In the past five years, there has been a significant increase of over 50% in annual service charges for flat owners, according to recent research. On average, homeowners now pay £1,431 per year, equivalent to £119 per month, in service charges. This increase of 51.7% since 2018 is mainly attributed to the implementation of fire safety measures following the tragic Grenfell Tower incident. In fact, the largest portion of the increase, amounting to 37%, occurred between 2018 and 2019. The average service charge for a one-bedroom flat is £1,287 per year, and this charge has remained consistent with that of a three-bedroom flat in 2018. At the halfway mark in 2023, the average service charges for a two-bedroom flat and a three-bedroom flat are £1,426 and £1,876 respectively.
It should be noted that service charges in London are considerably higher than in other parts of the country. On average, Londoners pay £1,792 per year, which is 25% higher than the national average. This discrepancy can be attributed to the higher cost of living in the capital, as well as the higher densities and amenities found in many buildings. In fact, 20% of Londoners pay more than £4,000 in service charges annually, compared to 11% across England and Wales. Conversely, the smallest blocks and converted houses tend to have the lowest service charges, with an average annual fee of £1,309 in blocks containing less than five flats. Limited communal space and self-maintenance by residents contribute to keeping charges low in these cases.
Some flat owners have experienced higher cladding-related bills, including expenses for waking watches and medium-term structural fixes. However, these substantial increases should no longer be a concern for most leaseholders. More recently, the rising costs of building materials and insurance have led to increased service charges. Although there have been some declines in the cost of these materials and energy expenses, it will take time for these reductions to have an impact on residents’ charges. Additionally, commercial contracts for communal utilities remain exempt from price caps, meaning leaseholders may have to wait for falling prices to benefit them.
To address poor property management, disgruntled leaseholders have several options. The ideal solution is to buy the freehold, but this may not be feasible for various reasons. Another option is to apply for Right to Manage, where the First Tier Tribunal (Property Chamber) handles property management disputes. This leaseholder-friendly route allows for more control over the block’s management by setting up a company to oversee it. Seeking advice from a solicitor is recommended, as the freehold may oppose the application. The cost for this process should not exceed £1,000 per flat in a block. Lastly, leaseholders can ask the Tribunal to assess the reasonableness of service charges. This can result in significant reductions in monthly charges and even reimbursements. Leaseholders are not typically responsible for the landlord’s costs in these cases. The Leasehold Advisory Service provides free advice and an application form for this purpose.
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