Ministers are in talks to change the law to protect leaseholders, as well as tenants facing large bills for repairs and services. In England the total annual service charge on leasehold properties is estimated to be between £2.5bn and £3.5bn.
Proposals to clampdown on “overpriced”, “silly” service charges and “unfair” costs paid by renters and leaseholders in England and Wales have been unveiled by the government.
The communities secretary, Sajid Javid, suggested that ministers were considering changing the law to create a fairer property management system, and make it easier to outlaw “rogue” letting and management agents…
The planned crackdown is the latest series of measures relating to tenants and leaseholders. In July the government proposed a complete ban on the sale of newly-built houses as leasehold in England, alongside restrictions on ground rents that could limit them to as low as zero. And in late 2016 ministers announced proposals to ban letting fees for tenants.
Now the government has service charges in its sights. These are the fees most leaseholders pay to cover their share of the cost of maintaining their building. According to official data, there are around 4.3m leasehold properties in England, and in 2014, total annual service charges were estimated at between £2.5bn and £3.5bn. Meanwhile, there are 4.5 million tenants in the rental sector, some of whom were being hit with “overcharged costs for repairs and services,” said the Department for Communities and Local Government.
Service charges are frequently the subject of controversy: in September, the Guardian reported on the case of a woman who has seen the annual service charge on her London flat increase from about £500 to more than £7,600. She claimed the £640 a month she had been asked to pay for her three-bedroom flat above a shop in Brixton was “extortionate”.
The DCLG said anecdotal evidence of poor management included a group of leaseholders charged 10 times the market rate to have a new fire escape fitted, with the £30,000 contract handed to the freeholder’s brother; one landlord charged £500 by his agent for repairing a shower door; and a London-based property agent who tried to charge a leaseholder almost £5,000 to transfer ownership of a parking space to other leaseholders.
Measures to be considered as part of the call for evidence include looking at how transparency can be increased in the system, “so that tenants and leaseholders know what they are being charged for and why.” The department said: “The government is determined to fix the problems in the property management industry, drive down costs and protect consumers from the small minority of rogue agents.”