Decoding Your Service Charge: Why Costs for Leaseholders Are on the Rise
For millions of leaseholders across the country, the arrival of the annual service charge demand can be a moment of genuine anxiety. Two major factors have caused service charges to spiral in recent years: enhanced fire safety regulations and soaring buildings insurance premiums.
The Anatomy of a Service Charge
A service charge covers: Repairs and Maintenance, Cleaning and Gardening, Utilities for Communal Areas, Health and Safety Compliance, Major Works Contributions (sinking fund), Management Fees, Specialist Services, Bank and Accountancy Fees, and Buildings Insurance.
The Grenfell Effect: The Necessary Cost of Fire Safety
The Building Safety Act 2022 has imposed far stricter regulations, creating substantial new costs:
- Enhanced Fire Alarm Systems
- Compartmentation Works
- EWS1 Surveys
- Mandatory Safety Inspections
New Rules: The Burden of Mandatory Inspections
Fire Risk Assessments (FRAs): A legal requirement under the Regulatory Reform (Fire Safety) Order 2005. Must be reviewed regularly—typically annually for high-rise blocks.
Electrical Installation Condition Reports (EICRs): Required at least once every five years for communal areas. Remedial work from these reports adds further costs.
Fire Door Inspections: For buildings over 11 metres, quarterly checks on common part doors and annual checks on flat entrance doors are legally required.
Alarm and Lighting Systems: Weekly alarm tests, six-monthly professional service; monthly emergency lighting tests, annual duration tests.
EWS1 Surveys: The Current Position
New RICS guidance (effective January 2023) clarifies that an EWS1 form is generally only required if there are specific concerns about combustible materials on buildings of five storeys or more. For buildings of four storeys or fewer, EWS1 is now very rarely needed.
The Insurance Headache
Buildings insurance premiums have dramatically increased due to: post-Grenfell reassessment of risk, annual indexation of rebuild costs, inflation and supply chain issues, and climate change increasing extreme weather claims.