Serivce Charge Index 2024
The Property Institute (TPI) has been concerned about rising service charge bills for some time, and in response to concerns and questions from leaseholders and other stakeholders, we have collaborated with our members to release service charge cost data and investigate the drivers behind rising service charge bills.
We are pleased to introduce the TPI Service Charge Index and Report, which will be repeated annually, to provide averaged data on service charge expenditure across the estates our members manage, as well as a detailed analysis into the trends, and the factors causing rising bills.
This page will be updated annually with new data.
This page will be updated annually with new data.
Over the last 24 months or so, leaseholders are likely to have seen their service charge bills go up significantly. In its newly launched Service Charge Index, The Property Institute (TPI) has reported average. service charge increase of 41% since 2019, as compared with a cumulative inflation rate of 23% over the same period. In the last year, there has been a 3% increase in the average service charge bill, according to the data, based on data gathered from 108 estates. In 2024, the average service charge cost per estate was reported at £467,138, meaning an average of £3,634 per leaseholder. While unwelcome, this should not come as a surprise. After all, people who live in freehold homes have had to contend with rising energy costs, higher building insurance premiums and increases in cost to home improvement or repairs and maintenance projects. These are all things that leaseholders pay for through the service charge and contributions to reserve funds. Rather than making a profit, managing agents collect service charge funds to meet real expenditure.
However, in addition to repairs and maintenance, insurance and energy, this year managing agents and therefore leaseholders are having to contend with the cost of implementing the new building safety regime, which was brought in by the Building Safety Act in 2022. Depending on the complexity and age among other factors of a building, the cost of implementation can vary hugely. Unlike cladding remediation, the government made no provision for this to be paid for by anyone other than leaseholders.
“The Property Institute and its members have been concemed about rising service charge bills and the long-term impact on reserve funds for some time. The cumulative impact of a pandemic, an energy price crisis, and the addition of the new regime requirements for building safety, and a cost-of-living crisis in the last couple of years has undoubtedly contributed to soaring costs for labour, materials, utilities, staff and insurance – as is evidenced by our Service Charge Index” said Andrew Bulmer, CEO of TPI.
“We are fully supportive of the new building safety regime; however, it cannot be denied that safety comes at a cost. A further complication is that not all the costs have been clear as early as we would like, while professionals have been waiting for details in secondary legislation, some laid only this year. As a result, I am not surprised that many leaseholders are as dismayed as we are by some substantial increases in their service charge bills, often at short notice.”
In 2024, the average service charge cost was £3,634 per leaseholder.
What are Service Charges?
Service charge money paid by leaseholders is held in trust in ring-fenced designated bank accounts (under Section 42 of the Landlord and Tenant Act 1987). It is used to maintain the structure and common parts of a long leasehold building and covers the cost of the services provided-the lease will set out how service charges are to be accounted for and which costs are to be paid for by leaseholders. Typically, the service charge will cover maintenance, cleaning, groundskeeping, repairs, health & safety compliance, inspections, surveys, energy supplies, buildings insurance, on-site staff costs and other general expenses, all incurred in the upkeep of the building.
All leaseholders paying variable service charges (based on apportionment) should receive an annual statement from their landlord or RMC-or their appointed managing agent within six months of the end of the accounting year. The annual statement should include an income and expenditure account and a balance sheet. An independent accountant should examine all annual statements of account before they are issued to leaseholders. Any surplus or deficit is accounted to the leaseholders at year-end, not kept by the managing agent, RMC or landlord.
The main drivers behind Service Charge increases
- Inflation
- Buildings Insurance
- The New Building Safety Regulatory Regime