Operational Charge
This is the charge for daily maintenance. It is paid by all 47 property owners in varying proportions depending on type and size of the property. Last year’s Operational Charge Budget was estimated at just over £51,000. At the end of the year (31 March 07), having absorbed the large increase in insurance premiums, we kept expenditure to less than £49,000 - a sum of £2,700 has therefore been fed back in to the 2007-08 budget. The new Operational Charge for the coming year, based on the new budget, will be £51,845 a small below-inflation increase

Minor budget reductions include water and the caretaker’s telephone but the PMC have also introduced some strategic savings. Having installed new intercoms two years ago, we had enjoyed a couple of years of free maintenance, and charges were due to be reintroduced this year. Other security maintenance charges rocketed and the result would have quadrupled security costs. It was decided therefore to stop regular maintenance altogether, allow a basic sum in the Operational Charges (£1,800) and increase the Reserve Charge to cover a ‘once in a blue moon’ breakdown.

Two of the largest expenditures are on the Caretaker and Managing Agent. Campbell’s salary was increased when the Residents took over the Management Company in 2000 but has only moved with inflation since then.

The PMC felt that an increase was overdue and have awarded him a 10% over inflation rise to £16,889pa. Your Managing Agent has also agreed a new fee - an increase of £1,470pa to £11,620, the first over inflation increase in four years

Septennial Charge
This charge, paid only by owners of units in the School Building and is on a graduated scale increasing each year until the work is carried out in 2010. This year your payments have increased by 4%

Reserve Fund
This charge is collected against any capital expenditure (including renewed fences, car park improvements, collapsed drains, and any unforeseen repairs etc) and is collected proportionately from all owners. As described above this now includes a sum of money which would have been spent on security maintenance so this has resulted in a significant increase

Arrears
Unpaid or late paid Service Charges are a huge headache to the PMC who give their time freely for the benefit of the residents at the Paragon. There were the usual battles throughout the year which ended with almost £6,500 outstanding. Until we create the incentive to have Service Charges paid on time, the rest of the owners will continue to pay the legal charges of late payers

Conclusion
Overall, Service Charges have risen by an average 9% mostly driven by increases in salaries and security maintenance (but at least any of the latter unspent this year will remain in the Reserve account). The Paragon is on a sound financial footing and if we can reduce expenditure in chasing Service Charge debts, I am confident that annual increases can be reduced to a near inflation rise

Ian Sime (Managing Agent)