Here at Cooper Parry, we’ve been hearing from our clients who manage portfolios of property, particularly residential, that service charge bills are rapidly creeping upwards. They’re not alone. According to The Property Institute’s (TPI) newly launched Service Charge Index, leaseholders across the UK are feeling the squeeze.
Since 2019, average service charges have skyrocketed by 41%, compared to a cumulative inflation rate of just 23%. In 2024 alone, the average service charge per estate hit a whopping £467,138, translating to around £3,634 per leaseholder.
So, what’s driving these hikes?
RISING COSTS: THE USUAL SUSPECTS
Managing agents aren’t turning a profit here — service charges reflect actual costs. And unfortunately, those costs have been piling up. Think about it:
- Energy bills: They’ve gone stratospheric for everyone, leaseholders included.
- Building insurance premiums: No one’s been spared from those increases.
- Maintenance and repairs: Labour and materials costs are soaring, and reserve funds are working overtime to keep up.
Even if you own a freehold home, you’re probably seeing similar jumps in your outgoings. The difference for leaseholders? These costs are bundled up into their service charge. It’s not about making a profit – it’s about covering real costs.
BUILDING SAFETY: A NEW LINE ON THE BILL
But there’s more to it than rising costs. The Building Safety Act 2022 has added another layer of complexity and expense. Leaseholders are now footing the bill for compliance with the new building safety regime, from inspections to remedial works, all of which vary depending on a building’s age and complexity. Unlike cladding remediation (which had some government funding), there’s been no financial relief for this. And while safety is priceless, it certainly isn’t cheap.
THE BIGGER PICTURE
Add a global pandemic, an energy price crisis, and the ongoing cost-of-living struggles, and it’s no wonder service charges are climbing faster than Everest in a storm. TPI’s Service Charge Index shines a light on these factors, offering transparency and analysis to help leaseholders make sense of the numbers.
WHAT’S NEXT?
The TPI Service Charge Index will now be an annual fixture, keeping a close eye on trends and costs across estates. While it’s not a magic wand for cutting costs, it’s a step toward understanding them. And starting the conversation about how the industry moves forward together.
As a managing agent, you need to keep abreast of trends and industry challenges. We can help you make sense of it all. Managing service charges can be a time-consuming challenge. Our tried and tested methods streamline service charge management, tackle backlogs and add value to your operations.
Get in touch if you want to have a chat about how we can help you get on top of the increasingly complex world of service charge management.
