Service charge glossary

A breakdown of key service charge terminology
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Service charge

A service charge is a payment made by a customer towards the cost of communal services and repairs for the block/site where their property is situated. For example, if you live in a block of flats with a communal garden, the cost of maintaining that garden is covered by a service charge.

Actual cost

This is the actual cost of providing communal services and repairs to the block/site throughout the financial year.

Estimated cost

This is the estimated cost of providing communal services to the block/site throughout the coming financial year.

Fixed service charge

If you have a fixed service charge you will pay the estimated cost sent out at the beginning of the financial year. If the actual cost is higher than estimated, you will not be asked to pay any additional amounts. If the actual cost is lower than estimated, a refund will not be made. Your tenancy agreement or lease dictates whether you pay a fixed or variable service charge.

Variable service charge

If you have a variable service charge you will pay the estimated cost set out at the beginning of the financial year. At the end of the financial year, you will be sent a service charge statement comparing the estimated to the actual costs. If the actual cost is higher than estimated, this will ‘roll over’ and added to next year’s charge. If the actual cost is lower than estimated, this will ‘roll over’ and be deducted from next year’s charge.

Personal service charge

This is a payment made by a customer towards the cost of services or repairs to their individual property. For example, if the utilities within a block of flats are provided by a shared system, you will be allocated a proportion of the cost for your personal use. Personal service charges are not eligible for Housing Benefit or Universal Credit.

Reserve fund

A reserve fund covers the future cost of more expensive replacements that do not take place every year, such as door entry systems and lifts. Regular payments included in the service charge are made by each customer within the block/site into this fund. If a property is empty, Grand Union will make the relevant contribution for the vacant period to ensure that all properties have contributed the same amount.