Majority of leaseholders consider service charges unfair

Majority of leaseholders consider service charges unfair

13:41 PM, 21st April 2021, About 2 months ago 16

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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

by Richard Adams

13:16 PM, 25th April 2021, About 2 months ago

Reply to the comment left by Chris at 25/04/2021 - 11:14
Depends on what you mean by "most". In my limited experience as a leaseholder I have put my head above the parapet twice and been able to become a Management Co director and thus influence what is needed to be spent and be answerable to other leaseholders. I have once sacked Man Agents, appointed by the Man Co not the freeholder. Latter is provided for in the lease. I have no knowledge of situations like you describe where the freeholder appoints Man Agents and leaseholders are denied input. If they doubtless exist as you say then anyone considering buying a leasehold property in this scenario should perhaps decide not to.

by Gracie

13:42 PM, 25th April 2021, About 2 months ago

Reply to the comment left by Richard Adams at 24/04/2021 - 18:32
There are many reasons why that sounds so much easier to do than it is in practice, such as getting the numbers together to do it & in my case, a commercial presence of allegedly over 25%, which excludes us from exercising the right of RTM.

by Richard Adams

13:49 PM, 25th April 2021, About 2 months ago

Reply to the comment left by Gracie at 25/04/2021 - 13:42
You are dead right that it can be difficult but it can be done and someone often must take the lead in galvanizing others. The alternative is to sit back and take it on the chin. Good luck in having a go.

by Gracie

19:32 PM, 25th April 2021, About 2 months ago

Reply to the comment left by Richard Adams at 25/04/2021 - 13:49
As I’ve said, we’re excluded. We do not have the option.

by Graham Bowcock

14:09 PM, 26th April 2021, About 2 months ago

My firm acts a managing agent to a few residential blocks, where we represent the management company owner by the residents. In my experience (25 years or so), there is a massive lack of understanding about what has to be paid for by the management company.

If you own a house then periocially it will need to be reroofed, or have new windows at great cost. A flat is no different so those costs do arise, but arer often treated as part of the sinking fund.

One of the biggest issues we have now is health and safety. We cannot simply instruct the guy down the pub to do and do repairs (as perhaps an owner occupier might), we have to go through proper and expensive procedures. This protects not only those working on site, but also the directors from claims.

We have fewer problems with blocks where there are no rentals as by and large the residents see what the monye is being spent on, but blocks with many BTLs can be a challenge. Flat owners relate the service charge to their own income (or occasionally lack of it).

If youi abandon service charges I do not know how blocks would function.

by Gracie

14:51 PM, 26th April 2021, About 2 months ago

Reply to the comment left by Graham Bowcock at 26/04/2021 - 14:09
I agree - there are indeed always big needs such as reroofing, windows, H&S, brickwork, painting, etc. Any common area or working part needs looking after, either by an MA to manage & pay for unless of course a bunch of leaseholders are quite capable of doing it themselves - hence RTM is a smart addition to the system. In my view, anyone who qualifies for the responsibility of a mortgage should have the logic to deal with responsibility in keeping the building standing - whether it be a house or block. those who can't be bothered should be allowed to outsource, I have no problem with the concept of MAs but they should be an option not forced upon anyone. As the NLC group shows, there are clearly more lazy & incompetent MAs than good ones, and if they were an option and not a need, & were regulated and couldn't treat leaseholders as cash cows, I'm sure the work ethic would improve.


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