Leaseholders should be told service charges for first 10 years of ownership, says London Assembly

The Greater London Assembly wants freeholders and managing agents to give potential leasehold purchasers an estimate of how much they will be paying service charges for the first 10 years of ownership.

This is among the recommendations in a report presented at a public meeting in Parliament on Thursday.

The aim of ‘Worry and stress’: Life as a leaseholder in London is to address surging service charges.

“Worry and stress”: life as a leaseholder in London

The London Assembly Housing Committee has published its report: ‘”Worry and stress”: life as a leaseholder in London’.

Housing chair Sem Moema says: “London has more leaseholders than anywhere else in the country – over a third of all homes in our city are leasehold. Behind the doors of these homes are often stories of residents paying thousands of pounds for opaque service charges, battling for basic transparency, and facing mounting costs through no fault of their own.”

The Residential Freeholders’ Association and The Property Institute are to be asked that their members sign up to the GLA’s Service Charges Charter:

Service Charges Charter

Read our Service Charges Charter – designed to improve transparency for leaseholders.

Shared ownership providers should track affordability for years one, five and 10 and have transparent charges as shared owners costs have now risen to 40% of net household income.

House builders should also give local authorities details of the lifespan of building components, which will give rise to increased service charge costs.

At the meeting today – hosted by Lord Bailey of Paddington, who is also a London Assembly member – MP Joseph Powell referenced the freeholders’ judicial review in the high court, where government is having to defend the 2024 Leasehold and Freehold Reform Act which threatens to close off several income streams.

“We obviously cannot discuss the case, but it shows what the government is up against,” Mr Powell said.

He assured attendees that MPs were sympathetic to leaseholders and that two ten-minute rule Bills had been presented in the last two weeks: one addressing right to manage and the other the regulation of leasehold managing agents.

In Mr Powell’s Kensington and Bayswater constituency shared ownership leaseholders of Notting Hill Genesis had huge increases in insurance costs. He explained that he fully understood why leaseholders were frustrated by the delay in introducing a complex set of reforms, but confirmed the next draft bill will be in Parliament in the Autumn.

Lord Bailey made the observation that the current consultation for secondary legislation to the Leasehold and Freehold Reform Act 2024 to ensure leaseholders have more transparent information will be key to helping force landlords and agents to change their bad practices when they are no longer able to hide behind opaque charges.

The meeting was addressed by Michael d’Ambra, of Shared Ownership Resources, who argued that the London Assembly report should have urged that shared ownership leaseholders be offered a buy-back scheme by the provider.

This is provided by some retirement housing providers, but LKP argued that given the complexity and unbalanced nature of shared ownership – and its uncertain long-term value as resale prices are, scandalously, not publicly available – an obligatory buy-back scheme should be imposed on all shared ownership providers. They build these products, on very advantageous terms to themselves, and buy-back would simply underscore belief in their long term viability.

However, Mr D’Ambra is a shared owner of a property whose landlord is Heylo, the for-profit social housing provider owned by US private equity giant Blackrock.

It is attracted to the legally enforceable rental income of shared ownership – a substitute for ground rent – and it is vanishingly unlikely that it would ever be enthusiastic about buy-back.

Juliet Salt, of the Social Housing Action Campaign (SHAC) spoke about their work, and the GLA report is calling on government to allow social renters the same rights as leaseholders to have access to the service charges accounts, given that they are impacted by them.

Martin Boyd, the chair of both LKP and the government’s Leasehold Advisory Service, and Harry Scoffin, of Free Leaseholders, participated in the GLA report and addressed the meeting.

Mr Boyd reminded the assembly members that he had helped the GLA with its 2012 report on leasehold, “Highly Charged”, which had good recommendations but the government did not take any of them forward for years.

Mr Scoffin began by making disobliging references to leasehold campaign groups who he believed are too close to government.

He urged more determined action by the Labour government given that it has a huge majority that even today – with defections and purges – nonetheless stands at 147.

Mr Scoffin was asked to outline what complete success would look like at the site where he lives, the high-end West India Quay (right) that stands beside Canary Wharf, and what would be the service charge savings if leaseholders governed it themselves in the manner that he wished. On other occasions, Mr Scoffin has referred to service charges paid by his mother are above £33,000 a year.

Mr Scoffin gave an overview of a property that he believed was managed for the greater profit of its Monaco-based landlord at the expense of its leasehold owning residents.

Seeing the issues at West India Quay is what motivates Mr Scoffin to address leasehold more generally, he explained.

Mr Scoffin said that self-management and empowerment of the leaseholders would bring down service charges by 30% at West India Quay.