Service charge

Solving England’s home service charge scandal

Ensuring land charges worth billions of pounds are fair and honest is not something that should be left to volunteers. Yet inadequate regulation of service charges means an ‘armchair army’ of angry apartment dwellers is often the only antidote to the epidemic of overcharging and errors revealed by an FT investigation. Comprehensive contract reform is needed, providing residents with transparency and a much more effective way to obtain restitution than taking matters into their own hands.

Planned changes to tenancy agreements, an originally feudal form of land ownership in English and Welsh law, have focused primarily on ground rents – the annual charge that landowners, who legally own the property, can levy on their tenants, the tenants. It’s understandable. One-sided contracts have led some tenants to face rapidly rising ground rents, absorbing much of their income while leaving them trapped in unsaleable homes; few want a house that comes with exorbitant rents.

Widespread issues with service charges – fees paid by residents to property managers for services ranging from cleaning to Christmas lights – also need to be addressed urgently. Those who pay them, including leaseholders alongside some freeholders and council tenants, have struggled to get explanations for the sudden increases in cleaning costs and have been forced into long and drawn out battles. expensive to get their money back; many of the few who have successfully navigated the system have a background in law or accounting. Although expanding the scope of the legislation, which is moving slowly through Parliament, will take more time, it is essential to get it right.

One of the fundamental problems is that tenants in English law leaseholds find themselves in an uncomfortable intermediate position between landlords and tenants. Because the contracts grant long-term extendable leases, often for more than a century, they offer a degree of security and means of accumulating wealth similar to other forms of land ownership. However, tenants have the legal quality of tenants and therefore have no contractual relationship with the property manager, beyond an obligation to pay invoices. Existing methods of replacing managers are time-consuming and difficult, especially for those who live in tall buildings.

Eventually, lease contracts should be abolished or completely abolished. To protect other service charge payers, invoices must be verified by an independent third party. This may increase costs for residents, but will protect them from exploitation. In addition, managers should be required to ensure transparency. Residents should be able to request itemized bills.

These changes will mean little without effective enforcement. Residents have challenged the charges in court, sometimes acting as their own lawyers, and often won, but the cost makes this impossible for many, including those on low incomes living in council-owned flats. One of the many existing regulators should be responsible for investigating disputes.

Conservatives present themselves as defenders of those who have worked hard to get on the property ladder. For this to make sense to tenants, they need to devote parliamentary time to this and other related issues, such as the cost of ensuring that new apartments comply with building safety regulations . Without such measures, many might begin to wonder if the party is really on the side of landlords or, as many suspect, property developers.