Rocketing service charges leave leaseholders with hefty bills

Rocketing service charges leave leaseholders with hefty bills

9:00 AM, 27th June 2023, About 11 months ago 1

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An 8% surge in average annual service charges has left leaseholders across England and Wales grappling with a £1,431 price tag, research reveals,

Estate and letting agents Hamptons say the main cause of this increase can be traced back to the implementation of new fire safety measures in 2018.

That legislation has led to a staggering 51.7% rise in service charges for flats.

‘Some degree of relief for leaseholders’

The lead analyst at Hamptons, David Fell, said: “The last few years have brought some degree of relief for leaseholders with increases in service charges tracking inflation.

“The big hike in service charges came nearly five years ago and was wholly a product of historic fire safety failures in larger blocks.”

He added: “The higher bills were put towards expensive short-term fixes such as waking watches, or medium-term structural remedies which sat outside the scope of either the government’s or developer’s funds.

“But in most cases, these hefty increases should be behind leaseholders now.”

Will shell out an astonishing £7.6 billion in service charges

Hamptons says that the escalating trend indicates that leaseholders will shell out an astonishing £7.6 billion in service charges this year.

The financial burden varies depending on the size of the flat, with one-bedroom flats facing an average annual charge of £1,287, two-bedroom flats at £1,426, and three-bedroom flats witnessing a substantial leap to £1,876.

London emerges as the most expensive city for leaseholders, with service charges standing 24% above the national average for England and Wales.

In fact, 20% of London’s leaseholders pay over £4,000 annually, as opposed to the national figure of 11%.

Also, half of the flats in England and Wales are in large blocks consisting of 20 or more units.

These blocks incur an average service charge of £2,606 per year, which is 99% higher than charges in smaller blocks with five or fewer units.

‘Leaseholder premiums have been bumped up’

Mr Fell said: “More recently, leaseholder premiums have been bumped up by the increased cost of building materials and insurance.

“Energy-intensive construction products and anything containing a microchip are however still recording double-digit value increases.”

He added: “While recent falls in the cost of some building materials and energy costs should start feeding through into lower charges for residents, it won’t happen overnight.

“Commercial contracts for communal utilities are exempt from the price cap with many freeholders signing fixed commercial agreements at higher prices, meaning some leaseholders will have to wait to see the benefit of falling prices.”


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Comments

Bryan

20:36 PM, 3rd July 2023, About 10 months ago

It is a disgrace how much they have increased. Health, Safety, Fire and other such regulations have had a big effect but insurance costs are probably the biggest factor. After Grenfell it seems insurance companies have double policy costs, whether you have any cladding or not. Also as properties age they require more maintenance and replacement which falls on the service charge. Not helped by poor management companies, one of which we have just kicked out of a block under owner freehold.

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