© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
© 2025 News On The Block. All rights reserved.
News on the Block is a trading name of Premier Property Media Ltd.
Service Charges: What’s Driving the Costs?
In recent years, service charge increases have put a strain on household budgets, leaving many residents questioning what’s behind the rising costs. As property managers, it’s our responsibility to balance maintaining high-quality services while managing costs effectively. From soaring inflation to stricter regulations, we break down the key drivers behind service charge pressures, and how we’re working with Resident Management Companies (RMCs) and customers to manage them, without compromising on the level and quality of the service.
Rising inflation
The UK has navigated a period of sustained inflation, which has influenced the cost of goods and services across various sectors. The contractors we use to provide essential maintenance tasks such as repairs, cleaning, and gardening have risen, and materials like timber, steel, and concrete have seen price hikes. Despite these challenges, our extensive network of national contractors allows us to leverage significant buying power, helping us secure the best possible value for our clients with a proactive approach to support RMC clients and our customers to minimise the impact wherever possible.
Buildings insurance
Building insurance costs have increased 92% in the last five years, according to data supplied by The Property Institute (TPI). With a hardening insurance market, insurers are facing increased claims and tightening their underwriting criteria. The Grenfell Tower tragedy has also highlighted the potential for significant payouts in the event of major incidents, leading insurers to reassess their risk profiles and increase premiums. And with extreme weather events becoming more frequent due to climate change, there are higher claims for property damage, contributing to the increase in buildings insurance costs.
We're starting to see some green shoots as the market and inflation begin to settle, reflected in the premiums insurance brokers are now able to offer. However, it's a changing situation that requires our RMC clients and property managers to remain agile.
The increasing complexity of building management
Modern buildings often incorporate sophisticated systems, such as fire safety equipment, lift installations, and communal heating systems. Maintaining these systems requires specialist expertise and often involves complex components and regular inspections. As buildings age, the need for major repairs and replacements becomes more frequent, adding to the overall service charge cost. The growing emphasis on energy efficiency and sustainability is driving the adoption of new technologies, such as solar panels. Whilst this can involve a significant upfront investment and ongoing maintenance costs, it can provide longer term benefits of cost. We are also looking at how leveraging technology and AI capabilities – making our buildings work smarter - can help us to drive cost efficiency whilst providing an enhanced service to our customers.
The impact of legislation and regulation
The Building Safety Act 2022, introduced in the wake of the Grenfell disaster, has placed greater responsibility on building owners and managers to ensure fire safety measures are in place. This includes undertaking comprehensive fire risk assessments, implementing remedial works, and installing new safety measures. These requirements, while essential for public safety, come at a cost. Similarly, regulations related to energy performance certificates, accessibility requirements, and health and safety, can all contribute to increased expenditure. Our RMC clients benefit from having access to in-house building safety expertise, which ensures that decisions always prioritise safety while remaining measured and considerate of customers' financial pressures.
Effective reserve fund management
The reserve fund plays a crucial role in long-term financial planning for managed properties. This fund is designed to contribute towards the cost of major repairs and replacements, such as roof work or lift overhauls. Insufficient contributions to the reserve fund can lead to significant increases in service charges when major works become necessary. A well-managed reserve fund, with regular contributions based on a professional long-term maintenance plan, can help to smooth out these costs and avoid unexpected financial burdens for leaseholders.
As a professional property manager, we will always look at the bigger picture and the benefits versus risk of a ‘quick fix.’ We advise our RMC clients that value has to be proportionate. If you set your reserve fund too high, you’re potentially impacting saleability, however too low and you end up with buildings that aren’t maintained to a high standard and that fall quickly into disrepair.
Looking ahead
Rising service charges on managed properties in the UK is a complex issue driven by a combination of economic, regulatory, and managerial factors. Understanding these drivers, RMCs and managing agents can work together to find balanced solutions that put safety first, are considerate to maintaining property standards while managing costs effectively. Collaboration, transparency, and proactive management are key to navigating this evolving landscape and ensuring long-term value.
If you’re a Resident Director or leaseholder looking for a partner that prioritises your property’s success, FirstPort is ready to help. Contact us today to discuss your property management needs.