- Average service charge for a flat in England and Wales rose 11% during 2024
More than half of leaseholders are paying more each year on their service charge than they do on council tax, new analysis has revealed.
The average annual service charge bill for a flat in England and Wales hit £2,300 in 2024, an 11 per cent increase on the previous year, according to the estate agent Hamptons.
This dwarfed the 2.5 per cent rate of inflation in the 12 months to December 2024 – the rate at which the cost of goods and services goes up on average.
Hamptons says that 2024 marked the biggest annual increase since it began tracking service charge costs in 2016.
This recent acceleration in costs means that average service charges are now above £2,000 in every region of England for the first time ever.
Only in Wales do average service charges stand below the £2,000 per year threshold.
On the rise: Average service charges now stand above £2,000 in every region of England, according to analysis by the estate agent Hamptons
Hamptons found that 51 per cent of leaseholders are paying more in service charges than they are in council tax.
Service charges have been rising faster than inflation for some time now.
Since 2019, the average service charge bill rose 40 per cent, from £1,717 to £2,300 per year, while inflation has risen 23 per cent over the same period.
What is driving the cost in service charges?
Most leaseholders, particularly those in purpose-built apartment blocks, will have a service charge to pay, which goes towards the upkeep of the building and any communal areas.
It can include the costs of buildings insurance, cleaning, gardening, repairs of communal areas, surveyors’ fees, fire risk assessments and managing agents fees.
For some purpose built apartments, it can sometimes include things like a gym, concierge and parking.
David Fell, lead analyst at Hamptons, says that higher insurance costs are partly to blame for the increase.
The average home insurance premium topped £400 last year for the first time, according to the Association of British Insurers after a 16 per cent increase year-on-year.
‘Service charges continue to be pushed up by climbing costs,’ said Fell. ‘While rising utility bills initially drove inflation, higher wage and insurance costs followed, resulting in the biggest increase in service charges since our records began.
‘With a high proportion of service charges taken up by labour and buildings insurance, most leaseholders will have seen their bills continue to rise in recent years.
‘While the cost of running a home has risen for pretty much every household over the last five years, some leaseholders have seen costs rise much more quickly.
‘And with limited ways to find savings, the cost of running some facilities, which were affordable five or 10 years ago, could now be breaking the bank.’
Record: The typical leaseholder in a one-bed paid £2,000 per year in 2024 for the first time
Leaseholders fight back
There is also concern that some leaseholders are being ripped of by the freeholders who own the land their apartments sit on.
Last year, we reported that hundreds of thousands of leaseholders may have been paying hidden insurance commissions to freeholders.
An estimated 900,000 leasehold flats owned by the largest freeholders across England and Wales may have been affected, according to the law firm, Velitor.
The campaign group Leaseholder Action is currently pursuing landlords and insurance brokers for secret commissions. These commissions were added to leaseholder buildings and terrorism insurance without their knowledge.
There is also growing concern that leaseholders might have to wait up to five years until the Labour Government introduces any meaningful reform.
David Fell of Hamptons says leaseholders are also finding their homes are becoming less attractive to potential buyers because of the high service charges, making them harder to sell.
He also warns that some banks are not lending mortgages on homes where they deem service charges to be too high.
‘Both buyers and mortgage lenders have become increasingly cautious about committing to high service charge costs, particularly where they perceive charges to be disproportionate to the amenities they get in return,’ said Fell.
‘Consequently, there is mounting pressure for leaseholders to have a greater say in how their money is spent.’
‘Would-be sellers paying high charges have often seen the value of their homes rise more slowly or even fall.
‘In some cases, sellers are offering potential buyers a cash contribution towards future service charge payments.’
Over both the short and medium term, service charges have been rising faster than inflation
How can leaseholders reduce their service charge?
Leaseholders in the same building can club together and manage their building themselves under a process called Right to Manage.
While they will still need to cope with the rising cost of building maintenance and other services, not paying a fee for a managing agent can reduce their service charge.
Service Charge Sorted, a company which offers support services to leaseholders managing their own blocks, said it saw a 37 per cent rise in enquiries between October and December 2024..
Simone Silverstein, an NHS manager from London, is the director of a block of 18 flats, which went Right to Manage in 2023.
She decided to take control of her own service charges after growing tired of expensive management fees and dishonest management agents, levying unexplained costs and charges.
Simone Silverstein, an NHS manager from London is the director of a block of 18 flats, which went Right to Manage in 2023
Simone said: ‘It has been more straightforward than expected to manage service charge costs independently because we don’t have disproportionate managing agents’ fees and unexpected costs pushing up our bills.
‘I have dealt with various agents in the past and never knew what fees to expect and if or when site visits would take place. Most agents promise the earth and deliver on nothing.’
The Right To Manage was introduced to empower leaseholders to take responsibility for the management of their block. They don’t have to prove the building has been badly managed to do so.
RTM essentially allows some leaseholders to take over management of the building – even without the agreement of the landlord.
Leaseholders must first send a notice to the freeholder if they plan to do this.
To use the right, leaseholders must also set up an company and follow certain rules. The company can manage the building directly, or they can pay a managing agent of their choice to do it.
There are also companies such as Service Charge Sorted that take care of some of the admin required for a fee.
Even if they don’t want to go Right to Manage, leaseholders can inform the freeholder if they are unhappy with the managing agent and request that they are changed – though they may not agree to do so.
Mary-Anne Bowring of Service Charge Sorted said: ‘A lot of people are still unaware that there is support out there to self-manage small blocks of flats and private housing developments and that it’s no more difficult than using online banking – homeowners can save an average of £340 a year, potentially even more.
‘A lot of homeowners in small developments are frustrated with hefty managing agents fees and a poor service. Typical minimum fees just hit small developments disproportionately.’