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The Great British '(F)leas(c)ehold' Swindle

Poor communication, inadequate repairs and unjustified service charges are common complaints from the estimated five million people who own their properties as leasehold. Leasehold dates back hundreds of years - before women even had the right to own property - to a time of lords and landowners, peasants and serfs.

'We can’t sell our flat and can’t afford to live in it'

Patrick Duffy has to pay his mortgage, rent and a service charge each month

The sky-rocketing charges faced by tenants and residents for the service element of their monthly bills amount to an "industrial-scale scandal", a support group has told BBC London.

I have spoken to some of the Londoners who now fear losing their homes because the charges - the amount that goes towards the upkeep of the building and other communal areas - have soared by hundreds of pounds a month in the space of a few years.

Patrick Duffy bought his two-bedroom flat with his partner in 2017 under a shared ownership scheme run by the One Housing housing association. Mr Duffy, 31, says they were once optimistic about the future but now feel their "dream has collapsed in on us".

He says their monthly service charge went from an initial £94 a month to £515 by April 2023 - and, two weeks ago, he was informed that it would rise again, to £646 a month.

"It’s crippling,” says Patrick, who with his partner, Lewis Ryan, owns 60% of the flat in Dalston, east London.

"At a time when mortgage rates have gone up so dramatically - it’s hit at a time when we are all quite vulnerable. The whole thing is very trapping.

"The worst thing about it is that we have no options and they’re also not willing to help us in any way. We put our house on the market but, because of the service charge, our property is not desirable. We can’t sell our flat and we can’t afford to live in it.”

Leasehold property owners pay a service charge to their building’s freeholder or landlord. A management agent is usually contracted to maintain communal services such as cleaning, repairs and insurance. There is no cap on these charges and paying them is usually a condition of the lease.

In a statement, One Housing told BBC London it did not profit from service charges. It said: “Across the country, charges for services such as insurance and energy costs have continued to rise very steeply. Furthermore, due to the timber-frame construction of the building [it] is subject to high insurance fees."

Patrick says he has also received an extra bill for more than £9,000. Because his bills were "estimates", he's now been told be needs to pay "actual" costs relating to previous years. So he needs to find this sum, on top of his monthly service charges, the rent he pays for the part of the property he does not own, and his mortgage.

One Housing said: "The charges Mr Duffy and his partner have received relate to total costs incurred over three financial years, equating to an overall balancing charge of £9,257.72 as the services provided during the three-year period cost more than estimated.

“In 2021-22, we were informed by the managing agent that the actual cost of insuring the building had more than doubled, which was not known at the time of the estimated charges being set. This is unfortunately the main factor in the recent estimated charges (set using the actual spends) being increased alongside any balancing recovery.

“We acknowledge that these charges are higher than anticipated and appreciate that any cost increase can be concerning and unwelcome."

Lewis says the rising costs cause fear and anxiety

'Squeeze you for every penny'

Patrick's partner, Lewis, 40, works for the NHS. They qualified to buy the shared-ownership flat because of his key-worker status but to keep up with the bills he had to start working weekends, until the pressure took its toll on his health and he needed to take time off sick.

Lewis says they would never had met the affordability criteria if they had known the service charges would be so high and they're now having to use credit cards to pay for groceries.

One Housing, which is part of the Riverside Group, states on its website that it has "a charitable housing association at its core", and that it supports people "to live well". But Lewis told me: "It doesn't feel like a charity. It feels like they are trying to squeeze you for every penny you've got.

"And they are working loosely within the realms of the law; they can issue us with any bill and you have to pay it - and that's the answer we've got every time."

The rising cost of buildings insurance has been cited as a factor in the soaring service charge bills

This story is not limited to any single housing association or freeholder. I have spoken to at least 40 people in London and elsewhere who say they are struggling to get answers about rising charges.

The government says it will continue to work to drive up standards and will keep regulation under review, adding that its Leasehold and Freehold Reform Bill would lead to greater transparency with service charges.

The law as it stands currently says leaseholders have the right to ask for paperwork or receipts showing how the service charge has been spent, but Patrick and Lewis say they haven't had this, despite asking for it.

One Housing said: "We are continuing to work with the freeholder and managing agent to look into these charges, and have previously supplied Mr Duffy and his partner with breakdowns of invoices and supporting documents upon their request."

Service charge higher than rent

I've spoken to eight other people who are leaseholders of One Housing and who have similar complaints. Michael Brown, 62, is one of them.

Michael, who is retired, faced a monthly service charge last year of £483. He says he was stunned to receive a letter last summer asking for an extra £3,777 on top of the fees he’d already been charged, as a result of an "incorrect" bill two years earlier.

Michael, who owns 35% of a flat in Stratford, east London, and rents the remainder, says he had to pay One Housing more than £8,000 for charges last year and was only able to find the extra money by cancelling dental surgery and a holiday.

He says he has recently received correspondence indicating he will in future have to pay £540 a month in rent, with a service charge of £560. Michael says this is the first time the service charge has been calculated as higher than his rent, adding that when he moved in, the service charge amounted to 25% of the cost of the rent.

Michael Brown says this vandalism on his estate has not been repaired properly

He says he’s put in several complaints and Freedom of Information requests to try to get a breakdown explaining in detail what he has been charged for, and adds that he and his neighbours have been asking to see invoices for five years but haven’t been given them.

“You want to see some evidence and invoices. No-one in their right mind would pay a bill without knowing what the invoice was for.”

One Housing told BBC London: “We share Mr Brown’s concerns about being unable to reconcile estimated and actual costs in a timely way and are pursuing [the management agent] for these; once actual accounts are produced... we are happy to provide all supporting evidence to substantiate the costs that are being passed on and have supplied those where already received."

But Michael tells me the system is “not transparent” and says that what adds insult to injury is that he believes the standard of maintenance doesn't justify the cost of the service charges.

He says some of the communal areas are unsafe, broken glass on another block on the site hasn’t been fixed and repairs are not done promptly - such as a leaky pipe in his building that hasn’t been fixed for several weeks.

One Housing told the BBC that neither it nor the management agent had "received reports of issues relating to vandalism, safety of communal areas or leaking pipes at Mr Brown’s building".

It added: "We feel the building is generally well maintained."

Michael says trying to get answers is "so frustrating"

Service charges in London are “significantly greater” than in the rest of England, according to government data.

Challenging these charges can be a long, expensive and stressful process as the onus is on the resident to take the case to a tribunal. Many are reluctant to do that as, in some cases, landlords can add their legal costs to the service charge.

Many people I've spoken to say they feel completely "powerless".

'Difficult to get transparency'

Ed Spencer, who owns a flat in Bethnal Green and is also a One Housing leaseholder, did manage to get back £25,000 for himself and his neighbours but said it took him three weeks to go through all the accounts to find the inconsistencies. Ed said he discovered the block had been charged hundreds of pounds for light-bulb changes, and other excessive costs had been imposed for services.

Ed, who is on a WhatsApp group with about 140 other One Housing residents, says “it’s very difficult to get any transparency” from the housing association.

A spokesperson for One Housing said: “We want to sincerely apologise for any distress some of our customers have experienced relating to service charges and are sorry to hear they are not satisfied with the service we have provided.

“We provide a breakdown annually of our service charges where this is possible, and our policy is to always fully investigate any issues that customers raise.

“We recognise that any cost increase presents an additional financial challenge at an unwelcome time and are committed to working to do all we can to keep costs down for our customers."

Suzanne Muna, second from right, says there is a mixture of negligence and deliberate overcharging from a number of different landlords

Social Housing Action Campaign (SHAC) is a lobbying group for housing residents that campaigns for lower service charges and an end to what it calls an "abuse" of the charges.

Suzanne Muna, from SHAC, says incorrect charging is an “industrial-scale scandal”. She believes there is a mixture of negligence and deliberate overcharging from a number of different freeholders, adding: “It creates an income stream for them.”

She says they have heard of landlords charging for services that they are obviously not providing: “Tenants and residents charged for the maintenance of public parks, charging residents for council services is actually quite common; residents are being charged for a concierge when there is no concierge; buildings without a lift are being charged for lift maintenance.

“We've seen everything."

'One letter that can ruin your life'

The Residential Freehold Association (RFA), a trade body representing freeholders, says service charges are an important part of maintaining a building but that more regulation is needed of the managing agents that do the work.

Jack Spearman, from the RFA, told BBC London: “It is, unfortunately, a sector which is unregulated, which means that you tomorrow could start a property management business, invoicing people lots of money, and there's no real control around you doing that.

"That's pretty bad. And that's why you have these situations and scenarios.”

A spokesperson for the Department for Levelling Up, Housing and Communities said: “Increases in service charges are completely unacceptable without proper justification, which is why we are committed to strengthening protection for leaseholders."

For Patrick, a meaningful change cannot come soon enough.

“We’re sitting in the dark waiting for the next bill to come,” he says.

“It’s one letter that can ruin your life."

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Leasehold flats: 'I wish I had never touched them'

Liz Winstanley had to move out of her home after delays in getting her leaking roof fixed

By Phil Hendry

"I wouldn't touch leasehold, and I wish I never had." Words born of bitter experience by Liz Winstanley.

She bought her two-bed leasehold flat in Manchester in 2018. When Storm Eunice battered Britain two years ago, the roof of her top floor apartment started to leak badly.

"Rain was coming down through the light sockets and through the switches," she said.

Most homeowners would try to get someone in as soon as possible to identify the leaks and get the problem fixed via a claim on their buildings insurance.

But because Liz's flat is leasehold, she had to rely on a managing agent to sort things out. She said after many calls and e-mails the first attempt to stem the flow failed. Mould started to grow in the increasingly sodden flat.

Liz had to move out. She pleaded with the managing agent, FirstPort, to find her suitable temporary accommodation, and eventually they did.

"It was in a dodgy area of Salford," said Liz. "There were parties all the time, and drug use in the block. One day they found a dead body. I couldn't stay there, I didn't feel safe."

Liz finally moved back home this month.

FirstPort told the BBC it recognised residents like Liz had faced a significant challenge, but it said that the delays were caused by the problem being more structural than first thought and due to an inherent defect in the roof's construction.

Poor communication, inadequate repairs and unjustified service charges are common complaints from the estimated five million people who own their properties as leasehold.

Leasehold dates back hundreds of years - before women even had the right to own property - to a time of lords and landowners, peasants and serfs. Campaigners against leasehold say it should be abolished, it is feudal and unfair, allowing freeholders - who in effect own the land flats and some houses are built on - to extract money from leaseholders via managing agents.

Gove confident leasehold bill will pass by election

Leasehold flats: 'I wish I had never touched them'

Liz Winstanley had to move out of her home after delays in getting her leaking roof fixed

"I wouldn't touch leasehold, and I wish I never had." Words born of bitter experience by Liz Winstanley.

She bought her two-bed leasehold flat in Manchester in 2018. When Storm Eunice battered Britain two years ago, the roof of her top floor apartment started to leak badly.

"Rain was coming down through the light sockets and through the switches," she said.

Most homeowners would try to get someone in as soon as possible to identify the leaks and get the problem fixed via a claim on their buildings insurance.

Liz had to move out. She pleaded with the managing agent, FirstPort, to find her suitable temporary accommodation, and eventually they did.

"It was in a dodgy area of Salford," said Liz. "There were parties all the time, and drug use in the block. One day they found a dead body. I couldn't stay there, I didn't feel safe."

Liz finally moved back home this month.

Poor communication, inadequate repairs and unjustified service charges are common complaints from the estimated five million people who own their properties as leasehold.

?Gove confident leasehold bill will pass by election

Leaseholders face refurbishment bills in thousands.

The government agrees there is unfairness. Housing Secretary Michael Gove has called some of those operating in the leasehold sector "bandits".

This week, the Leasehold and Freehold (Reform) Bill is being debated in Parliament. The government says it will give leaseholders like Liz an easier and less costly route to getting legal redress. It will call for greater transparency to justify the service charges levied - but not to cap them - and will make new leases a standard 990 years, rather than the current 99 or 125 years.

Mr Gove rejects the calls for complete abolition of the leasehold system, saying legally it is "knottingly complex". He also resists suggestions the government has given in to lobbying from those with vested interests who profit from the current set-up.

"Making sure the room for exploitation is squeezed is critical," says Mr Gove. "The real challenge with abolishing leasehold with the stroke of a pen is the complexity of the English legal system."

But Scotland managed to do so 20 years ago, which means aside from a handful of properties in Northern Ireland, England and Wales are now the only countries in the world where leasehold is still widely used.

Anti-leasehold campaigners say Mr Gove's legislative efforts don't go far enough.

"Leaseholders want full control over the homes they've bought, their service charges and ultimately as a result, their lives," says campaigner Harry Scoffin.

"What the government is proposing is transparency over those costs. The problem is we're going to find out how much we're being ripped off by, but the rip-offs won't stop."

Harry's mother Anna says she feels exploited. Service charges for her flat in London's Canary Wharf went up 40% in the last two years, she says, to over £33,000 a year.

Anna Scoffin is frustrated at the big increases in her service charge

"I feel like my freeholder can dip his hand into my bank account whenever he wants and the system allows him to do it," says Anna.

She says some owners in her block have resorted to selling their flats at auction at knock-down prices to avoid the charges.

The newly appointed managing agents of Anna's building told me they are carrying out a review of service charge levels in conjunction with the building's freeholder - a billionaire businessman.

A leading London estate agent also suggests the government's efforts to reform the leasehold system for people like Liz and Anna don't go far enough.

Steven Herd of MyLondonHome.com says abolishing leasehold and replacing it with commonhold - a system that would allow homeowners to collectively either manage their own apartment blocks or appoint a managing agent of their choice, rather than the freeholder's - would give flat owners power over their own buildings.

Mr Herd says people, especially younger first-time buyers who make up half of leasehold purchases, are becoming increasingly aware of the pitfalls of the leasehold system.

"People who are seeing their service charges double with no perceived increase in service or amenity believe that it's a toxic market."Leaseholders face refurbishment bills in thousands