Mayor Launches New Service Charge Charter

More protection offered to leaseholders against unreasonable increases

54 per cent of leaseholders said they had encountered problems with service charges
54 per cent of leaseholders said they had encountered problems with service charges

Leaseholders in London are to be given more protection from costly service charges under new rules introduced by Sadiq Khan.

The Mayor of London announced on Friday that he is launching a new Service Charges Charter that will require housing providers to be more transparent and give more clarity to leaseholders over the charges they may incur.

London is home to around 1.25 million leasehold homes – a quarter of all the leasehold homes in England – while there are 50,000 shared ownership homes in the capital.

Under the terms of a leasehold agreement – whereby someone owns their home but not the building it is located in or the land it sits on for a fixed period of time – homeowners are expected to pay service charges to cover the cost of things like the maintenance of the building and communal areas.

According to a 2019 Homeowner Survey by the Homeowners Alliance, around 54 per cent of leaseholders said they had encountered problems with their leasehold property over issues relating to service charges.

Although leaseholders can challenge any changes that they deem to be unreasonable, Sadiq Khan has said that this is often a “time-consuming process”.

Mr Khan said, “Shared ownership properties can be a helpful first rung on the housing ladder for Londoners. However, too many homeowners have faced a confusing set of fees and charges. Where service charges are incorrectly administered, leaseholders are often drawn into a time-consuming process to challenge.

“Our new Service Charges Charter will help shared owners have a better experience of home ownership, reducing stress and worry. Housing providers also recognise the benefits that following Charter can bring – leading to more efficient services, and a reduction in complaints.”

Leaseholders in London pay an average of £2,000 a year in service charges according to the Association of Residential Managing Agents, but there is no limit to how much the charges can go up or down by.

Under the terms of Sadiq Khan’s new charter, housing providers will have to give new buyers a clear list of all the charges they could incur before the lease begins. Service charges will have to be set at “realistic” levels and reviewed regularly to ensure that costs to leaseholders are minimised.

Where any changes to the operation or management of a building are being considered, leaseholders must be consulted if it could result in changes to the service charge.

Although it will not be mandatory for housing providers to sign up to the mayor’s charter, any provider involved in the delivery of the GLA’s affordable homes programme will be expected to do so.

Joe Talora - Local Democracy Reporter

January 21, 2022