Could service charges become a thing of the past?

The government has announced that it is considering changing the law to deal with the increasing problems faced by home owners who have to pay service charges. But will they be able to go far enough?

What are service charges on residential property?

Services charges are costs paid by residential home owners to maintain communal parts of buildings, including paved areas, alarm systems, car parking spaces, green spaces, window cleaning and street lighting in some developments. Service charges can also cover property management fees and insurances. Service charges can be paid by property owners of freehold as well as leasehold property. 

Leasehold property owners have long been aware of problems caused by increasing ground rents (the service charges paid to the freeholder), but now even owners of freehold properties are having issues with these types of charges. 

The issues with service charges usually arise where properties have been built recently. 

Why are service charges causing problems for home owners?

Service charges are in the news again because of the government's plan to look at the law surrounding them, but the problems have been going on for a number of years. The problems typically arise because:

• it is very difficult for home owners to mount any sort of challenge to the service charges, how much they are charged, what the money is spent on,  or any increases that are imposed;
• service charges are often increased every year and what started as an affordable annual charge of a few hundred pounds, can quickly rise to four figures;
• where property management fees are considered to be excessive, it is very difficult for residents to change the management company dealing with their property;
• once service charges rise to a certain point, they become off putting for potential purchasers of property, meaning people who own these properties are stuck and unable to sell; and
• in certain cases, where service charges are excessive, mortgage companies have declined to lend against properties, further compounding problems for home owners. 

What is the government proposing to do about property service charges?

The government will look at residents having more rights to challenge service charges and the management companies who administer them, after holding a consultation. There are no firm plans as yet, but capping unfair ground rents in leasehold properties at reasonable levels has been announced as part of the government's wish list in the Leasehold and Commonhold Reform Bill, which could come into force in the next couple of years. 

It remains to be seen how the owners of affected freehold properties will benefit from any changes. 

Get legal help to deal with property service charges

If you are stuck in a freehold or a leasehold property which has excessive service charges, there may be legal steps you can take to protect yourself and claim compensation. 

When you bought your property, your conveyancing solicitor should have warned you about the possibility that your ground rent or service charges could increase over time, and what the consequences of that could be. If your conveyancing solicitor didn't give you that advice, you might be able to bring a claim against them for professional negligence. 

At Samuels Solicitors LLP, we have successfully helped many clients with claims for compensation and legal costs against conveyancing solicitors who didn't advise clients about the issues they could have with service charges or ground rents. 

If you are struggling with increasing ground rent or service charges, in a freehold or a leasehold property, and you want to bring a claim against your conveyancing solicitors, contact us today to find out how we can help.