How systems to strengthen service charge management can remove business risk and build trust

What are the problems social landlords face in dealing with service charges? 

Dan Oehlman (DO): The challenges are multiple and layered. One of the main challenges is how the sector tries to deal with service charges at scale. If you’re an organisation with 15,000 units, the levels of cost are going to be significant.

The responsibility to manage the amount of information around those service charges is a lot. People have struggled with standardising an approach.

The tool of choice has been spreadsheets, like Excel. It’s a wonderful tool but with that comes a lack of standardisation and I see teams of people sitting next to each other doing very different things in different ways using spreadsheets.

Within those spreadsheets will be thousands of costs, so there’s a chance of things going wrong through human error. So it’s a really hard problem for organisations to get a grip on.

Have you seen the problem getting worse?

DO: Blocks are getting more complicated, and have done over the past 20 years. The idea that you just have a lobby with an entry phone, maybe a lift and a cleaning contract just isn’t true any more. You’ve got multiple different technologies, you’re dealing with fire risk, sensors, automatic opening vents – you name it. At a senior level, organisations have buried their heads in the sand about service charges for some time now. 

Why have they buried their heads in the sand?

DO: It’s because it’s a really difficult nut to crack. There’s the issue of the social housing sector working in silos and that lack of cross-communication between departments, which means considerable pain for service charge teams as they don’t have that visibility.

Service charges require good-quality data. Now, with financial pressures, it’s starting to get people to lift the lid of that box.

What is the impact on residents?

DO: Ultimately, it impacts the quality and the accuracy of charge. That naturally has an impact on the resident’s experience, not just of the service charges, but also of the services and the organisation. Housing associations are responsible for the financial and contract management of those charges.

When that comes under scrutiny, it’s understandable that customers feel let down. The fact that the sector manages homes at such a scale shouldn’t be an excuse to get it wrong. We need to find a better way of handling it.

What is the impact on service charge teams?

DO: For teams, it’s a very demoralising job. I don’t think anyone expects to be thanked for sending a bill. But it is a real challenge when, as a team, you are providing information that is the best that you can provide with the tools and with the information that you have. But ultimately, you are left to deal with the challenges of the customer who might challenge the charge.

As it can be demoralising, there is then the issue of staff retention. And there aren’t a huge number of experienced service charge practitioners out there.

So recruitment is really difficult for teams to bring somebody in who has knowledge and understanding, especially when you have poor data.

How can landlords use software solutions to tackle the problem?

Neil Stewart: There are a couple of things that the use of software solutions potentially delivers. One is risk management. So having separate spreadsheets across each of your blocks, especially if they’ve been acquired through mergers and acquisitions, is an issue. But standardising by using a software system that’s going to hold all your data in a secure and robust way removes risk from the business. 

A survey found that around 40 per cent of residents thought they were being charged for services that didn’t apply to them. Were you surprised by that figure?

DO: I wasn’t surprised at all and thought it might be higher. And if you get something wrong, it will take a number of years before residents trust you again.

What difference will residents see from a new service charge system being introduced?

DO: When they have an issue or a question, they will see the level of the response and the speed has changed. And I think that’s where trust can start to build up. There is a level of transparency if somebody asks a question, as landlords have all this information they can act upon. 

Does there still need to be a ‘lightbulb’ moment in the sector for landlords to shift to new systems for dealing with service charges?

DO: Absolutely. Housing associations tend to have a sort of ‘parent and child’ relationship with their tenants by telling them what to do – ie “you will have these service charges and this is how much they will cost and you will pay”.

But really, the success to this is building a peer-to-peer type relationship with your customer. That should be a two-way conversation. Those customers should feel comfortable to tell you information about the services that you’re providing.

Trace Solutions has published a white paper on the use of software solutions to manage service charges in housing associations