Posted by Charles Walker [BWFL] on July 23, 2007, 4:27 pm, in reply to "Re: some maths on service charges"
Message modified by user charles July 23, 2007, 4:28 pm

Stefan, Can I address some of your points? 1. Yes the reserves are meant to act as a buffer to supply funds for items of large expenditure and over the years they have done this. When the budget is set, projected expenditure is looked at and compared to what is in the reserves and how they are shaping up to cover large spends like external decs, carpet replacement etc etc.. This is now done five years in advance. We then put things into several categories. a. What needs to be done asap b. What can be deferred to a future date c. What is not necessary and will only be done if it does not impact on the service charge. An example of this is a proposal to redec the main square. All this is done on known factors. 2. The problem we have now is that unknown factors are now impacting. I know I am repeating myself, but please let me give you some examples. a. The gym noise works an unknown factor of about £70,000. Either we did the work and kept the gym open. Closed it. Or carried on using it ignoring a court order and run the risk of being convicted of a criminal offence. Please advise what you would have done. b. Fuel/electric charges have gone up over the last few years of 150%. Unless we all freeze and have no lighting in the common parts, we had no choice but to pay the hike. And yes we do buy this on the future market to try and stabilise things as much as possible. What is a problem is that they go up quickly but are not so quick to come down if at all. Please advise what you would have done. c. Aging equipment. We have been looking at all the estate infrastructure. We act on advice. How long do we have left for this particular pump or boiler? We are told it has five years left of life, for example. Then overnight it fails. It is a difficult call; extend the life of an item for a bit longer to allow a reserve build up or spend money on a replacement straight away. Sometimes we get this right sometimes not. But our future projections for the reserves indicate that we need to replace a lot of the aging equipment in a very short time span. Please advise what you would have done. d. The Wheelhouse roof. Over the years we have had localised problems. To reduce cost we have tried to repair this in a localised manner. Last year, when it was apparent this was not resolving the problem we had to take the decision to have the whole roof done from scratch. To resolve the problem once and for all. I do not see we had any other solution. e. Estate leaks. Our premiums last year went up over 100%. The insurance companies now felt we were becoming an expensive risk. This has led to all the grief of the plumbing checks to try and improve our claims history so we can get reduce premiums. Please advise what you would have done. f. Though we live in a low inflation economy, rising costs for the daily running of the estate have been increasing at about 3% per year. So if one looks back over the years. Say 10 years this means costs have gone up 30% over this period. g. Another impact this year is that we have been using the reserves as a buffer for this the fact that we are having to make projections on figures that are six months out of sequence is proving difficult and come to roost this year because of the pressures outlined above. The service charges are set Jan – Dec each year as per the lease. The accounts for these charges are done June – June each year. It is difficult to forward project when we are blind and out of sequence for six months. The law is quite unhelpful in this respect. Countries like Australia have this running concurrently. We have found for the first time that our projected costs for the rest of the year and for planned projects for the next five years are not going to be taken up in their entirety by the current level of reserves and this recent hike is an attempt to bring this all back into line. We took the decision to do this now rather than defer the pain to a future date. At some stage this had to be addressed. These are just some examples. I could mention the replacement of balcony screens a few years ago on Chart House which rusted and corroded in an unexpected manner, quite differently to those on Wheelhouse which were a different design etc etc. Now you ask will service charges not go up or go down in January 2008. We hope not but nothing in life can be that certain. We are and have been looking at costs under close scrutiny. We hope fuel charges will come down. We hope our claim record improves. We hope we do not get more unexpected items. We hope that now we have systems in place for better projections of planned maintenance which has been possible to put in place with the evidencing and cataloguing the whole structure of all aspects of the estate will enable us to plan ahead with more certainty. We are looking at other aspects like bulk buying, reducing staff costs [overtime, sickness and agency cover] We are still planning ahead for the new estate office, with the ultimate dream of factoring out the need for such an input for managing agents, enable us to provide services like in house letting services. This all will help put a downward pressure on costs. Your statement that service charges have gone up 76%. What you do not do is put this in context. Someone reading your post would get the impression that this has happened in one fell swoop, instead of over a period of time. I do not deny they have gone up, but I do not accept that we see this as a minor hiccup and that we have imposed higher rates as a sort of irresponsible indulgence and hope we can hide this under the carpet. Yes I have said, and will repeat, that I will work towards reducing the impact on service charges and that is why we are really trying to get systems in place to assist this. I have said before we could reduce cost in one fell swoop if we closed the gym and the estate office, if this is what people want, fine. What no one has done yet to my knowledge is suggest how things could be done better or differently or offered up to become a director. Maybe you have some neat suggestions and solutions? We have not always got things right. Also look beyond Burrells Wharf and compare like for like. Is Burrells Wharf more expensive, considering the services provided and the age of the estate, with a similar estate? This needs to take into account the work we have done on issues like health and safety, project management etc etc. I have just woken up from nights so please forgive my grammar etc.

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