Big rise in service charges for flats triggered by fire precautions

New research from lettings agency Hamptons shows that since 2018, average service charges for flats across England and Wales have increased by 51.7 per cent.

The agency says this is predominantly reflecting the introduction of additional fire safety measures, and it means leaseholders will hand over a total of £7.6 billion in service charges in 2023.

The average annual charge for a one-bed flat stands at £1,287 per year, a figure which rises to £1,426 for a two-bed and £1,876 for a three-bed.

Service charges are higher in London than anywhere else in the country sitting 24 per cent above the England and Wales average.  

Half of the flats in England and Wales are in blocks of 20 or more. Service charges here average £2,606 each year, some 99 per cent higher than in blocks of five or fewer.

At the halfway point of 2023, the average annual service charge for a flat in England and Wales stood at £1,431, equating to £119 per month.  This figure includes all flats where a service charge is paid every month.  Houses, where a service charge is payable - alongside the small minority of flats where there is no formal service charge - are not included in the figures.

Service charges have increased 51.7 per cent since 2018 when they averaged £943, the last time they stood below £1,000 per year.  Some 37 per cent of this increase came between 2018 and 2019 and predominantly reflected the large number of fire safety measures which were put in place in the wake of the Grenfell Tower disaster in June 2017.

Over the last 12 months, however, the average service charge has risen 8.0 per cent, an increase which is broadly in line with wider inflation.  

The smallest blocks and converted houses tend to offer the lowest service charges.  

In blocks containing fewer than five flats, average annual service charges stand at £1,309.  Limited communal space or grounds, coupled with residents carrying out a higher proportion of the maintenance themselves, keep charges low.

Around half of all flats in England and Wales are in blocks of 20 or more.  At an average of £2,606 each year, service charges are 99 per cent more than in the smallest blocks.  Higher service charges here typically reflect the more complex nature of larger buildings alongside the additional services being offered in larger blocks, such as a gym, concierge and communal grounds.

Hamptons analyst David Fell says: “The last few years have brought some degree of relief for leaseholders with increases in service charges tracking inflation. The big hike in service charges came nearly five years ago and was wholly a product of historic fire safety failures in larger blocks.  

“The higher bills were put towards expensive short-term fixes such as waking watches, or medium-term structural remedies which sat outside the scope of either the government’s or developer’s funds.  But in most cases, these hefty increases should be behind leaseholders now.

“More recently, leaseholder premiums have been bumped up by the increased cost of building materials and insurance.  Energy-intensive construction products and anything containing a microchip are however still recording double-digit value increases.

“While recent falls in the cost of some building materials and energy costs should start feeding through into lower charges for residents, it won’t happen overnight. Commercial contracts for communal utilities are exempt from the price cap with many freeholders signing fixed commercial agreements at higher prices, meaning some leaseholders will have to wait to see the benefit of falling prices.”