Property Service Charges

Sam Carling Excerpts

Thursday 30th October 2025 Commons Chamber

[Rebecca Paul]

I completely agree.

To add insult to injury, Alfie told me that FirstPort charges an £80 administration fee if payment is not made within 30 days of demand. In 2023 he received his fee on Christmas day while in discussions about a payment plan to settle outstanding fees. FirstPort refused to remove the charge despite his financial struggles. Alfie has now left the UK and is renting his flat out at a loss, because that is the only option available to him.

[Sam Carling (North West Cambridgeshire) (Lab)]

The hon. Lady highlights the problem of residents being charged late payment fees. I have a number of constituents who never received an original letter demanding payment, but who are then charged late payment fees despite not knowing a payment was due. Does she agree with me that the lack of communication is another critical issue that we must address?

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[Sam Carling (North West Cambridgeshire) (Lab)]

I am so pleased that we are taking the time today to debate property service charges in depth. Across my constituency, residents are drowning in soaring bills, deferred maintenance, opaque accounts and a carousel of management companies passing the buck. These charges do not exist in a vacuum; they sit alongside dodgy contracts, conflicts of interest and unadopted roads—a structural failure that leaves residents feeling trapped and powerless.

Since being elected, I have had so many constituents come to me with leasehold horror stories. Of course, it is the service charge hikes are that are brought up most. In one case, a £4,600 charge in 2017 was due to increase to over £9,000 this year, in a property where many residents are retired and on a fixed income. That is not to mention the lack of transparency over what the charges were for. In this instance, residents pointed out that a £6,000 charge for staffing was levied during a time when there were no permanent on-site managers. I want to give credit where it is due. When I met the team at that management company for an explanation, they held their hands up and acknowledged that things needed to improve, and they have since followed up with residents.

Other companies, however, are not quite as reflective. Having thought about this, I will not name the companies in my speech, because I do not want to blight the developments in question, but I must warn these companies that that is an option in the future if we do not see improvements. The managing agent of one development in my constituency did not respond positively to my letter setting out residents’ concerns. Indeed, it is displaying what I have come to call the four horsemen of the managing agent: hikes in service charges, inadequate maintenance, poor communication with residents and a lack of financial transparency.

In a previous contribution in the House, I said that residents had informed me of a 150% increase in the service charge in two years. In its very blunt reply, the managing agent said that that was wrong and that the real increase was only a doubling in four years, which it considers reasonable. I do not, and nor do my affected constituents, who have pointed out that if we factor in various additional costs that used to be in the service charge but were then separated out, it is closer to the increase they cited.

Maintenance work does not get done. When residents took me around their development this year, I saw for myself the shoddily constructed steps that create hazards, plus defective drainage, malfunctioning lighting and so much more. The responsibility for some of these issues is not clear, as the developer should be taking on some issues that arose shortly after development. The lack of clarity means that residents are dealing with onerous back-and-forths, whereby responsibility is forever passed on and it seems like maintenance issues will never be solved. Just today, a resident described to me how there was a rat infestation at one point, and a contractor was apparently paid £30,000 of residents’ money to resolve it. It did not. The residents’ association was later able to sort it out, but not before that huge sum of their money was frittered away.

That brings me on to the poor communication. When highlighting the above problems, as well as concerns from residents about service charge breakdowns, I asked the managing agent what it would do to improve communication. I expected an answer that pushed back but at least agreed to look into the concerns I raised. I did not even get that. The response said it all:

“We do not consider that communication requires improvement.”

Then we come to the fourth horseman: a lack of financial transparency. I have been told by residents that they are contractually bound to an insurance policy with a £5,000 excess, making it completely unusable. A resident has shown me figures for one block that show a total insurance premium charged of over £60,000, of which just under £20,000—around 30%—was commission, in a confusing brokerage set-up, with much of that going to a company linked to the managing agent in quite clear ways, which smacks of a conflict of interest or worse. There are so many other examples of this. At another development in my constituency, accounts were provided late to residents for three of the last five years, and in the most recent two years, accounts have not been provided at all, despite much pushing from residents and leaseholders.

It is not just leaseholders in flats who are affected by service charges. I have not yet discussed the fleecehold scandal sweeping up so many of my residents in the newly built developments of Hampton. Unadopted roads are rife in new developments, meaning that residents are paying twice for their local areas to be maintained: once in their council tax, and once in a separate service charge. I counted the number of roads that need to be adopted but are without a section 38 agreement—meaning there is a long way to go before they are adopted—in the Peterborough part of my constituency. There are 289 of them, and they are mostly housing roads. That is an unjust extra charge for thousands of residents in Hampton, Stanground, Orton and elsewhere because roads are not being adopted. Some proposals have been made on how we could tackle this problem. The Home Builders Federation, for example, has made useful suggestions about common adoptable standards and mandatory adoption by public authorities.

[Dame Meg Hillier]

Many Members have raised the issue of the adoption of roads. Obviously, physical roads are easier to define, but there are parts of private estates that are only for that estate. Does my hon. Friend agree that there is a challenge, given the current financial situation, because it usually costs councils money to adopt a road, and under the current law, it could be a big hit for those leaseholders to pay the fee up front for the council to adopt the road?

[Sam Carling]

My hon. Friend makes a very useful point. I should have clarified that the figure I gave does not include the private roads that were not supposed to be adopted; it was purely the ones that are having this issue.

As my hon. Friend says, councils are in a difficult financial situation. The precarious state of local government finances after 14 years of cuts and freezes certainly has not helped. We also have a lot of councils blaming developers and developers blaming councils, and there is an increasing divergence between what council planning departments are requiring to grant permission for development and what the highways departments of said councils are willing to adopt. That is particularly vexing when there is a two-tier system, with planning at one level and highways at another. I hope local government reorganisation will help with that, but it is happening in unitary authorities too, and we need to explore ways to deal with that.

Ultimately, these are symptoms of a wider issue in how the system treats freeholders and leaseholders alike. The leasehold and commonhold reform Bill will be a vital step forward. I am pleased the Government are committed to ending leasehold for new developments. From my experience, that change cannot come soon enough. A key advantage of commonhold becoming the default tenure is that managing agents will be appointed by and responsible to leaseholders, rather than absentee corporate freeholders. Of course, the situation with managing agents still needs to be improved, and I am very supportive of mandatory regulation as a core step towards that, which I hope the Minister will comment on.

This debate comes in a week of real progress: the Renters’ Rights Act 2025 has become law, finally giving tenants the fair treatment they deserve. Let’s keep up that progress, because nobody should have to pay through the nose for poor service, broken promises and a system that puts profit before residents.

--- Later in debate ---

[Sam Carling]

I thank my hon. Friend for her work on this issue on the Treasury Committee. In my speech, I raised an insurance issue that my constituents have gone to the Financial Ombudsman Service about, but they are having problems about whether it is a FOS issue or a property ombudsman issue, and it is just not very clear. Would she join me in calling for more clarity?

[Dame Meg Hillier]

I completely agree with my hon. Friend that we need clarity on this issue. We are talking a lot about service charges, but the insurance industry has a responsibility because it accounts for a large chunk of them. Regulators have a clear role to play, and it is important that that is considered in all the changes we are discussing.

I am pleased that the Government have been consulting on these issues. The consultation on service charges ended in February, so I hope the Minister can give us an update about it. It is important to touch on a couple of other issues. We know that poor maintenance leads to high costs, so standards and expectations should be set on maintenance, which costs leaseholders, but costs them less in the long run if things are maintained. That is a repeated theme across my constituency, as some very modern blocks have not been maintained properly, which means leaseholders end up paying more in the end than they should have done.

There is also an issue with greening blocks. I have constituents working very effectively to try to get electric vehicle charging points and better insulation in a block that is an old warehouse; the famous loft apartments were very popular in my constituency at one point. However, improving such things creates betterment, which increases the ground rent, because the owner of the building can say it is an improvement and can charge more. Such tenants are making their property greener, cleaner and more efficient—costing them less in a lot of ways—but they are ending up with their costs being put up somewhere else, which seems to be a complete imbalance that we have not discussed.

On the right to manage and commonhold—I am a Labour and Co-op MP, and I am very proud to be pushing for commonhold—there can be issues where there is a right to manage. I am working with a development where there is a right-to-manage company, but the directors have hidden themselves away and are not acting responsibly in answering and providing information to their neighbours in the development. I think governance needs an overhaul in this area. It is not going to solve everything if residents take over the management but then do not do a good job, so there needs to be transparency all round.

As we know, this is on top of increased mortgage charges, and let us not forget what the 2022 Budget did to mortgage charges. Shared owners are paying mortgages, rents and service charges, and this is all adding to the cost of living and causing huge upset, on top of the spending on building safety requirements that are hitting so many of my constituents. That is causing real problems, but we need to be clear, so rather than go through the list myself, I will endorse all the asks that my hon. Friend the Member for Doncaster East and the Isle of Axholme (Lee Pitcher) listed about transparency, openness and getting clearer rights for residents to challenge service charges and to make sure they absolutely understand why they are being charged such fees. That is the basic minimum, but we should be making sure it happens.