Tenants and leaseholders are increasingly upset about the size of service charges. Can social landlords do more to assuage their anger? Neil Merrick investigates.

Since moving into her flat in west London two years ago, Laura Benkis has refused to pay any of the money she owes her landlord for rent or services.

As a shared owner, Benkis should be paying rent to Clarion Housing Association for a portion of the flat she part-bought in Ealing’s ‘Green Quarter’. She’s also liable for service charges.

Benkis accepts she owes Clarion money, and has put aside about £13,000 to cover the arrears. But along with shared owners in neighbouring flats, she’s refusing to hand over the money until Clarion produces a financial statement explaining the sums she’s charged each month for services.

Benkis claims the association has failed to set out a business case for raising rents or service charges. “I’m waiting for them to clarify what I’m paying for,” she says.

Benkis and other residents in Ealing are by no means the only shared owners angry about service charges. Nor is the disquiet confined to leaseholders.

For the past 12 months, the Social Housing Action Campaign (SHAC) has been highlighting the need to end what it calls “service charge abuse”. The campaign was launched after almost 90% of tenants and leaseholders who responded to a SHAC survey said they were dissatisfied with the sums charged by landlords.

Suzanne Muna, secretary and co-founder of SHAC, says service charge increases in recent years far exceed inflation. In some cases, housing associations now charge for services that were previously included in rent, such as checking fire extinguishers work properly.

Unlike rents charged by housing associations and local authorities, service charges aren’t subject to any cap. Furthermore, shared owners must continue to pay 100% of service charges, even if they own the lion’s share of a property.

According to the Property Institute, the professional body for the property industry, service charges rose by an average of 41% during the past five years, compared with a cumulative inflation rate of 23%.

Last year, the Housing Ombudsman ticked off social landlords for not making it clear why service charges had risen, or explaining what residents were getting for their money. Arguments over bills were seriously testing relations between residents and landlords, said Housing Ombudsman Richard Blakeway.

One leaseholder, who declined to be identified, says service charges for her flat in north London rose from about £50 per month six years ago to anything from £120 to £170 per month today. She cancelled her direct debit and, after lengthy arguments, refused to pay any charges to her housing association for about a year.

“The LAS advises disgruntled leaseholders not to withhold payments, as they could be in breach of their lease and face repossession. Better to pay up, buy some breathing space, and argue about the charges later”

The association, she says, tried to charge her and other leaseholders for communal TV aerials, communal telephones and entry gates, even though it doesn’t provide these amenities. “It’s a continuous battle looking at items and making sure you’re only billed for the right things,” says the leaseholder.

Service charges is the number one area of concern among leaseholders contacting the Leasehold Advisory Service (LAS), an arm’s length body set up 30 years ago that comes under the Department for Levelling Up, Housing and Communities.

Alero Orimoloye, a solicitor and senior adviser at the LAS, says disquiet among leaseholders over service charges is nothing new. “There’s always been a sense of hopelessness,” says Orimoloye, who has worked for the service since 2005.

However, LAS figures show it now receives about 800 enquiries per month about service charges, compared with 600 per month two years ago. Complaints normally revolve around the scale of charges and the quality of service or work.

By law, landlords must show it was necessary to incur the cost, that prices charged by contractors are competitive, and that charges passed onto individual households are reasonable. “You have to consider the person who’s paying,” says Orimoloye. “They have a right in the matter.”

The LAS advises disgruntled leaseholders not to withhold payments, as they could be in breach of their lease and face repossession. Better to pay up, buy some breathing space, and argue about the charges later.

“In some cases, housing associations now charge for services that were previously included in rent, such as checking fire extinguishers work properly”

However, Suzanne Muna says tenants and leaseholders who contact SHAC fail to understand why they should pay for a service they don’t receive, and risk not seeing their money again. “They don’t see why they should pick up the charge for these things,” she says.

Some residents who withhold money are successful in getting charges reduced, but others are scared to enter into a dispute, says Muna. Meanwhile, the waiting list for the first-tier tribunal that adjudicates on property disputes grows ever longer. “If everybody who wants to went to court, the courts couldn’t cope,” she adds.

The picture is confused by the fact that service charges may be fixed or variable. At L&Q, the charge for most tenants is fixed at the start of each year, but charges for some tenants vary from month to month, as is the case for leaseholders.

Adrian Shaw, head of rent and service charges at L&Q, is sympathetic to claims that charges could be better explained to residents. The association is piloting a system in northwest England with communications consultants Tripartum that’s designed to break down charges more clearly.

Depending on its success, the new approach may be rolled out to all L&Q customers in 2025/26. “We can look at how much information we give residents when they’re purchasing or starting a tenancy,” says Shaw. “We’re trying to improve all the time.”

Shaw also acknowledges that, following rent reductions over four years until 2019/20 and last year’s government-imposed cap, social landlords are raising extra money through charges. “Over the past five years, housing associations looked long and hard at where they need to recover costs,” he says.

Laura Benkis hails from Canada where, she says, homeowners’ associations make sure there’s better auditing, and residents receive financial statements that set out the reason for charges.

“Since 2019…building insurance has risen 92%, utilities costs by 73%, and professional fees by 69%. Building safety legislation had added an average of £177 to bills”

In the UK, things are further complicated by the surfeit of organisations involved in mixed tenure developments. Landlords such as L&Q and Clarion often pass money they receive from residents to managing agents, which set the level of charges based on the costs they incur for services.

Clarion says it cannot discuss individual cases, but has met with Benkis and other residents to discuss their grievances. Last October, it says, it provided copies of invoices submitted by First Port, managing agent for the Green Quarter, covering 2022. The next set of First Port accounts were expected to be sent to residents by the end of June.

Along with other associations, Clarion blames rising energy costs and other price rises for the scale of service charges. In May, Fiona Fletcher-Smith, chair of the G15 group of London housing associations and chief executive of L&Q, wrote to the then Housing and Communities Secretary Michael Gove after MPs criticised the bills facing some households.

Since 2019, Fletcher-Smith pointed out, building insurance has risen 92%, utilities costs by 73%, and professional fees by 69%. Building safety legislation had added an average of £177 to bills. “Housing associations are charitable organisations that don’t make a profit from service charges,” she wrote.

But Fletcher-Smith also acknowledged service charges could be explained better. “G15 members accept that improvements need to be made to the way service charges are set, collected and how we respond to queries about them.”

Two months earlier, the Levelling Up, Housing and Communities Select Committee had warned that the future of shared ownership schemes is at stake because of anger over service charges. Committee chair Clive Betts said some shared owners face “a blizzard of charges and an unfair burden for maintenance and repair costs” that could ultimately mean they never buy their home outright.

MPs suggested that charges might be scaled down as residents buy increasing shares, an idea that should go down well with shared owners, such as Laura Benkis.

In the meantime, all she and her neighbours are asking for is more transparency so they can check how bills are calculated. “If you go to Tesco, you get an itemised receipt,” she says. “Just show us what we’re paying for.”

Ombudsman or tribunal – where should residents go for help?

The Housing Ombudsman can adjudicate over the following:

• Was information about service charges clear and transparent at the start of the tenancy or lease and subsequently?
• Did the resident receive the service paid for?
• Was the standard and level of service provided appropriate?
• Did the landlord provide key information to the resident on request?
• Did the landlord follow its policies and procedures, as well as the terms of the tenancy/lease, in deciding any change in the sum payable?

The First-tier Tribunal (property chamber) can adjudicate over the following:

• Who’s responsible for paying a charge, and is the charge reasonable?
• Would it be appropriate for a landlord to appoint a new manager to administer service charges?
• Has there been a breach of the terms of a lease in relation to service charges?
• Should a ‘dispensation’ be granted so a landlord isn’t required to consult tenants or leaseholders over a specific service charge?