Landlords are struggling to sell leasehold flats because management charges have reached astronomical levels with many owners now forking out £2,000 or more a year, making them unattractive to many buyers.

Estate agency Hamptons says the average annual service charge for a flat during 2024 increased by 11% to £2,300 or £192 a month. This compares with 2023 when they increased by 4.3%.

“Would-be sellers paying high charges have often seen the value of their homes rise more slowly or even fall," says David Fell, its Lead Analyst.

“In some cases, sellers are offering potential buyers a cash contribution towards future service charge payments.

“Both buyers and mortgage lenders have become increasingly cautious about committing to high service charge costs, particularly where they perceive charges to be disproportionate to the amenities leaseholds get in return.  

“Consequently, there is mounting pressure for leaseholders to have a greater say in how their money is spent.”

The Government agrees, and housing minister Matthew Pennycook, announcing Labour’s intention to effectively abolish leasehold, recently said: “For far too many leaseholders, the reality of home ownership has fallen woefully short of the dream – their lives marked by an intermittent, if not constant, struggle with punitive and escalating ground rents; unjustified permissions and administration fees; unreasonable or extortionate charges; and onerous conditions imposed with little or no consultation. This is not what home ownership should entail”.

Outstripping inflation

Also, service charges increases are far outstripping inflation. During 2024 they rose four times faster than the Consumer Price Index and increased by 34% during the past five years compared to inflation at 23%.

Having a gym on site costs on average attracts a service charge that’s £561 a year higher than developments without one. Lifts cost leaseholders £364 more and those with a concierge £892.

The higher number of large city centre schemes which offer this kind of service across the Midlands and North of England has created a growing North-South divide.  

In recent years, service charges have risen much faster in the North of England than in the South.   For example, the North East has seen average service charges rise 60.9% over the last five years.