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New-build properties command 96% service charge premium

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  • 09/03/2016
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New-build properties command 96% service charge premium
Service charges for new-build properties are 96% higher at £2,777 than for older dwellings, and levels vary markedly between developments, research reveals.

According to the survey by Direct Line for Business, a third of management companies increased these fees in the last two years.

Libraries, 24-hour concierge services, gyms and cinema rooms contributed to the increased cost.

Nick Breton, head of Direct Line for Business, said: “Service charges are often a hidden cost, which should be factored in when considering the affordability of a property.  In some cases service charges are uncapped and can escalate rapidly.  Landlords need to take into account all associated costs when purchasing a property, such as service charges, ground rent and taxes that may impact their rental yield.”

The average service charge or fees leaseholders pay to cover their share of the overall building maintenance, now stands at £1,863, according to the findings.

This cost alone represents more than two months of the average monthly rental income received by landlords, which stands at £906.

The method for calculating service charges varies between developments. In some cases it is a flat rate for all properties, while for others it is determined by the number of bedrooms or the square footage of a property.

Service charges usually cover repairs to communal areas of a development such as windows, drainage and the roof.

They may also be used to establish a sinking fund for major renovations. In some cases they are also used to pay for shared services such as gardeners, landscapers, concierge services or cleaners.

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