high-quality services through set Key Performance Indicators (KPIs).

What does the management fee cover?

When benchmarking your management fee, we position ourselves within the medium range of our competitors. Your management fee covers essential services, including:


•    A 24/7 emergency repair service. 
•    Preparing budgets, collecting and administrating invoices, collating and preparing year end accounts and communicating this to all leaseholders. 
•    Managing repairs and maintenance  
•    Organising building insurance
•    Procurement of all service contracts
•    Health & safety checks and risk assessments
•    Resident meetings and building inspections
•    Day to day management and customer service 

As part of your management fee, your Property Manager is your main point of contact and visits your development regularly. As part of their role, they are on hand to answer any queries, discuss accounts, budgets and host a minimum of two resident meetings a year.

What is a Reserve Fund?

A Reserve Fund (also known as a "sinking fund" or "cyclical fund") is a savings pot built up over time to cover future major repairs and maintenance at your building. There are two types of reserve funds: 

• Sinking Fund – Used to create a fund sufficient enough to pay for a future large-scale repair, such as replacing window frames, a lift replacement or a roof replacement. This helps to prevent leaseholders facing large one-off charges when the work is required.

• Cyclical Fund – Used to create a fund sufficient enough to pay for any maintenance items that occur less frequently than annually, such as painting, tree maintenance and carpet cleaning. This helps to spread the cost over a longer period of time.

These funds help prevent unexpected and large bills for leaseholders when work becomes necessary. 

Why do I pay for building insurance?

We arrange a single insurance policy for all the properties where we have a financial interest. This includes our shared ownership houses and apartment blocks where we are the freeholder.

We arrange a single insurance policy for the whole building (not content insurance) to ensure that the entire risk is covered. This is our responsibility under your lease agreement.  

Building insurance contracts extend beyond 12 months, so you will be consulted when this is renewed throughout this process to through the section 20 consultation. This normally happens every five years.

As part of The Regenda Group, Redwing and Regenda manage over 13,000 properties. By using one insurance company for the properties they manage, leaseholders can receive a competitive price for their insurance through economies of scale.

Your current insurance premium considers the reinstatement cost for each of the buildings and the overall claims history within the portfolio. If you would like further information on the building insurance, please contact us on 0344 736 0063. 

You can also visit https://www.redwing.co.uk/insurance for more information.

What happens if I want to dispute my service charges?

If you think you service charge is unreasonable you can refer you case to the first-tier tribunal (FTT) for an independent decision. 

Who can answer questions about my service charge?

Your Property Manager can help with any questions! Get in touch on 0344 735 0063 or info@redwing.co.uk.

You can also visit The Leasehold Advisory Service for independent advice.