Sharp rise in annual service charges post-Grenfell

Service charges for flats in England and Wales have soared by more than 50% in the past five years- largely due to new fire safety measures in the wake of the Grenfell Tower tragedy.

Annual service charges have rocketed by 51.7% since 2018. Some 37% of this came between 2018 and 2019 as new fire safety measures were introduced in response to the 2017 Grenfell disaster.

With the most recent annual increase of 8% being more in line with wider inflation, analysts at Hamptons said such hefty increases should now be a thing of the past.

Average annual charges for a one-bedroom flat now stand at £1,287 per year- the same charge as a three-bedroom in 2018. The average charge is £1,426 for a two-bedroom flat and £1,876 for a three-bedroom flat. There are also some regional differences, with leaseholders in London paying some 24% above the national average. Around 20% of leaseholders in the capital pay more than £4,000 a year compared to 11% nationally. Across England and Wales, leaseholders pay a total of £7.6 bn in service charges annually.

David Fell, Hampton’s lead analyst, said: “The last few years have brought some degree of relief for leaseholders with increases in service charges tracking inflation.

“The big hike in service charges came nearly five years ago and was wholly a product of historic fire safety failures in larger blocks.

“The higher bills were put towards expensive short-term fixes such as waking watches, or medium-term structural remedies which sat outside the scope of either the government’s or developer’s funds.

“But in most cases, these hefty increases should be behind leaseholders now.”

Fell added that leaseholder premiums had been higher recently due to the increased cost of building materials and insurance, while energy intensive construction products and ‘anything containing a microchip’ were still recording double digit value increases.

“While recent falls in the cost of some building materials and energy costs should start feeding through into lower charges for residents, it won’t happen overnight,” he said.

“Commercial contracts for communal utilities are exempt from the price cap with many freeholders signing fixed commercial agreements at higher prices, meaning some leaseholders will have to wait to see the benefit of falling prices.”

Figures show smaller blocks and houses converted into flats tend to offer the lowest service charges. In blocks of less than five flats, average annual service charges were £1,309.

More than half of all flats in England and Wales are in blocks of 20 flats or more, where service charges are 99% higher than smaller blocks, standing at £2,606 each year. Larger buildings may have a more ‘complex nature’ as well as facilities such as a gym, concierge and communal grounds.

 

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3 Comments

  1. LVW4

    Profiteering! Typical managing agent/freeholder behaviour. Service charges should be going down, but these ‘fake’ increases will have been baked in, and leaseholders are stuck with them.

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    1. jan-byers

      Do you not understand the word INFLATION?

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    2. Woodentop

      We pulled out of managing blocks of flats long before Grenfell. The rising costs, particularly for old properties were climbing year on year to maintain to required safety standards plus “that roof” which no-one wants to fund replacement. Insurance rates after Grenfell went through the roof. It all has to be paid for and you haven’t seen anything yet once the new EPC regs come into force!
       
      Service charge today needs to plan  for future expenses, not just today.

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