Majority of leaseholders consider service charges unfair

by Property118.com News Team

13:41 PM, 21st April 2021
About 3 weeks ago

Majority of leaseholders consider service charges unfair

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Majority of leaseholders consider service charges unfair

Research from property management specialists, Keller Williams UK, has found that the majority of leasehold homeowners consider service charges unfair, with a lack of transparency around how they are spent also a prominent issue.

Along with ground rents, service charges will be paid by some leaseholders to cover the cost of maintaining the building in which their property is located. They can also be charged by the owner of a building for any work required to maintain the value of the property. While there is no cap on what can be charged, the owner or landlord does have to prove the cost is justified in line with any work carried out.

Generally, service charges will cover the ongoing upkeep of a building with multiple residences, including but not limited to the cleaning of communal areas, heating the building, staff costs such as a concierge, building insurance, maintenance and repairs and grounds keeping.

Of course, this cost can vary regionally and Keller’s research shows that the average service charge will cost leasehold homeowners in excess of a thousand pounds in London (£1,900), the South East (£1,301), the East of England (£1,182) and the South West (£1,121), while in the North East it averages around £650.

So while service charges can be hefty they do play an important role in maintaining leasehold homes and so it’s perhaps surprising that Keller Williams found that 74% of leasehold homeowners don’t think it’s fair to charge them.

However, the research also shows this could be down to how their money is spent, rather than the requirement of paying to upkeep the building itself.

A huge 96% of leasehold homeowners said they would like to see more transparency on how their service is calculated and why they are paying the required sum.

CEO of Keller Williams UK, Ben Taylor, commented:

“Service charges are an integral part of maintaining the wider community areas and standards of living in many leasehold buildings and so it’s quite surprising that so many leasehold homeowners believe them to be unfair.

Of course, this attitude seems to stem from a lack of transparency on how they are spent, rather than having to pay them in the first place.

I think many appreciate that their service charge could increase should there be a substantial maintenance job required. However, this friction point between leaseholder and freeholder could be greatly reduced by placing an emphasis on educating and informing leaseholds as to how their money is being spent.”

Do you think it’s fair to charge service charges for the upkeep of leasehold homes?
No 74%
Yes 26%

Do you think there should be more transparency on how service charges are charged and spent?
Yes 96%
No 4%

Survey of 1,203 leasehold homebuyers (last six months) carried out by Keller Williams UK (8th April 2021).

Average service charge by region
Location – Average service charge (2021)
London – £1,900
South East – £1,301
East of England – £1,182
South West – £1,121
North West – £944
West Midlands region – £894
East Midlands – £860
Yorkshire and the Humber – £824
North East – £649

Comments

Richard Adams

11:19 AM, 22nd April 2021
About 3 weeks ago

I own three leasehold properties and was Chairman of the Management Company of one having responsibility for formulating annual budget spending. Details of this clearly explaining everything is sent to all, repeat all, other leaseholders. Some then bleat down the line later about the level of service charge because they would rather not pay it or at least pay less. It became clear to me that in most cases they had not bothered to absorb the information they had been sent.

Ed Regent

14:40 PM, 22nd April 2021
About 3 weeks ago

When you link this to building safety and the cladding scandal you can see how these charges are going through the roof as waking watch and obscene insurance costs are added. I would never, ever, ever buy or recommend anybody to buy a leasehold property!!!

Binks

7:55 AM, 24th April 2021
About 3 weeks ago

Frankly some of those answers smack of serious ignorance. 74% of leaseholders think it’s unfair to charge service charges? How do they think buildings maintain themselves? Unless one has a management company that’s ripping them off, service changes are essential. I own a period building with five flats (own the freehold as well as all the flats) and manage it myself so I know exactly what has to be spent to keep a building in good shape (without forking out for management company charges). Previously I owned a share of freehold in a similar building where all of us leaseholders managed it ourselves. Insurance costs alone are high and ever increasing, but any maintenance costs don’t magically disappear when one has a different tenure. I get that transparency and proper process regarding expenditure matter, but many leaseholders seem to think that a home ownership should have no cost, but presumably want clean communal areas, well insured building in good repair, maintained gardens and outside spaces etc. There are also ways and means to deal with unreasonable service charges and charges that were not properly advised, so perhaps people just need to educate themselves and get of their backside if they think something is dodgy.

Chris

10:31 AM, 24th April 2021
About 3 weeks ago

The biggest issue on a lot of Service Charge bills is the insurance which can be over £400 for a standard 2 bedroom flat. As the managing agent gets commission on this there is no incentive for it to be reduced.

Richard Adams

13:32 PM, 24th April 2021
About 3 weeks ago

Reply to the comment left by Binks at 24/04/2021 - 07:55
Absolutely spot on what you say.
"There are also ways and means to deal with unreasonable service charges and charges that were not properly advised, so perhaps people just need to educate themselves and get of their backside if they think something is dodgy".
Instead it seems many leaseholders have just responded to a survey in bleating mode.

Gracie

13:55 PM, 24th April 2021
About 3 weeks ago

Reply to the comment left by Richard Adams at 22/04/2021 - 11:19
You're lucky, 15 years of owning my leasehold flat we've had 3 managing agents of which two have NEVER properly explained their costs - just rounded figures and no receipts provided. (For both budget & expenditure accounts) regardless of being questions. Then the law allows us to take them to FTT....along with costs (no guarantee of passing them along) & hassles of getting there - LH have to fork out the costs first & we see how biaised the cases can be - very hit & miss. The third MA was the only transparent one - because they only charged £50 pa for arranging an insurance renewal, and for one year "orchestrating" the roof works which we all paid after seeing quotes. So no receipts or accounts required. Funny how the next two MAs needed to charge £84pm to manage the same 3 flats, same amount of work as the £50pa MA (each flat roughly 30sqm each, & 1 business roughly the same)

Rupert Oldham

18:17 PM, 24th April 2021
About 3 weeks ago

Reply to the comment left by Binks at 24/04/2021 - 07:55
The article clearly states that leaseholders understand that service charges are necessary but require more transparency. Obviously leaseholders do not believe that service charges as a concept are unfair, simply that *the service charges they receive* are unfair. Mine are, my managing agent add a nice 400% for themselves before they bill us for anything. Recently we had to pay £1400 for some shirtless lunky to brace a fence, something I would have done for less than 200. They are rip off artists and they go about their nefarious business with impunity. Leasehold needs to be abolished.

Richard Adams

18:32 PM, 24th April 2021
About 3 weeks ago

Reply to the comment left by Gracie at 24/04/2021 - 13:55
Like Binks said with my agreement leaseholders don't have to suffer what you have described. Managing agents are appointed by leaseholders through their Management Company which leaseholders can be directors of if they feel inclined so any bad agents can be sacked if no good which seems too have happened in your case. If your Management Company don't set budgets that are clear to understand (which are passed to agents to implement) then challenge them . Kick up a stink at AGM's.

Sally Mills

23:50 PM, 24th April 2021
About 3 weeks ago

Firstly leaseholders are Not Homeowners. They are tenants to a landlord and are refered to as such throughout their lease document. Secondly, service charges are of course essential but the works and services are To often decided by an unqualified, unscrupulous and unprofessional external management company who dances to the tune of the freeholder who’s sole aim is to make as much money as he can.
This country needs to keep up with the rest of the world and consign feudal leasehold tenure to the history books where it belongs, we need to promote Commonhold tenure.

Chris

11:14 AM, 25th April 2021
About 3 weeks ago

To Richard Adams
Most managing agents are appointed by freeholders and leaseholders have little or no input. They are rarely able to be Directors unless they have a Right to Manage Company.

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