Service charges are the most contentious element of property ownership and it’s rare that property managers have raving fans. It’s no secret that leasehold laws are desperate for reform - the industry awaits more detail on what this might look like, but the next twelve months could well see some pivotal changes.
Discontent around service charges is rampant and has been for many years – but the industry has carried on regardless and has failed to take heed, thereby forcing the government to take the lead, likely ushering in more scrutiny for property managers.
Service Charge Sorted, a platform created to allow homeowners to self-manage small blocks of flats and private estates, saw a huge 37% spike in enquiries during the last quarter of 2024, demonstrating the growing disaffection from homeowners who are increasingly opting to take service charges into their own hands. Homeowners do so not only to reduce bills, but also due to consistently poor service from managing agents.
The growing numbers of homeowners choosing to oust managing agents and handle their own service charges results from years of excessive fees for very little return. Mysticism and a lack of transparency are also motivators. For small blocks and estates, self-managing offers an alternative to the inequitable burden of managing agents fees. Due to minimum fee thresholds, and legal requirements and responsibilities imposed on managers, service charges are often disproportionately unfair to small blocks and estates.
However, while self-management is becoming increasingly popular, and is an effective solution for those living in smaller blocks and private estates (it can be as easy to use and as transparent as online banking), it doesn’t fix the issues for homeowners living within larger buildings. These are the people trapped in unsaleable properties and faced with huge increases on their annual charges who have little or no recourse.
While the government has shared its intentions to reform the system, there is more property managers can be doing to tackle the issues in the meantime, striving to create a fairer, more transparent system.
Technology can be better harnessed to modernise processes, offering homeowners clarity on how their annual service charge is spent, any works to be completed and when those jobs are scheduled to take place. We know that homeowners are more satisfied when there is clear communication from property managers, particularly when it comes to helping homeowners understand why the service charge may have to rise! There are many reasons for an increase in charges, such as remediation works in the wake of to the Building Safety Act, which in some cases couldn’t be foreseen and is unavoidable. Communication is never a one size fits all approach and communal living brings multiple perspectives and interpretations. That said, smarter use of technology can share building safety information, policies, invoices and much more; they’re tools to eliminate uncertainty and ensure that leaseholders know what to expect and when. Transparency is key.
2025 could be a pivotal year for property management and the way service charges are managed. We can expect self-management to gain real ground and managing agents would be best advised to act now to get ahead of impending legislation, improving the data they collect to inform the service they provide.
We’re likely to see broader reform to the system as a result of the Leasehold Reform (England and Wales) Bill, which could include simplification of service charge disputes, making it easier for homeowners to dispute unfair service charges. It could also include new guidelines on what constitutes a ‘reasonable’ service charge.
The industry could also see the introduction of caps or limits on service charge increases, particularly for high-rise and multi-unit buildings. However, quite how a cap can work if a block has under-collected but subsequently identifies requirements is a mystery. Property managers can also expect more scrutiny from the government and regulators, who will hold them accountable for any excessive increases. Yet the government is hardly fast at getting its own Building Safety Fund effectively paying out!
It's positive that the government is seeking to reform the system to create a more level playing field. As an industry, we can get ahead of the curve to shape best practice.
Mary-Anne Bowring, Group MD, Ringley Group
