The flat I want to buy has a £3,000 annual service charge: Should I steer clear?
Proper news from Britain - News from Britain you won’t find anywhere else. Not the tosh the big media force-feed you every day!
- Got a property question? Email jane.denton@mailonline.co.uk
I'm a first-time buyer and have seen a flat I like. It's a two-bedroom flat with an asking price of £365,000.
I've been told the annual service charge for the flat is currently more than £3,000 a year. This sounds like a lot to me.
There is a garden space around the property, but it seems quite low-maintenance. The communal entrance hall isn't anything fancy either.
How concerned should I be about the service charge? Is it likely to keep rising? Can the charge be challenged?
The flat is being sold with a share of the freehold. The estate agent also told me that a few years ago some of the freeholders in the block wanted to build another floor on top of the block.
What would this mean for me financially if this went ahead, is it a red flag?
Jane Denton, of This is Money, replies: There are two significant parts to your question.
The first relates to the annual service charge for the flat, which is currently more than £3,000.
You have shown me photos of the property. As you say, the communal entrance hall is sparse, the allocated parking spaces are small and need their lines repainted and the communal grounds are large but low-maintenance.
You want to know where on earth your £3,000-plus service charge a year would go. What would the money be spent on, and does the charge represent value for money?
Analysis by the estate agent Hamptons in February revealed that more than half of leaseholders are paying more each year on their service charge than they do on council tax.
According to the research, 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.
Most leaseholders, particularly those in purpose-built apartment blocks, will have a service charge to pay.
The charge 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.
Unless it is otherwise stated, if you own a share of freehold, you will still have to pay service charges and ground rent for the building.
The second part of your query concerns an additional floor potentially being built on top of the low-rise block. You would need to find out as much information about this as possible before putting in any offer.
I understand the idea for an additional floor was mulled over a few years ago, but you would need to know what the current freeholders are thinking and whether the matter has progressed.
A solicitor would be helpful to get to the bottom of this. An extra floor added to the building could trigger both pros and cons, the latter including extra costs.
I have asked two property experts for their take on your case.
Liam Gretton, owner of Liam Gretton Bespoke Estate Agent, on Wirral Peninsula, says: It's brilliant that you're getting stuck into the details as a first-time buyer.
Leasehold flats, especially those with a service charge and a share of the freehold, can at times feel like a bit of a maze, however asking the right questions now will save you a lot of headaches later.
Service charges across the country will vary depending on the location, property and the management company.
At £3,000 per year, the service charge on this flat definitely seems on the higher end of what I would expect for a block with a communal hallway and simple garden space.
However, that doesn't automatically mean it's unreasonable. The key thing is understanding what that money is being spent on.
You could request a copy of the service charge accounts for the last few years, along with a breakdown of what's included, buildings insurance, cleaning, garden upkeep, any management fees and contributions to a reserve fund.
Often, higher charges include contributions to a long-term maintenance plan, which can be a positive sign. It means the block is being looked after and future major works like a new roof or exterior redecoration are being budgeted for in advance.
On the flip side, high charges can also be a red flag for poor management or overcharging, especially if there's no obvious benefit in the block's condition. You'll want to review those accounts with a fine-tooth comb, or better yet, with your solicitor during the conveyancing stages.
Regarding whether service charges go up, yes, typically they do. Inflation, rising insurance premiums, and general maintenance costs all play a part.
However, they shouldn't skyrocket without reason. Again, looking at previous years will give you a feel for how well-managed the finances are.
You mentioned that the flat is being sold with a share of the freehold. This is often seen as a real plus. It usually means you'll become a part-owner of the building's freehold alongside the other leaseholders, giving you more say in how things are run and how money is spent.
That's a lot better than being at the mercy of an outside managing agent with no accountability.
That brings us to the proposed addition of a new floor, which is certainly not something to ignore. Adding another floor to a building can bring disruption, noise, dust and even a change to the character of the block.
However it also depends on the detail. If this is just an idea that was floated and never progressed, then it might not be a concern. If it's something that's still on the table, you'll want to know where the freeholders stand now, and whether any plans or permissions have been submitted.
If a new floor did go ahead, and you're a shareholder in the freehold, it could increase the value of the building and potentially yours as a part-owner.
Is it a red flag? Not necessarily, however it is something to research before proceeding.
Ask questions, review the documentation, and if in doubt, get your solicitor to dig deeper. That is what you are paying them for.
Manjinder Kaur Atwal, director of housing at Duncan Lewis Solicitors, says: Embarking on your first property purchase is thrilling, but encountering a service charge exceeding £3,000 annually for a two-bedroom flat is indeed a showstopper.
Considering that the average service charge for flats in England and Wales was around £2,300 in 2024, your prospective flat's charges are significantly higher than average.
Service charges cover the upkeep of communal areas and shared services. However, if the property boasts only a modest garden and a simple entrance hall, such a steep fee raises eyebrows. It's crucial to obtain a detailed breakdown of these charges to understand where your money would be going.
Service charges have been on an upward trajectory. This trend suggests that your already high service charge could climb even higher, impacting your future financial planning.
As a leaseholder, you would have the right to challenge unreasonable service charges. The Landlord and Tenant Act 1985 allows leaseholders to dispute charges they deem excessive or unjustified.
Service charges are fees leaseholders pay for property maintenance and management. Under the Landlord and Tenant Act 1985, these charges must be reasonable, and the services provided should meet a reasonable standard.
If you believe a service charge is excessive, you would the right to challenge it. You would need to begin by requesting a detailed breakdown of the charges from your landlord or managing agent.
After reviewing this summary, you could inspect supporting documents, such as receipts and invoices, to verify the legitimacy of the charges. If disputes remain unresolved, you could apply to the First-tier Tribunal (Property Chamber) to assess the reasonableness of the charges.
The mention of some freeholders previously proposing to add another floor is a significant consideration.
Such developments can lead to increased service charges, potential structural risks, and prolonged construction disturbances.
It's essential to determine whether this proposal received planning permission and the current stance of all freeholders on the matter.
While the flat may seem appealing, the substantial service charge and potential for future developments are red flags that warrant thorough investigation.
Engage with the sellers, review the service charge accounts, and consult with a legal professional to ensure you're making an informed decision.
.jpg)
