Service charges: Flat leaseholders speak of rocketing fees

Kasun Kalirai feels “stuck”, struggling to sell the flat he loves, that he would never have put on the market had it not been for the service charge of £4,300 per year – up more than four times since he moved in. He has become numb to the bills and admits feeling powerless in the face of the increasing costs. So why have these eco apartments in Peterborough been left with service charges “spiralling out of control”?

Kasun bought the leasehold to the flat in Spring View – a brand new apartment block on the doorstep of his favourite football team Peterborough United – in 2016.

“I fell in love with it when I first saw it there and then,” he said. “I’m still in love with it now. I love the space, the balcony, where it’s situated.”

According to the developers, Morris Homes, the flats were part of “the first zero carbon challenge in the UK”.

But the increase in service charge Kasun pays to the management company appointed by the developers, Premier Estates – one of the UK’s largest – has been “really significant”.

It has risen from about £900 a year when he moved in to where it stands now.

“You become a bit apathetic to it all. You just think, ‘OK, another bill’. You used to get emotional but now the emotion’s out of it,” said the 39-year-old.

The 74 apartments in Spring View are a mix of shared ownership, social housing – operated by Cross Keys housing association – and privately-owned flats.

The first person to move in was Michael Ferguson in 2016, chair of the residents’ group, who said “things have spiralled out of control”.

He pointed to the costs associated with the building insurance, which sit at about £1,000 per apartment per year.

Michael said it was the “sort of service charge you’d expect to see in a London apartment”.

He hoped it would fall, especially, as he said, 50% of the homes were “affordable homes, not unaffordable homes”.

Premier Estates – which took over in 2018 – said new building safety requirements, the cost-of-living and energy crisis, and the pandemic had “undoubtedly contributed to soaring costs nationwide, whether for homeowners or leaseholders paying through service charges”.

It also said Spring View’s assets “relating to its carbon zero design” required specialist maintenance and upkeep.

But Cross Keys said it shared “our residents’ concerns about the significant service charge increases”.

“Unfortunately, in common with our residents, we have no control over these increases as we do not own the building and are therefore in the hands of Premier Estates.”

The housing association asked for “further transparency” over significant cost rises around the heating system and claimed Premier Estates “refused our offers of help” over some repairs, including leaks to top-floor flats.

Donna Nicholls bought her flat under a shared ownership scheme run by Cross Keys and had a leak on-and-off in her flat for about four years, before it was fixed in December.

In relation to her leak, Premier Estates said “interim repairs were undertaken whilst long term repairs were planned, financed and completed”, adding: “Certain repairs do present logistical challenges given the building’s unique design.”

Last financial year, Cross Keys said it subsidised charges, reducing them by about £105 per month, but it has not done so this year.

Donna, 40, said last year it was £87 per month, down from an average of about £250 per month, so she had been expecting a rise, but when she opened her letter in March it was £445.

“I was upset, angry, I just couldn’t stop crying. I got on the phone straight away to Cross Keys. I just knew I was going to struggle,” she said.

She added she was “very lucky” to have her parents’ help. “It upsets me to think that there’s people that don’t have that… I know if I didn’t have their support, I don’t know where I’d be.”

Morris Homes told the BBC the flats “were built to a very high standard” and “do not believe that the initial construction is a factor in what we believe are ongoing maintenance issues on an eight-year-old building”.

It said it had spent more than £1m on improving the building’s fire safety as a result of recent government changes, stating it was “one of the first buildings in the country to be brought up to full compliance”.

Travel down the A1 and A14 and you will find another set of flats where the Premier Estates name is familiar, near Addenbrooke’s Hospital in Cambridge.

The company was appointed by the freeholder in September 2021, but resident Frank Gommer said leaseholders “got rid of” the firm about 18 months ago.

They set up a Right to Manage company to take over the management of the building, but Premier Estates still run parts of the site.

Frank Gommer said over the whole course of living there the service charge – at its height – had reached £6,000 per year, which was “horrible, it’s more than the mortgage we pay”.

“You have no control over where the money goes. It’s all determined by external parties who we feel don’t want to listen to our inputs.”

They are now taking the freeholder to court, challenging the “reasonableness of service charges” linked to 2015-2016 and 2021-2023, which Frank said regarded “if the amount which was spent was justified, or could they have done it more economically or it wasn’t necessary at all”.

“The problem, of course, is the freeholder or property manager hold all the information… but you as leaseholder, the burden of proof is on you to show the work was not justified.”

A statement from the freeholder’s representatives said it was unable to comment in detail because of the ongoing case, but added: “We are confident that the landlord has been engaging constructively with residents to resolve all issues as quickly and at best value to residents as possible.”

Back at Spring View, Kasun said it was the second time in three years he had put his flat on the market.

But viewings are low and the feedback is the same.

“It’s too expensive – £4,300 a year is out of a lot of people’s budgets, so it’s becoming increasingly difficult to sell,” he said.

People questioned him about speaking to the media while his house was on the market, but he said: “I feel the information needs to be out there.

“A lot of leaseholders, there’s four million of us out of there, feel like we’re stuck because the flats are becoming unsellable.”

A spokesperson for the Department for Levelling Up, Housing and Communities, said: “Unjustified increases in service charges are completely unacceptable, which is why we are committed to strengthening protection for leaseholders and are bringing forward reforms through the Leasehold and Freehold Reform Bill.

“The Bill will improve homeownership for millions across England and Wales by improving transparency of service charges, and by making it cheaper and easier for leaseholders to extend their lease or buy their freehold.”