Service charge ‘crippling’ new build homeowners

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Thousands of homeowners around the country are facing financial strain as a result of rising unregulated service charge, it has been reported.

It is not uncommon for homeowners on new build developments to be required to pay a service charge to cover the maintenance of communal areas, however concern is now growing that the uncapped and unregulated charges are rising at an exponential rate, making an impressive profit for management companies and leaving homeowners under increasing financial pressure.

Despite the housing developments being ‘unadopted’ by the council (meaning the council takes no responsibility for the upkeep of the roads, grass verges, pavements, play areas etc), homeowners are required to pay these charges on top of full council tax rates.

Many homeowners have come forward with stories of charges rising significantly once the development has been completed and the day-to-day management has been outsourced to a management company, with some residents reporting rises of as much as 600 per cent in just a year and a half.

It has long been an accepted practice for leasehold homeowners, especially flat owners, to be required to pay service charges for the maintenance of communal areas, but this new problem affects both leasehold and freehold property owners, and those living in flats and houses.

If the owner of the property fails to pay the charges, the management company has the right to recover the debt through the courts, and ultimately repossess their home if the debt remains unpaid.

One of the biggest concerns surrounding this issue is the apparent lack of information at the point of purchasing the property.  One homeowner was told at the point of sale that she would be required to pay £100 per year to cover grass cutting on the development.

Just a year later, when a different management company took over the contract, that fee rose to more than £300 per year.  Although not a huge sum, the rise has caused the homeowner, who already struggles financially, concern about how much higher that figure may rise in the future.

Other property owners have voiced concern about how these unregulated fees may affect their ability to sell their property in the future.  One homeowner commented:

If I don’t know what the costs are going to be in the future, how can I reassure a future buyer?  I feel I was completely mislead when I bought my home.