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Flat’s £23,000 service charge bill ‘beggars belief’, says owner | Money

A resident at a 24-flat development in central London says he had the shock of his life when he opened his latest service charge bill and found he was being asked to pay £23,309 for the year – 12 times the average for the capital.

“Many of the charges listed beggar belief,” says Waiel Yahia, who bought his three-bedroom flat in early 2017 when his bill that year was £9,420. Another resident with a smaller flat, Chandini Lachmandas, is being charged £16,943 this year, up from £6,965 three years ago.

Residents are now paying more than the millionaires living in one of Mayfair’s most exclusive developments, which boasts luxury perks such as a swimming pool, cinema and wine room.

“This is a nice development but we don’t have any of those things,” Lachmandas says.

The development, One Seymour Street, is certainly a cut above the average block. Located close to Oxford Street, it was only completed in 2018, although its 24 apartments were snapped up off plan the previous year at prices starting just below £1m for a one-bed flat, according to press coverage at the time.

But while they typically came with a seven-figure price tag, residents say this is not a “super-luxury” development and that the only amenities are on-site porters and a car park.

In 2017, buyers were told in writing by the developer, the Portman Estate, that the estimated first-year service charge was £7.97 per sq ft – yet owners have now been told that for 2020-21 it will be £19.39 per sq ft.

The charge they are paying is significantly more than the £14 per sq ft that the well-heeled residents of the Four Seasons Residences at Twenty Grosvenor Square in Mayfair reportedly pay for luxury amenities including a supervised children’s playroom, library, 25-metre pool, gym, cinema and wine storage and tasting room.

The estimated average service charge bill in London is about £1,800 to £2,000 a year, according to the website of the HomeOwners Alliance, which says: “Anything over £5,000 is expensive, and you should definitely be asking questions.”

The latest budget document, covering the year to 24 March 2021, shows some dramatic increases. Window cleaning alone is £6,397 – up 360% on the £1,392 figure the previous year.

Meanwhile, “security guarding” was just over £11,000 during the eight months from July 2018 to March 2019, then £136,000 for the following 12 months, rising to £172,000 for the current period.

Lachmandas paid £1.9m for her two-bed flat in 2017 and describes the £19.39 per sq ft service charge as “scandalous”. The 38-year-old claims some flat owners had tried to sell up, adding: “Our property values have taken a huge tumble – no one wants to take on these nonsensical, inexplicable fees.”

One of the costs that has caused particular irritation relates to the Christmas decorations in the lobby.

The 2018-19 document produced by the previous managing agents gave a figure of £349 for “Christmas decoration cost for the residential reception”. But in the 2019-20 document, produced by the current managing agent, CBRE, £900 was quoted, and the latest budget, under the heading “Internal floral displays”, gives a figure of £1,320.

Yahia, who paid just under £2m for his flat, says: “We were never asked if we would like one. While I would be happy to have a tree, I certainly would never have agreed to one so expensive.”

Lachmandas says the 2018 tree at £349 “was perfectly decent”. She adds that she and other residents “have only ever seen a tree – no other decorations”.

The Portman Estate – which is also the freeholder of the block – controls 110 acres of prime property in central London and is headed up by Christopher Portman, the 10th Viscount Portman, who earlier this year was featured in a “global real estate rich list” that claimed his “net worth” was $2.4bn (£1.8bn).

It is currently involved with the development of several new housing schemes including TwentyFive in Marylebone, which is due to be completed in the coming weeks. The marketing material for TwentyFive says the estimated service charge is £6.85 per sq ft.

The Portman Estate declined to answer most of Money’s questions but in a statement, Tom Knight, its portfolio director, says: “We take our residents’ concerns about the service charge extremely seriously and are working closely with CBRE … to provide a full and comprehensive response to the questions raised by the leaseholders as soon as possible.

“As a responsible landlord we are fully committed to a thorough review of the costs for the service charge and, as at all of our managed properties, ensuring they are fair and reasonable.

“We are in ongoing communication with all our residents and are making arrangements with each of them individually to review the services provided to ensure they meet their needs.”

On the issue of the Christmas tree, it says the 2020-21 service charge budget included £506 for a large, real, non-drop tree with decorations, plus £648 for a large luxury garland for the main entrance door, which comes to £1,154. The total cost “accounts for the items to be delivered, fully dressed, then removed and disposed of”.

Charges too high? What you can do

If you are a leaseholder who is unhappy about high service charges, there are things you can do.

You have the right to ask for a summary showing how the charge is worked out and what it’s spent on, plus any supporting paperwork such as receipts.

You can get free independent advice from the Leasehold Advisory Service (LAS).

You could use a mediation service to help you and your landlord reach agreement (you may have to pay a fee).

You may be able to change the management of your building if you are unhappy with the way it is being run. You can ask a tribunal to appoint a new manager, although you must prove bad management, which can be a high hurdle.

Leaseholders can exercise their “right to manage” (RTM) – in other words, take control of the management of their building. Others who have done this have cut service charges dramatically. You don’t have to prove bad management or get the landlord’s consent but, under the RTM rules, at least 75% of the building must be residential.

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