Leaseholders in England and Wales are facing a significant financial strain, with an average increase of £600 per year in service charge fees over the last five years. A recent investigation by the BBC revealed that some residents have experienced increases of over 400%, leaving many unable to afford their homes or sell them due to the high ongoing costs.
Service charges are fees paid by leaseholders to freeholders or managing agents for a variety of property-related services. These can include:
Typically, service charges are assessed annually or bi-annually based on estimated costs for the upcoming year. At the end of each period, landlords provide a statement detailing actual expenses. If costs exceed estimates, leaseholders can be subject to additional charges known as “balancing charges.” Conversely, if expenses are lower than projected, leaseholders may receive credits toward future payments.
The leasehold system has its roots in the Middle Ages but evolved into its current form during the 1920s. Today, there are over 4.7 million leasehold properties across England, representing 19% of total housing. The rapid growth in leasehold dwellings—approximately 100,000 new properties each year—has raised concerns about governance and transparency.
Critics argue that some freeholders exploit this system by imposing excessive charges without justification. Former MP Peter Bottomley has voiced concerns about widespread exploitation among leaseholders who face challenges with lease extensions and escalating costs.
Recent legislative efforts aim to reform the leasehold system significantly. In 2017, the Conservative government expressed intentions to eliminate leasehold arrangements for new builds. The Leasehold and Freehold Reform Act introduced important changes requiring standardization of maintenance costs and detailed cost breakdowns from managing agents.
The government plans to further address these issues with a proposed Bill aimed at establishing a commonhold system, where residents would own the land beneath their buildings. This system is expected to become the default tenure by the end of Parliament’s current term.
Despite these promising developments, many campaigners remain skeptical about how effectively these changes will address existing challenges for current leaseholders feeling trapped by high service charges.
As discussions continue around transitioning from a leasehold system to commonhold ownership, it remains crucial for leaseholders to be informed about their rights and options for challenging unreasonable charges through legal channels such as tribunals. With over 125,000 individuals seeking advice from government-supported services in recent years, it is clear that the conversation surrounding service charges is far from over.
Trump’s Tariff Plans: A Day-One Agenda Against Drug and Human Trafficking In a bold move to combat drug and human smuggling, President-elect Donald Trump has announced plans to impose significant tariffs on Mexico, Canada, and China immediately after his inauguration on January 20.
Government Unveils “Get Britain Working” Initiative to Combat Unemployment In a bid to rejuvenate the UK job market, the government has introduced its ambitious “Get Britain Working” initiative, promising extensive reforms aimed at reducing the benefits bill and increasing employment.