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Meet the growing numbers of home owners who are the victims of sky-high service charges:

When Kirsti Overton and her partner Chris Penfold bought their £150,000 three-bedroom flat, they were over the moon finally to own a home together. But five years on, they have been forced to sell up because their service charges have nearly tripled. 

A Money Mail investigation today reveals how some firms appointed to manage properties are cashing in while leaseholders are seeing bills soar to unaffordable levels. 

There are also fears that residents are being hit with rising charges by mistake. Some firms have been forced to refund residents tens of thousands of pounds after charges were found to be unjustified or made in error. 

Forced to sell up: Chris Penfold and Kirsti Overton

Kirsti and Chris first paid £1,473 a year to cover costs associated with the block of 25 apartments in Newcastle upon Tyne. Fast-forward to 2021 and their manage-­ ment agent, Kingston Property Services, has now said they must pay £4,140 — more than eight times the cost of their monthly mortgage. Kirsti, 33, says: ‘We have never been able to save anything because we are always having to pay these bills. It’s so stressful not knowing how high they could end up in the future.’ 

But estate agents have warned the couple that they may not be able to find a buyer willing to take on the high fees. Experts say rip-off service charges levied by unregulated firms could be the next scandal to blight the housing market. The Leasehold Advisory Service, which offers free legal advice, says one in four inquiries are about costly service charges. 

EVER HIGHER VARIABLE COSTS 

Service charges are supposed to go towards maintaining the building and any communal areas, such as the garden or car parks. In some developments, water rates and building insurance premiums may also be covered. Luxury apartment blocks may also expect residents to foot the bill for concierge staff, swimming pools and gyms. Charges usually range between £1,000 and £2,000 a year. 

Fees totalling more than £5,000 a year would be considered excessive, according to property experts at HomeOwners Alliance. Landlords typically employ managing agents to look after properties and collect service charges from the leaseholders. In the past fees were usually fixed, but today more leases now allow for ‘variable’ charges, which mean fees can be increased to cover rising costs and inflation. Experts warn that unscrupulous firms are hiking fees to rake in extra profit. 

Amelia Murray purchased a flat with her brother three years ago. But she says: 'We never would have gone ahead had we known what a costly nightmare we faced dealing with the building’s managing agent'

Amelia Murray purchased a flat with her brother three years ago. But she says: ‘We never would have gone ahead had we known what a costly nightmare we faced dealing with the building’s managing agent’

Katie Kendrick, founder of the National Leasehold Campaign, says: ‘Leaseholders remain at the mercy of their free-­ holders and their managing agents and continue to be used as an end-­ less cash cow. We know our homes need maintenance but having no control over these costs is like writing a blank cheque.’ 

Paula Higgins, chief executive of consumer group HomeOwners Alliance, says buyers of newbuild properties are at particular risk. She adds: ‘Developers can set service charges unrealistically low to tempt buyers into going through with a purchase. Once a managing agent takes control of the development, it will usually hike the fees to meet actual costs.’ 

Generous commission paid out to brokers for home insurance is also driving up the cost of premiums for leaseholders. Harry Scoffin, of the charity the Leasehold Knowledge Partner-­ ship, says: ‘Average commissions of around 40 per cent of a leaseholder’s premium is a common consumer grievance in the sector. ‘And there is no law that compels the freeholder or broker to reveal this information to the leaseholder who foots the bill.’ 

HOW THE BILLS QUICKLY ADD UP 

In Kirsti and Chris’s case, the cause of the rising bills appears to be down to huge increases in the amount of money the firm has spent on repairs, increasing from £3,801 in their first year to an estimated £8,000 needed for 2021. Jobs include servicing floors, lights, windows and fixing leaks in the red-brick listed building. Residents also pay into a ‘reserve fund’, which is for more expensive jobs such as replacing a roof. 

But while they contributed £5,000 in 2016, they are now being asked to pay in £14,500. Other costs include a £5,135 annual cleaning bill and a £495 accountancy fee. The firm also charges a management fee to cover its own services and staff. This has risen by 10 per cent to £6,775 since they moved in. 

Andy and Siobhan Masterson, both 50, used to pay £800 a year for their two-bedroom flat in Sutton, Surrey, but since the freehold was purchased by another landlord their fees have soared to £3,509. New agent Eagerstates has commissioned more than £10,000 of work — and each time a job costs leaseholders more than £250, it charges a 15 per cent management fee. Eagerstates says it had to ‘pick up the slack’ left by the previous agent to ‘bring the property up to date and compliant with laws’. 

How I plotted escape

My brother and I bought a flat together three years ago. But we never would have gone ahead had we known what a costly nightmare we faced dealing with the building’s managing agent. 

The first bill arrived months after we moved in. There are two flats in the building and between us we were billed £7,717 for ‘external decorating’ – including a £1,177 management fee. When we asked local builders for quotes, they came in at less than half the cost. Yet we paid out the money and wrote it off as a bad experience. 

But the bills kept coming and over the next few months we and our neighbours were each invoiced £467 for an asbestos survey we did not need, £400 for a fire safety check and £400 for a fire safety sign. We were also charged £1,493 a year for buildings insurance. 

So we decided to take matters into our own hands and ask to buy the freehold for the building, which meant we could organise any work needed ourselves. 

But we were told we would have to pay a £420 fee just to get a response from the firm. Alternatively, we could apply for the Right To Manage (RTM). Under the Commonhold and Leasehold Reform Act 2002, leaseholders can replace their management company with themselves or another firm. 

The Leasehold Advice Centre helped us prepare and serve notices, complete title searches and register the RTM. It took five months and cost £834. We still pay annual ground rent but have more than halved our insurance cost and are no longer on the hook for any more shock demands. 

A Kingston Property Services spokesman says the building’s age means more needs to be spent on repairs and saved for future works. He adds: ‘The management fee is fixed and therefore unaffected by the amount of works commissioned for the building.’ 

NEXT CHAPTER OF THE SCANDAL? 

It is not the first time Britain’s 4.5 million leaseholders have felt exploited by profit-hungry businesses. For years, they have been forced to pay punitive ground rents to firms that own the land their home is built on. In January, after a Daily Mail campaign to end toxic leaseholds, ministers pledged to scrap the archaic charges for millions. The new rules followed an investigation by the Competition & Mar-­ kets Authority (CMA), which uncovered ‘troubling evidence’ of potentially unfair terms and misselling. Housing developer Persimmon has since agreed to sell free-­ holds to leaseholders at a discounted price. Aviva said it would refund up to 1,000 families whose ground rent bills had doubled. 

Pressure is now piling on other developers and investment firms that bought freeholds to follow suit. But leaseholders are still not protected against sky-high service charges. The CMA said it had received complaints about costs rapidly escalating and home­owners billed for work not carried out. It warned: ‘A service charge should be compensatory, rather than a means of making a profit.’

In September 2020, the CMA said: ‘The wide variety and high cost of these charges can often take homeowners by surprise and leave them feeling vulnerable, frustrated and exploited in their own homes.’ Cross-party peer Lord (Richard) Best co-wrote a report with industry professionals in 2019 calling for management agents to be licensed and unscrupulous firms fined. 

He says: ‘We urgently need a regulator because people just don’t know the score about these firms. Leaseholders have nowhere to go if something goes wrong.’ 

But ministers are yet to introduce new laws on service charges and, until then, the CMA cannot address the issues it has identified. Yet in Scotland managing agents, known as property factors, are regulated. Leaseholds are also banned in Scotland and residents in a block of flats can vote to fire a factor if they wish. 

BATTLE OVER BOTCHED BILLS 

Bungling firms have also been billing homeowners incorrectly — leading to some residents winning back tens of thousands of pounds. Last week the Financial Times revealed widespread errors in how service charges are calculated by major housing firms. Insurance giant Aviva has agreed to refund leaseholders of a luxury central London development more than £300,000, the newspaper reported. 

Yet residents, who trawled through documents to find they had been billed £200,000 for Christmas lights over three years, say they have found more than £2million in possible charge errors over five years. Meanwhile, Optivo, one of the UK’s largest housing associations, admitted residents of its over-55s block in Kidbrooke Village, SouthEast London, had been over-­ charged by £20,000 a year for gas and agreed to refund them a total of £143,000. 

Roger Edwards and his neighbours spent hours checking bills from One Housing Group (OHG), which is landlord to more than 35,000 people. The 64-year-old lawyer and his partner Paula Edwards, 49, bought their new-build two-bed-­ room flat in Wandsworth, SouthWest London, for £440,000 in 2015. And in 2016, the block of 31 flatowners received an estimated service bill of £37,573. But OHG ended up charging them £51,319.84 for the year of which Roger had to pay £1,796. 

So Roger and his neighbours got together to ask OHG for con-­ tracts, invoices and receipts on a variety of expenses including CCTV maintenance, rubbish collection and repair jobs. After fail-­ ing to provide receipts for materials purchased for work, the company agreed to credit them with refunds totalling more than £11,500. The firm agreed to refund another £14,000 after further challenges of the 2019 accounts. 

Roger and his neighbours have since taken over their bills and appointed a new managing agent after successfully applying for Right To Manage. He says: ‘By the end of it we had completely lost trust in the company, which at best was clearly incompetent.’ 

In 2019, OHG had to refund 12 residents £246 after it charged them for maintaining a nonexistent lift for nine years. At the time it apologised for the errors on the bills for the block in Reading, Berkshire. It is understood bulkbought products made it difficult for OHG to provide receipts. Its chief operating officer Chyrel Brown says: ‘We apologise for any errors that have occurred.’ 

When David Watson moved into his one-bedroom flat in Camber-­well, South London, in 2016, he was paying £118 a month to housing association London & Quadrant Housing Trust (L&Q). But the fees have been hiked every year since. By April they had more than doubled to £320.98. The company wrote to residents to say it would be hiking cleaning costs after re-measuring their communal areas, before admitting these bills should have been capped at £100 all along and that the letters had been sent in error. Yet even after receiving a £1,304.20 refund, David, 41, says: ‘We feel like we are stuck with a company which is failing to check how it is spending other people’s money.’ 

An L&Q spokesman says: ‘We have refunded leaseholders for charges above this cap, and are writing to them to apologise for our error, explain what happened and put things right.’ Optivo says it became aware of inconsistencies when it took over the block in 2017 and that it has addressed them with a ‘lengthy and thorough review’. Aviva disputes the £2million figure, but confirmed it had refunded leaseholders after ‘historic service charge errors by the estate’s managing agents’ were identified. 

It is not the first time Britain’s 4.5 million leaseholders have felt exploited by profit-hungry businesses

It is not the first time Britain’s 4.5 million leaseholders have felt exploited by profit-hungry businesses

OWNERS CAN TAKE CONTROL 

Leaseholders must be offered the chance to find a cheaper quote but agents are not obliged to go with a different option. There is not a free ombudsman resolution service for leaseholders seeking to challenge service charges. But leaseholders can take their landlords to the FirstTier Tribunal (Property Chamber) if they believe the fees are not ‘reasonable’. 

You can also apply to the tribunal to appoint a different managing agent. Your case will be heard by a panel, which may assess whether the agents are in serious breach of conduct set out by the Royal Institution of Chartered Surveyors. But there is a minimum £300 fee. You may have to foot your landlord’s legal bills if you don’t win. 

Another option is to submit a notice to the First-Tier Tribunal of an intention to buy a share of the freehold so you can manage the property with your neighbours. But you will need to get at least half of the other leaseholders on board and hire a surveyor to value the price of your share. And a landlord can serve a counter-notice, which can result in a lengthy and costly process. 

Anna Scoffin’s service charge bills have soared by more than £10,000 in the past eight years, from £16,426 a year when the building was under a previous agent to £26,520 today. But she cannot legally buy her freehold share because a business takes up more than 25 per cent of her Canary Wharf skyscraper. Anna, 55, says: ‘It’s a horrific situation when you’re faced with spiralling charges.’ 

A cheaper option is Right to Manage. Again, you need at least half of your neighbours to agree and a solicitor to help you send notice to your landlord of your intention. If the firm tries to block your request, you go to the FirstTier Tribunal. The Government also wants to make it easier for leaseholders to become commonholders, which would allow them to look after their own blocks. 

Read more at DailyMail.co.uk