Soaring service charges drive a rise in RTM companies

Landlords in England and Wales are taking a stand against rising service charges, with a study revealing a 20% increase in applications to form ‘Right to Manage’ (RTM) or flat management companies. 

The research by Direct Line found that service charges for leasehold flats are increasing by an average of 10% per year, with 7% of landlords experiencing hikes of more than 21%.

This has led to a surge in interest in RTM companies at Companies House which allows groups of leaseholders to take over the management of their building from the freeholder.

The average annual service charge now sits at a staggering £1,580, with one in five landlords paying more than £2,000 annually.

That’s much higher than the average monthly rent in England of £850.

Service charge increases have put landlords under pressure

Direct Line’s landlord product manager, Sarah Casey, said: “Rising mortgage rates and steep increases in service charges have put landlords under real pressure in recent months.

“As a result, it is not surprising to see an increase in the number of flat owners teaming up with other leaseholders in their blocks to form Right to Manage companies.”

She adds: “By taking control of the management of their block in this way, landlords can have more say in what work gets done, when it is done, and at what cost.”

London landlords are feeling the pinch

The research reveals that London landlords are feeling the pinch the most, with average service charges reaching £1,994 – exceeding the median monthly rent in the capital.

Londoners have also seen a steeper rise in service charges, with an 11% increase over the past two years.

As a result, nearly two-thirds (60%) of leasehold landlords in England and Wales are considering setting up an RTM or flat management company.

An additional 17% would be open to joining if someone else in their building established it.