© 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.
New research by landlord insurance provider Direct Line for Business reveals property service charges are rising rapidly, with a third (33 per cent) of management companies increasing these fees in the past two years.
The average service charge or fees leaseholders pay to cover their share of the overall building maintenance now stands at £1,863. This cost alone represents more than two months of the average monthly rental income received by landlords, which stands at £906.
In addition, they will also have other costs to think about such as tax, mortgage payments, management and agency fees, and any ground rent, which now averages £371 a year for a new build and £327 for a pre-2016 property.
The service charges for new-build properties coming on the market in 2016 are significantly greater than for older dwellings at £2,777. This is 96 per cent higher than the average for an older property. Service charge levels also vary markedly between developments. One new-build development coming onto the market in Croydon in 2016 will see home-owners paying £1.55 per square foot in service charges, while a development in Lambeth coming onto the market in 2017 is charging four-and-a-half times more at £7 per square foot.
There is an increasing trend for new-builds to include amenities such as libraries, 24-hour concierge services, gyms and cinema rooms.
This is contributing to the increased cost of service charges, but also offers added value for landlords looking to invest in this type of property.
Recent moves by developers have seen more private housing stock owned by freeholders subject to service charges. Owners of freehold properties on private roads or estates are being charged for upkeep of roads and gardens. In one example, owners of every four-bedroom property on a development in Guildford are charged £900 a year for upkeep of the road and communal gardens.
Nick Breton, head of Direct Line for Business, says: “Service charges are often a hidden cost which should be factored in when considering the affordability of a property. In some cases service charges are uncapped and can escalate rapidly. Landlords need to take into account all associated costs when purchasing a property, such as service charges, ground rent and taxes that may affect their rental yield.”