What Are the Average Leasehold Service Charges?
Leasehold Service Charges
A service charge is a fee that’s paid by leaseholders to cover the costs of maintaining a property or a building. It can be a fixed or variable charge, depending on the lease agreement and the type of property.
The average Leasehold Services charges for a property are often around PS1,800 a year, according to HomeOwners Alliance. However, they can be significantly more for flats in London and new-build properties.
In addition to these, there may also be ground rent which is a payment made by the leaseholder to the landlord for the land that the property sits on. This can only be increased if the leaseholder agrees or states in their lease that they can do so.
What Are the Average Leasehold Service Charges?
Service charges are used to pay for repairs, general upkeep and building insurance. They also contribute to reserve funds for major structural repairs.
They can be very expensive but they do play an important role in maintaining a leasehold property. Recent research by property management specialists, Keller Williams UK, has found that the majority of leasehold homeowners don’t consider it fair to be charged these sums and don’t like a lack of transparency around how these charges are calculated.
It’s important to check that your service charge is correct before agreeing to sign a lease because it can have an impact on your monthly finances. You can ask for a breakdown from your freeholder or the managing agent and make sure that you understand what’s included in your charges, how they are calculated and when they need to be paid.
If you don’t agree with your charges, you can challenge them by using a tribunal in England or Wales. There are different types of tribunals and the law can be very complicated so it’s best to take legal advice if you want to dispute your charges.
You can tell your freeholder if you’re struggling to meet your payments and if they don’t help, you can take further action including eviction or repossession of the property. They should send you a summary of your service charge by the end of each month and let you see proof of how the money has been spent, which is a legally required document.
In many cases, the landlord will estimate what they will spend on maintenance and upkeep for the coming year and this is how your service charge is based. They must show you this in your lease and produce an audited end of year statement showing how much they have actually spent.
As a leaseholder you can challenge your service charge by taking it to a tribunal in England or Wales, where a decision is made on whether the charge is reasonable or not. This process can be lengthy, complex and costly so it’s best to take legal advice as soon as possible.
A third of management companies have hiked their service charges in the last two years, which has pushed up the average to an eye-watering PS1,863 a year across all leasehold properties and PS2,777 for new-build flats and houses. This cost is almost two months’ worth of the average monthly income received by landlords who let their properties.