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Service Charge Problems and Housing in the UK

Updated on May 5, 2014

My Flat

Diametric Positions

There has always been a conflict of interests between leaseholders and landlords. They have diametric positions when it comes to money – the landlord wants to maximise his return on his investment; and, the leaseholder wants good value rental costs and doesn’t want high service charge bills.

Over the past few years the situation has got worse. Inflation is eating into the real income of most people. The promise of easy money from investing in stocks and shares has left many people in tough financial straits since 2008. There is a strong uncertainty in the employment market.

Housing Market

Because people still want to invest their money to make a regular return on their investment housing has gained in popularity. House prices continue to rise in an unsustainable fashion (mostly led by ridiculous increases in London house prices). The cost of buying a property to let has gone up and so the landlords are passing on the extra expense to the leaseholder and tenant. Not only do they increase rents, they also seek to pass on more expenses to the leaseholder via higher service charge bills.

Until recently the situation was exacerbated by government schemes aimed at lending people money so that they could get a mortgage. With the new arrivals on the market, naturally house prices went up. The Bank of England have since placed dampeners on this initiative to encourage property ownership. At the same time Banks and Building Societies have increased their scrutiny of finances before they give a mortgage.

Since there is a chronic house shortage in the UK, there seems little the government can do to slow down the housing boom. Traditional economics of supply and demand would suggest that the best solution is to build more houses. Yet so called ‘affordable housing’ in London remains unrealistically expensive to either rent or buy. Typically the council offers 2 bedroom flats with shared kitchen for £1,400 a month. In some cases that is more than the private sector charges.

For those with millions and billions, especially foreigners the London housing market seems a safe investment with a reasonable and guaranteed rate of return. Even if a property is not rented, keeping the property for a few years brings a good rate of return.

Absentee landlords and landlords who have taken a huge debt in order to fund a buy to let property often seek to pass on any costs to the leaseholder. They try to retrospectively charge for costs that were not billed at the time. They contract out building work that is aimed at improving the property (and its potential value) even though the lease agreement states that only repair costs can be passed on to the leaseholder.

These are just a couple of examples of how landlords seek to get more money out of leaseholders. They haven’t fully understood the lease agreement, and are hoping that paying seems the path of least hassle for the beleaguered leaseholder.

Expensive Service Charge Bill

The law might appear an ass; it also appears something outrageously complicated – something that only the wealthy can use for their benefit.

I had all of these feelings when a bill dropped on my mat for £12,000 for building work to make my flat and common areas more environmentally friendly. I am green but not capable to drop a good part of a year’s salary on proving how eco-friendly I am.

I despaired. Lawyers wouldn’t say anything until I agreed to pay them. The government website didn’t provide the answers. Then at a low ebb, I sent off an email to not expecting a great deal in response.

Within 24 hours I had a reply – they understood my situation and asked for more particulars. They summed up my legal options in a few hundred words and told me what research I had to do. And sure enough, improvements were not covered in the lease agreement. I rang up the landlord and stated on the phone chapter and verse to him from the lease agreement, and then left the ball in his court stating I wouldn’t pay the extra service charge bill and he was free to take legal action against me.

That was the end of the matter.

I felt compelled to write this short article to help other people stuck with a rapacious landlord who is seems determined to use the service charge system to get extra money out of leaseholders and tenants.


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