'Hidden' property charges are on the rise, according to Direct Line for Business.
The costs of owning a leasehold property are rising, with leasehold fees, service charges and ground rent all on the up, according to new research.
The study by Direct Line for Business found that a third of management firms have put their fees up for leaseholders in the past three years.
The average leaseholder is now paying a massive £1,863 a year to cover their share of the building’s overall maintenance. Move into a new-build leasehold property this year though and you could find yourself paying even more. The average service charge on new-build properties is now a whopping £2,777 according to Direct Line.
One reason for the hefty new-build service charges on new builds is the range of shared amenities on offer. New developments can now include libraries, 24-hour concierge services, gyms and cinema rooms.
Landlords beware
Anyone looking to buy a leasehold property such as an apartment to rent out should make sure they factor service charges into their calculations.
An average annual service charge of £1,863 is more than the two months of the average monthly rental income for landlords, so they could have a huge impact on your income.
Ground rent also needs to be considered. It averages £371 a year for new builds now and £327 for properties built before 2016.
Growing problem
Gone are the days when only leasehold properties were subject to service fees.
Increasing numbers of freehold properties are being built on private roads or private estates, and that means annual fees to pay for the upkeep of the roads and gardens.
One development in Guildford charges the owners of the four-bedroom houses there £900 a year to cover the cost of maintaining the roads and communal gardens.
Mind your mortgage
These rising management fees could also cost you your dream home.
When working out how affordable a mortgage is, lenders factor in service charges. And they could bump your monthly costs beyond what the lender thinks you can afford.
Nick Breton, head of Direct Line for Business said: “Service charges are often a hidden cost, which should be factored in when considering the affordability of a property. In some cases service charges are uncapped and can escalate rapidly."
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