Law change aims to lower leasehold service charges

The housing minister said a change in the law would "hopefully" lead to a reduction in service charges for leaseholders.

Lee Rowley told the BBC's Politics East the new law would force managing agents to be more open about how bills were calculated.

He was speaking after a BBC East investigation revealed some service charges in Peterborough and Cambridge had more than quadrupled in just a few years.

Agents blame rising costs, particularly insurance, for the increased charges.

Dozens of leaseholders have contacted us from around the country after our investigation found some residents at Spring View flats in Peterborough were paying more than £4,000 a year in service charges.

One of them, Kasun Kalirai, said he was struggling to cope with the demand, which is four times higher than eight years ago.

One person told us his service charge had risen from £500 a year to £2,500 in four years.

Another said the service charge for her flat, which was £1,000 in 2017 was now more than £6,000 a year.

"It's clear the market isn't working and it's one of the reasons why the government has brought forward the leasehold reform bill," Mr Rowley said.

"That will ensure that service charges are reasonable and give appropriate redress."

The new law, which is currently going through Parliament, will force agents to provide a full breakdown of costs.

Labour says the bill has been watered down and will be ineffective but the minister insists greater openness will bring down the charges.

"The managing agent will have to justify what his charges are for," he said.

"We know there are some commissions in the background that aren't justified and that transparency will highlight it and hopefully bring service charges down.

"By shining sunlight in those areas where the system doesn't work, we can hopefully drive better behaviour and make it work better."

Andrew Bulmer, the chief executive of the Property Institute, which describes itself as the voice of the management profession told Politics East that agents had been "badly vilified".

He said: "A service charge is not a revenue source, it's a recharging of costs.

"Energy costs have gone up by 73%, insurance costs by 92% and where you have a building with a safety issue like cladding, then we are seeing insurance costs which have gone up by 400 or 500 percent."

He said some developers set service charges too low for new buyers and then had to increase them dramatically when the buildings began to age.

He insisted the industry had nothing to hide and had been calling for independent regulation for the last 10 years.

"Bring it on," he said. "We want to see it."

The Government hopes the Leasehold and Freehold Reform bill will become law later in the year.