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Buyers being put off by flats with service charge

Journalist: Ruby Hinchliffe, The Telegraph

ended 21. December 2023

We're looking for comments from estate agents and mortgage brokers on instances where buyers have been put off by properties with high, or even just average, service charges – especially when the building is visibly unmaintained and the value isn't clear.

We have a case study of someone trying to sell their flat, who said prospective buyers have complained that their service charge is too high considering the state of the building.

He pays around £4k a year/£300 a month in service charge, which is pretty average. Have estate agents noticed a change in attitude amongst buyers to service charge as mortgages get more expensive?

5 responses from the Newspage community

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Elliott CulleyVerified
Director at Switch Mortgage Finance
It is now more expensive to purchase a property with monthly mortgage payments rising. As a result I have seen many clients being put off with the idea of buying a flat, due to the extra costs of service charges that come with most flats. Service charges vary per flat and there is a consensus among clients that the money is not spent well and maintenance carried out does not reflect the cost they pay.
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Jamie Thompson0
Mortgage Broker at Jamie Thompson Mortgages
I recently tried to buy a flat. The estate agent didn't even know what the service charge was, allegedly. How are you supposed to make an informed offer based on that? You should not be able to market a property without disclosing the service charge and ground rent. How can you ask for hundreds of thousands of pounds for something and not know basic things about what you are selling? Turns out it was higher than I expected so I pulled out. What a waste of everyone’s time.
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Alastair HoyneVerified
CEO, Finanze Capital at Finanze Capital
As we deal primarily with investors, service charges factor highly in their decision on what makes a deal viable from a cashflow point of view. We’ve seen a number of properties where the service charges have been the equivalent of the mortgage payment. Sadly we’ve also seen properties where it’s hard to see how charges can be justified given the condition of communal areas. From an affordability and viability standpoint, charges can be a deal breaker.
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Malcolm Davidson0
Director at UK Moneyman
The service charge is only part of the problem - try getting a residential mortgage on a new-build flat in one of our city centres that are dominated by Buy to Lets!
We have had several declines this year from Lenders further to valuer’s comments that too many apartments in the block have been bought up by Investors and that this could affect re-saleability.
Of course the more Lenders that decline, the worse the problem will get!
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Scott Taylor-Barr0
Principal Adviser at Barnsdale Financial Management
Service charges have always been a contentious issue with leasehold purchases, be those apartments or some houses. No one likes the idea of another large bill, that they have little control over, but being legal obligated to pay, hanging over them. This is especially true when it seems that the service charge is not being used to maintain the building, as it begs many questions about the quality of the management company and their motives - are you going to be able to get things done that need doing, or are you just a cash cow for a faceless organization? It's an area that buyers need to look into carefully and understand what the charges are, what they cover and how they can rise over time. Some lenders have introduced criteria where they will refuse to lend in some scenarios where the service charge rises at too high a rate, or is already at a high level.