Service charge

Charter of rental charges from the mayor to protect tenants

Leaseholders in London are to be given greater protection against costly service charges under new rules introduced by Sadiq Khan.

The Mayor of London announced on Friday that he was launching a new Service Charges Charter which will require housing providers to be more transparent and give tenants more clarity about the charges they may incur.

London is home to around 1.25million rental properties – a quarter of all rental accommodation in England – while there are 50,000 condominiums in the capital.

Under a tenancy agreement – ​​whereby a person owns their home but not the building it is in or the land it is on for a specified period of time – landlords must pay a service charge to cover the cost of things like maintenance of the building and common areas.

According to a 2019 survey of landlords conducted by the Homeowners Alliance, approximately 54% of renters said they experienced problems with their leasehold property due to service charge issues.

Although tenants can challenge any change they think is unreasonable, Sadiq Khan said it was often a “time-consuming process”.

Mr Khan said: “Condominium properties can be a useful first rung on the housing ladder for Londoners. However, too many owners have had to deal with a confusing array of fees and charges. When service charges are mismanaged, tenants are often embroiled in a lengthy dispute process.

“Our new Service Fee Charter will help co-owners have a better home ownership experience, reducing stress and worry. Housing providers also recognize the benefits that Charter compliance can bring – leading to more efficient services and fewer complaints. »

Tenants in London pay an average of £2,000 a year in service charges according to the Association of Residential Managing Agents, but there is no limit on how far the charge can go up or down.

Under the terms of Sadiq Khan’s new charter, housing providers will have to provide new buyers with a clear list of any charges they may incur before the start of the lease. Service charges should be set at ‘realistic’ levels and reviewed regularly to ensure that costs to tenants are minimized.

When changes to the operation or management of a building are contemplated, tenants should be consulted if this may result in changes to service charges.

While it is not mandatory for housing providers to sign the Mayor’s Charter, any provider involved in delivering the GLA’s affordable housing program will be required to do so.