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Buy to Let

Service charges rising rapidly

Christina Hoghton
Written By:
Christina Hoghton
Posted:
Updated:
09/03/2016

A third of managment companies have hiked their service charges in the last two years

Property service charges are rising rapidly with a third (33%) of management companies increasing these fees in the last two years, according Direct Line for Business.

The landlord insurance provider said that 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.

New build premium

Direct Line found that service charges for new build properties are 96% higher than for older dwellings at £2,777, and levels vary markedly between developments.

Recent moves by developers have seen more private housing stock owned by freeholders subject to service charges. Owners of freehold properties situated on private roads or private estates are being charged for upkeep of roads and gardens. In one example owners of every four-bedroom property situated 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 impact their rental yield.”