Leaseholders Face Hardship Due to Escalating Service Charges

“I wish I’d never bought it,” sighed Joe. In 2018, he utilized inherited funds to acquire a one-bedroom apartment within One The Brayford, a recently developed upscale waterfront complex in Lincoln. Initially, his outlook was positive: “I was left some money by my late mum and wanted to invest in a property that I loved. I fell in love with the area, fell in love with water at the front.” Under his leasehold contract, Joe was required to pay an annual service fee of £1,100 to RMG, the property management firm, for expenses including building insurance, upkeep, and repairs. This did not deter him: “I still went ahead with the purchase on the understanding that we were going to be given a five-star restaurant at the bottom and my investment would go up in value because of this. That never happened.” Subsequently, the yearly service charge has risen, now reaching £2,800 for his one-bedroom flat. Joe considers this exorbitant and contends that leaseholders are being overcharged for items such as building insurance, night-time security, and building manager salaries. Furthermore, unforeseen additional expenses have arisen. “The toilets in reception area for the staff were blocked. I think they came up to about £800 and it was charged to our invoices without consultation,” Joe stated. “It just seems like a conveyor belt of costs that aren’t investigated, aren’t discussed with each owner, and owners aren’t replied to. It’s really affected my finances dramatically.” Joe acknowledges having withheld payments while disputing charges with RMG; however, this action has exacerbated the situation. Legal, court, and administrative charges have been levied against Joe: “For a one-bedroom apartment in Lincoln, I’ve paid about £25,000 in the past five years to RMG. “You end up feeling that you are trapped in the building. They won’t communicate with you. You can’t make formal complaints because they’re not responded to.“It’s had a huge impact on my income and a huge impact on my mental health.” A representative for RMG commented: “Service charges rise alongside inflation, including rising energy costs, and are also impacted when unforeseeable, but crucial, maintenance works must be completed.” “Costs have also been significantly impacted by heightened insurance premiums due to the building’s external wall which, whilst deemed safe, contains materials considered to be more susceptible to fire than traditional brick which is an issue completely out of our control.“We completely understand the impact rising costs can have and always offer a full breakdown of service charges to customers and they are always given a reasonable time to pay and are asked to call us to discuss any concerns. “We work proactively with all residents to prevent late payments and we will only need to pursue legal action as a very last resort.” Legislation designed to enhance the clarity of service charges and grant additional rights to leaseholders was expedited through parliament prior to the election, yet advocacy organizations and certain political figures advocate for the complete elimination of the leasehold system. The Residential Freehold Association attributed the escalation in service charges to inflation and substantial material cost hikes post-Covid-19, further stating: “Leasehold is a well-established, evolved and flexible tenure system for communal living. “There are a raft of existing protections for leaseholders including the ability to challenge unfair or unreasonable service charges before an independent tribunal.” In Hull, Monika Schoenleber-Lewis and her husband, Colin Lewis, discovered City Exchange while searching for an apartment. The Grade II listed building impressed them, leading to their purchase of the leasehold for a two-bedroom unit, despite considering the £220 monthly service charge somewhat high. However, they soon faced an unpleasant surprise. Merely 18 months after their occupancy began, Pure Block Management notified them that their service charge would escalate to £654 per month. Mrs. Schoenleber-Lewis indicated that the news was not well-received: “Everyone was up in arms. We were shocked and we were talking about what we were going to do. “They notify you via email but they don’t have to meet you at all and they would not meet with us.””We still love Hull and the building is amazing. We love old buildings but would we buy it again? I don’t think so, because it is way too much.” Mr. Lewis expressed concern that the service charge could render the flat unappealing to prospective purchasers: “If we did choose to sell it, we would struggle and we would be left with quite a large amount of money to pay out on a regular basis for something we couldn’t enjoy.” Liam Parker, the director of Pure Block Management, stated: “At times, with historic buildings such as this, unavoidable works can be of significant cost.” He mentioned that a complete roof renovation was currently necessary, estimated at £700,000. “We appreciate the impact of the cost of this work on both the residential and commercial leaseholders, and therefore works have been planned to be completed in two phases, spreading the cost over three years,” Mr. Parker added. “In order to make sure we have funds in place to begin this process and for works to start next summer, the annual service charge for all leaseholders did increase significantly in 2024.” “We expect the service charge to return to a much lower level once the roof works are completed.”