“Unavoidable property service charges should be transparent from the outset,” says CEO of Ethical Leasehold Management

Recently released figures have revealed a dramatic increase in property service charges over the past two years with a third (33%) of management companies hiking up their costs.

According to the research, by landlord insurance provider Direct Line for Business[1], the average annual service charge leaseholders pay to cover their share of the overall building maintenance now stands at £1,863 – more than twice the average monthly rental income received by landlords.

For newly built developments, the costs can be even higher – due largely to the increasing amenities provided by developers, such as concierge services, lifts, leisure and fitness facilities and even cinema rooms and business suites.

Service charges are unavoidable, but some management companies are working together with leaseholders to ensure these ‘hidden’ extra charges are made more transparent from the outset so buyers are better able to assess the affordability of a property. A landlord or management company should only charge for the services that are detailed within the lease.

Ethical Leasehold Management (ELM), an Aldershot-based, not-for-profit freeholder/landlord and estate management company, specialises in retirement developments across Surrey and Hampshire. Lorraine Collis, Chief Executive at ELM, comments: “As many of our residents have formerly owned their own home, usually freehold, we sometimes find that they can struggle with the transition to life as a leaseholder; particularly with the so-called ‘hidden costs’ of service charges.

“It is a fact that running and managing an estate, be it a single building of apartments or a large estate/development, requires repairs and maintenance and investment of both time and money, just like any home would.

“We are also proposing through the Minister of Justice that a legal ‘cooling-off period’ is introduced for those buying a leasehold property, similar to that in the USA. This will ensure that prospective purchasers have a clear window of opportunity to understand and accept the service charges and the concept of leasehold ownership. It would be an unmistakable way of saying ‘this is different to freehold ownership’.

“Once you have entered into a leasehold agreement, you are obligated to pay the service charge as detailed in your lease. I must stress that once understood the service charge is usually viewed positively with all of the day-to-day costs and responsibilities of things like insurances, window cleaning and gardening removed.

“One thing to remember, if you are really unhappy with the management of your property, you do always have the Right to Manage option. This is a legal process which allows leaseholders to set up their own company to take over the daily running and maintenance of the property, and eventually appoint another management company, should they wish.”

For more information about ELM, call 01252 356000 or visit www.elmgroup.org.uk.

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