Why do we have leasehold properties and service charges?

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Leaseholders in England are paying an average of £600 ($828) more per year in service charge fees than they were five years ago, according to a BBC investigation. In some cases, homeowners have seen the fees increase by more than 400%, leading them to struggle to pay and in some cases leaving them unable to sell their property. Service charges may include costs associated with building insurance and maintenance, with payments fluctuating from year to year.

There are currently more than 4.7 million leasehold dwellings in England, accounting for almost one-fifth of the country’s housing stock. The system dates back to the Middle Ages, but freeholders and their agents have been accused of imposing exorbitant costs. Peter Bottomley, a former MP, has called for the system to be abolished. However, agents insist they are simply passing costs along to leaseholders.

Leaseholders have the right to challenge the reasonableness of their service charge fees through a tribunal, which can rule on whether or how much of a fee is payable. A landlord may face legal action if they refuse to supply information related to service charge fees. A right of re-entry or forfeiture may allow a landlord to regain control of a property where fees have not been paid, though these actions require compliance with legal requirements and a court order.

Last week, the UK government announced plans to introduce a “commonhold” system whereby residents own the land beneath their building. Although the current government has already made some changes – including forcing agents to provide full breakdowns of costs and standardising maintenance fees – further secondary legislation is required to implement these shifts. The governing Conservatives pledged in 2017 to abolish leasehold for new buildings. A leasehold reform consultation will also consider the possible transition from leasehold to commonhold tenure

Read the full article from The BBC here: Read More

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