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Rent and service charges

Rent and Service Charges

A service charge is the cost of providing a service to a property, estate or scheme that does not fall into the definition of rent.  Rent is the cost of the mortgage, management and maintenance (or the bricks and mortar) of your home.

Your total rent payment is made up of two elements

  • Rent - Payment for the mortgage management and maintenance' of the home
  • Service charge - Payment towards delivering services beyond the benefit of occupation of the home (doesn't apply to all properties)

There are a number of service charges that include:

  • Caretaking
  • Lift maintenance
  • Door entry maintenance
  • Gardening of communal areas
  • Lighting in communal areas

Housing benefit and Universal Credit cover most communal charges.

Some services may be personal to you such as:

  • Personal heating and hot water
  • Personal water rates
  •  Home contents insurance

Housing Benefit and Universal Credit will NOT cover these charges.

The service charges you pay will depend on where you live and the services you receive. Your tenancy agreement states which services you receive. These details are also listed on your rent review notice.

 

Rent

How is my rent set?

Guidelines were introduced in 2002 that detail the way that rents have to be set. These guidelines relate to ‘Formula Rents.

 

What factors are used in the formula?

  1. The formula takes into account:
  2. The national average housing association weekly rent
  3. The average earnings in Greater Manchester in 1999 compared to the rest of the country as they were in 1999 (this is not your personal income)
  4. The number of bedrooms in your home
  5. The value of your home in 1999 compared to the national average value of housing association property in 1999

 

“The formula”

Weekly rent is equal to: 70% of the average rent for the social housing sector multiplied by relative county earnings multiplied by bedroom weight,

plus,

30% of the average rent for the social housing sector multiplied by relative property value.

 

Why are the details start at 1999?

The Government simply wanted to get an idea of the differences in prices in different parts of the country at a point in time. They chose January 1999 as that point in time.

 

What does this formula do?

The formula was created to calculate what is called a ‘TARGET’ rent.  This is the rent the Government says should be charged for similar properties owned by different landlords in the same region. 

Landlords were required to move all rents to the target level by March 2015.  In order to do that, rents could move at a rate of Retail Price Index (RPI) plus 0.5% +/- £2.00 per week over a 52 weeks period. 

This RPI rate of increase no longer applies and rents will now increase at a limit of Consumer Price Index (CPI) plus 1% on an annual basis.

Formula rents will still be used to calculate the rent when a property becomes vacant and is relet unless it is being let under the Affordable Rent programme (detailed further below)

 

When will my rent change?

Any changes to your rent are normally effective on the first Monday in October in any year unless we agree a different arrangement at any other time personally with you.

As detailed above, there is a limit on the amount that a rent can increase.  The limit is at the rate of Consumer Price Index (CPI) plus 1% on an annual basis.  The CPI is based as at September of the previous year before the increase takes place.

 

Things have changed in 2016

The Government requires landlords to reduce rents by 1% each year for a period of 4 years.  This will apply to all properties except for sheltered housing and supported housing schemes.  These properties will continue to be increased for the time being.

The requirement to reduce rents is detailed in the Welfare Reform and Work Act 2016. The reduction DOES NOT apply to any service charges that you may be required to pay.

 

How will I be told about any change in my rent?

You will be given a minimum notice period of one month. If your rent is reducing, you will receive a letter telling you how much it is reducing by. If your rent is increasing, in most cases, you will be served a rent increase notice that is headed: 

 

‘Section 13(2) of the Housing Act 1988.  Form number 4B’

 

This notice is the legal notification that your rent is going to change.  It will tell you what your rent is now and how much it will be changing to.

In some cases, there is a provision in your tenancy agreement that means that your rent can be increased by sending you a letter.  You need to check your tenancy agreement to see if this affects you personally.

 

What if I think the increase in my rent is too much?

We would ask that you contact us first so we can explain why your rent is going up. 

If you are not satisfied with the answer, then in most cases you can refer the rent increase notice to a Rent Tribunal which is an independent panel who will compare the proposed rent to similar properties in your area.  They can determine a lower rent or a higher rent. Please note that this only applies if your rent has been increased by the Section 13 notice.

Guidance notes are supplied with the rent increase notice, which advise you how to ask for an independent review. 

 

SERVICE CHARGES

Some tenants have to pay service charges for the property they live in.  A service charge is a charge for a service provided to your home that is shared amongst a number of properties in a block or on an estate, or in some cases is personal to you.

Your service charges are called ‘fixed’ service charges and the expected cost of providing the service is split equally between the properties receiving the service on the estate or in the scheme or in the block.

 

What is a fixed service charge?

A fixed service charge is the amount the landlord ‘fixes’ in any one year.  This is the amount that is expected to cost to cover the cost of the service provided for the coming year.

 

How are service charges increased?

These charges are increased at the same time as your rent. Service charges that are covered by Housing Benefit or Universal Credit are generally limited to a maximum increase of Consumer Price Index (CPI) plus 1% in any 52 week period. Some service charges are not covered by Housing Benefit and can be increased at a different rate.  Any increase in rent, service charges and support changes are all included in the rent increase notice ‘Section 13(2) of the Housing Act 1988.  Form number 4B’ or in the letter telling you that the rent is being increased. The breakdown of the services is included in the increase notice so you can see a what services you are paying for

 

AFFORDABLE RENTS

Some rents are set under the Governments Affordable Homes Framework which was introduced to enable the housing providers to build new homes.  Affordable rents will be charged on all newly built properties plus some existing properties that we can convert to affordable rent when they are vacated.   

 

How is the rent set?

Affordable rents are set at a level up to 80% of a market rent (inclusive of service charges) at the time the property is let.  A market rent is the rent a landlord can expect to achieve when letting a property for private renting purposes.

When you make a bid on a home on our waiting list, it will be clear if the property you are bidding on is subject to an affordable rent.

 

When will my rent change?

The rent will be increased once a year, usually in October, at a maximum rate of CPI (Consumer Price Index) plus 1%.  The CPI is based as at September of the previous year before the increase takes place.  You will be informed in writing when the new level of rent will take effect.

 

THINGS HAVE CHANGED IN 2016

The Government requires landlords to reduce rents by 1% each year for a period of 4 years.  This will apply to all properties except for sheltered housing and supported housing schemes.  These properties will continue to be increased for the time being.

The requirement to reduce rents is detailed in the Welfare Reform and Work Act 2016

 

Rental exchange

We are helping our tenants to get a better credit rating by sharing rent payment information. 

Your credit rating is used to help lenders decide whether to lend you money, how much to let you borrow, and in some cases how much interest to charge you. Having a strong and positive credit history helps demonstrate to lenders and other providers of goods and services that you can be trusted to repay what you borrow. 

Some stores offer credit without making any checks, but these often come with a very high interest rate. Payday loans also have high interest rates, and these can increase if you miss a payment. 

To help our tenants access safe and responsible credit, we have entered into an agreement with the UK’s largest credit rating company Experian to support Rental Exchange. This means we will share details of your rent payments with Experian on a monthly basis.  

This new scheme to share information about your rent payments will mean that those tenants that pay their rent regularly and on time can build up a good credit history. This will make it easier to open or change bank accounts, shop online, receive better mobile phone rates, receive better gas and electricity rates, and obtain cheaper credit. 

Sharing your rental payment history will also help create an online proof of identity, proving you are who you say you are and that you live where you say you live. 

The really good thing is that by paying your rent regularly and on time every week or month your credit rating will grow. 

If you would like to know more about the Rental Exchange, visit www.experian.co.uk/rental-exchange