Why Service Charges Are Increasing for Leasehold Flats

3 September 2025

Leaseholders across the UK are facing steep rises in their annual service charges, with some bills increasing by hundreds or even thousands of pounds. Service charges are paid to the freeholder or managing agent to cover the cost of maintaining the communal areas of a block of flats - everything from insurance and cleaning to repairs and, in some cases, heating and hot water.

But why exactly are service charges rising so fast, and what does this mean if you’re trying to sell your flat?

Why Service Charges Are Increasing

Rising Insurance Premiums

Building insurance has surged in recent years. Blocks with cladding or fire safety concerns are particularly affected, but even standard premiums have risen due to higher claims and increased risk from flooding and extreme weather.

General Inflation

The cost of labour, materials, and everyday services has jumped significantly. Contractors, cleaners, and maintenance teams all cost more, and these increases are passed directly onto leaseholders.

Heating and Hot Water

In blocks with communal boilers, heating and hot water are included in the service charge. Volatile energy prices have made this a major source of upward pressure.

Building Safety Act 2022

The Act put more responsibility on freeholders to ensure buildings are safe. Regular inspections, fire safety assessments, and compliance work all carry costs, which are now appearing in service charge bills.

Freeholders Profiting Before Reform

Some leaseholders believe freeholders and managing agents are increasing charges now, ahead of the Leasehold and Freehold Reform Act 2024 (LAFRA). Once in force, LAFRA will require greater transparency and scrutiny of service charges, limiting opportunities for unjustified increases.

Cladding and Fire Safety Works

Many blocks are still dealing with post-Grenfell fire safety works. Interim measures such as “waking watch” patrols and temporary fire alarms are often charged directly to leaseholders, alongside expensive remediation projects.

Professional Fees and Consultants

Freeholders rely more heavily on surveyors, fire engineers, and lawyers to meet new legal standards. These professional fees are rarely cheap and are added to the service charge.

Higher Reserve Funds

Managing agents are building bigger sinking funds to cover major future works, such as roof replacements or lift renewals. With construction costs rising, contributions have been scaled up.

Rising Interest Rates

When freeholders borrow money to pay for upfront works or insurance, today’s higher interest rates make those loans more expensive - costs which are then recovered from leaseholders.

Managing Agent Fees

As the property management industry moves towards tighter regulation, some agents are already increasing their fees in anticipation of future compliance costs.

Energy Efficiency Upgrades

Blocks are under pressure to meet environmental targets, with projects like LED lighting, insulation, or smart heating controls adding to short-term charges.

Legal Disputes and Defects

Where there are disputes over historic building defects, legal and expert costs often fall back on leaseholders via the service charge.

How High Service Charges Affect the Sale of a Flat

For sellers, rising service charges can directly impact the saleability of a property:

• Buyer hesitancy: High charges make a flat less attractive, particularly to first-time buyers already stretching their budgets.

• Mortgage issues: Some lenders may be wary of unusually high or unpredictable service charges.

• Lower offers: Buyers often negotiate down the price to offset the higher ongoing costs.

• Slower sales: Deals may stall or collapse when buyers review the management pack and see escalating service charges.

Being upfront with buyers about the charges - and showing how the money is being spent - can help reassure them that the charges are at least justified.

What Can Leaseholders Do If Charges Seem Unfair?

If a leaseholder believes service charges are excessive or unreasonable, they do have options:

1. Request a Breakdown – Leaseholders have the right to see how service charge money is being spent, including invoices and receipts.

2. Challenge Informally – Sometimes, raising concerns with the managing agent can resolve errors or disputes.

3. Apply to the First-tier Tribunal – Leaseholders can formally challenge whether charges are reasonable and whether works were necessary.

4. Check the Lease – If costs fall outside what the lease allows, they may not be payable.

5. Act Collectively – Leaseholders can join together to form a residents’ association or exercise the Right to Manage, taking over control from the freeholder.

6. Future Protection via LAFRA – The new Act will give leaseholders more transparency and stronger rights to challenge unfair service charges.

Rising service charges are becoming one of the biggest issues facing leaseholders in the UK. For sellers, they can complicate sales and reduce flat values. For buyers, they are an ongoing affordability concern.

While some increases reflect genuine cost pressures - from inflation to safety upgrades - others are harder to justify. Leaseholders who feel unfairly treated should remember they have the right to challenge charges, and upcoming reforms under LAFRA should give them more power to hold freeholders accountable.