26th February 2019
Over half of Londoners regret buying their home due to high leasehold service charges
Survey of London leaseholders sheds new light on their feelings towards the tenure
- 46% of Londoners are put off purchasing a new build home due to high service charges
- 32% believe there is no reserve fund in operation at all for their building
- More than half (57%) experienced an unexpected service charge increase
A survey of 1,000 London homeowners has uncovered some stark findings, revealing that many leaseholders are disillusioned with the lack of transparency on fees and service from managing agents and are therefore particularly keen to understand more about Right to Manage.
Leasehold properties in London are on the rise, with 98% of all new build properties sold in the capital in 2018 classified as leasehold. While the tenure is particularly prevalent in London, one in every five homes in England is now also classified as leasehold, up 7% in a decade.
The investigation of leaseholders commissioned by PBM property management found that despite the increasing prevalence of service charges, there is a distinct lack of knowledge amongst consumers as to what is right and reasonable. The results highlight the fundamental image problem the sector has – 57% of Londoners have experienced an unexpected increase to their service charges, while over half (53%) have regrets about buying their home due to high service charges.
Despite this, 33% of homeowners prioritise an effective and responsive management agent over price (26%), decreasing to only 20% of under 44s.
Gary Cane, Managing Director at PBM Property Management, commented, “Our aim was to shine a light on the lack of communication and transparency leaseholders are frequently experiencing from their property management company. As a property management company operating in London we often encounter leaseholders who do not fully understand the tenure of their property and are not aware of what their fees are going towards. While the pros and cons of Commonhold can be debated, there isn’t necessarily such an issue with leasehold as a tenure as there is with the current lack of regulation, education and protection and quick solutions that aim to protect homeowners against unscrupulous parties are urgently needed.”
Service charges are likely to be incurred when purchasing a new build property, yet concerningly 46% of the people surveyed are put off from purchasing a new build property due to high service charges. Government led initiatives like Help to Buy and shared ownership target young first time buyers, yet this figure rises to 63% of under 35s, demonstrating the disconnect between the appeal of new build properties and the target market.
A lack of oversight and understanding of where costs are being allocated is also a key issue for the survey respondents. Nearly two-thirds (59%) would like to have more influence over how their service charges are spent. Despite this desire to have a greater influence over how service charges are spent, people are prevented from doing so by a lack of knowledge about how to switch (22%) and nearly two fifths of respondents (37%) either don’t know changing managing agents is a possibility or haven’t considered it. Of significant concern was the fact that 25% of respondents are unsure whether there is a reserve fund being actively maintained at their property and a third (32%) know that there isn’t. Reserve funds are important for homeowners with a share of freehold or leasehold as it ensures that there is some money available for large scale projects when required.
Gary Cane, commented, “It is concerning that 63% of under 35s are put off from purchasing new build properties due to service charges. There is a fundamental lack of knowledge among homeowners as to how their service charges are being spent, yet homeowners aren’t fully aware of their options to remove their existing managing agent. The industry has a serious image problem with managing agents that needs to be corrected, by addressing performance issues, by ensuring consumers are receiving value for money and by educating them on the true cost of delivering services. Right to Manage is an opportunity for leaseholders to take ownership of their costs and the service they are receiving. The transparency Right to Manage provides is one of its key benefits, it helps people to realise how costs are allocated and the importance of maintaining a reserve fund.”