A COUPLE have told how their “dream has collapsed” after their service charge was hiked by £552 a MONTH.
Patrick Duffy, 31, and his partner Lewis Ryan, 40, say they would never met the affordability criteria for their two-bedroom flat in London if they had known the fee would climb by so much.
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The pair told the BBC how they bought their home in 2017 under a shared ownership scheme run by the One Housing housing association.
The shared ownership scheme allows first-time buyers to buy with a lower deposit than for a typical purchase.
You co-own your home with a housing association, buying a portion of the property and then pay rent on the rest.
Patrick and Lewis have a mortgage on 60% of their home that they own.
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They then pay rent to the housing association on the remaining 40%.
On top of this this, they also pay a service charge every month.
Service charges are paid by the leaseholder for the services provided under the terms of the lease to the building’s freeholder or landlord.
This cost generally covers repairs or maintenance to the property, including building insurance.
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There is no cap on these charges and paying them is usually a condition of the lease.
Patrick and Lewis’ service charge went from an initial £94 a month in 2017 to £515 by April 2023.
Michael Gove promises homeowners a ‘rapid’ timeline for slashing ground rent before next election
Just two weeks ago, the pair were told this would rise again to a “crippling” £646 a month.
They have tried to put their flat on the market, but because of the service charge, they say it is “undesirable”.
Patrick told The BBC: “We can’t sell our flat and we can’t afford to live in it.
“At a time when mortgage rates have gone up so dramatically – it’s hit at a time when we are all quite vulnerable. The whole thing is very trapping.”
Lewis, who works for the NHS, started working weekends to keep up with the soaring costs but he had to stop when it started to take a toll on his health.
The couple are now having to use credit cards to pay for groceries while they try to juggle their mortgage, rent and service charge.
A spokesperson for One Housing, told The Sun: “We’re sympathetic to Mr Duffy and his partner’s concerns around the service charges at their home and want to apologise for any distress experienced.
“One Housing is the landlord for homes where Mr Duffy and his partner live, but we do not own the building.
“The managing agent provides us with the costs of delivering a variety of services, including utilities, communal cleaning, security, concierge costs, repairs and maintenance, window cleaning, gardening etc.
“We then pass these costs onto our customers through service charges in accordance with landlord and tenant law.”
Concerns are growing that the lack of regulation around these charges could leave homeowners lumbered with unaffordable bills and homes that are consequently difficult to sell.
Hidden charges with leasehold properties
One of the biggest mistakes buyers make when buying a house is choosing a leasehold property without understanding the extra costs or rules around it.
They’re common and not always possible to avoid, but it’s important to know what you’re getting yourself into.
Owning a leasehold on a property means you have the right to live in it for a set period of time.
In the UK, the standard amount of time is 125 years, but it could be more or less.
Unless you extend it, the ownership of the property returns to the landlord when it’s up, also known as the freeholder.
It’s important to consider how long is left on the leasehold before buying it as the longer buyers leave it, the more money they stand to lose.
The cost of extending a lease varies wildly – from just £1,000s to £10,000s.
Another issue with buying a leasehold property could arise if you live in a building block.
If you’re in a block of flats then somebody owns the freehold of that block.
That freeholder is responsible for maintaining the condition of those parts of the building that might not be connected to your property like the roof.
If it incurs damage, for example, as a leaseholder, you’ll still have to pay for that by a service charge.
This is why it’s important to not only look at the interior and parts of the leasehold property during the survey.
It comes as the government looks to press forward with a bill on leasehold reform.
The Leasehold and Freehold Reform Bill aims to make it cheaper and easier for more leaseholders in England and Wales to extend their lease, buy their freehold and take over management of their building.
It would also regulate service charge and estate management costs for the estimated five million people who own their properties as leasehold in the UK.
MPs approved the Bill at third reading, meaning it will now be considered further by the House of Lords
What is a leasehold property?
Owning a leasehold on a property means you have the right to live in it for a set period of time.
In the UK, the standard amount of time is 125 years, but it could be more or less.
Unless you extend it, the ownership of the property returns to the landlord when it’s up, also known as the freeholder.
Service charges are paid by the leaseholder for the services provided under the terms of the lease.
It’s different to ground rent, which is a fee charged as a condition on your lease for the land your home is on.
What are service charges?
Service charges are payable by the leaseholder to the landlord for the services they have to provide under the terms of the lease.
This can include maintenance and repair, insurance and the cost of management.
The amount usually varies from year to year depending on the costs the landlord incurs.
These are usually split between leaseholders according to the lease terms.
The lease states when the service charge is due but this could be yearly, twice yearly or quarterly.
Are there limits on service charges?
Service charges can go up or down without any limit, according to the Leasehold Advisory Service.
But the landlord can only recover reasonable costs.
This means have the right to apply to the tribunal to challenge any service charges that you feel are unreasonable.
The Leasehold Advisory Services advises potential buyers to find out what the current charges are, and what they are likely to be in the future.
It says a solicitor will normally ask the seller for this information.
What to do if you think you’ve been wrongly charged
Any fees should be stated in your leasehold agreement and you should know of any additional charges before buying the leasehold property.
For any additional fees your freeholder, or landlord, should inform you of the charges well in advance.
While the freeholder isn’t required to find the cheapest contractor or building work, they are responsible for ensuring that the costs incurred are reasonable.
You are entitled to request invoices evidencing the costs incurred during any service charge period, according to Lawcomm Solicitors.
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Doing this will allow you to assess whether you are getting value for money.
If you are ultimately unhappy with the charges levied, you can make an application to the First Tier Tribunal for a determination as to their reasonableness.
How to get free debt help
THERE are several groups which can help you with your problem debts for free.
- Citizens Advice – 0800 144 8848 (England) 0800 702 2020 (Wales)
- StepChange – 0800138 1111
- National Debtline – 0808 808 4000
- Debt Advice Foundation – 0800 043 4050
You can also find information about Debt Management Plans (DMP) and Individual Voluntary Agreements (IVA) by visiting MoneyHelper.org.uk or Gov.UK.
Speak to one of these organisations – don’t be tempted to use a claims management firm.
They say they can write-off lots of your debt in return for a large upfront fee.
But there are other options where you don’t need to pay.
Do you have a money problem that needs sorting? Get in touch by emailing [email protected].
Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories.
