The Financial Times (FT), one of Britain’s most high profile newspapers, has published a detailed exposure of the service charge scandal, and has called on government to bring it to an end.
“If you just let them put it all through on trust then you’re almost certainly getting fleeced”
Clare Richards, Peabody tenant
The piece by Madison Marriage describes the obscene and scandalous service charges being demanded by some of the largest and most wealthy housing associations, as well as other types of private landlord.
The cases described in the article echo many of those brought to SHAC as part of our research for the Service Charge Abuse dossier.
Three separate examples from Optivo are cited, overcharging to amounts that total from £20,000 to almost £200,000 on different estates. L&Q wrote to tenants across its estates with higher service charge demands claiming that cleaning charges had been too low. They said that they had identified the error as a result of re-measuring communal areas, but were unable to provide any evidence of remeasuring.
One Housing Group made numerous errors and was unable to show receipts for its service charge demands. Peabody, was forced to “refund residents the sum of £5,282 after it wrongly attempted to charge them for scaffolding, roof repair work and graffiti removal.”
These cases are the tip of a very dirty iceberg. In all, the journalist reviewed 80 service charge complaints from residents across the UK. But even this number fails to capture the sheer scale of overcharging by housing associations. Often, only one tenant leads the challenge, but the number affected can run into the hundreds. Across the three million homes owned by housing associations, the reality is that overcharging is amounting to millions annually.
“If the level of overcharging that we uncovered in our small block is anything to go by, [property companies] are ripping off their customers, and taxpayers, on a gigantic scale … It is an absolute disgrace and a licence for freeholders and unscrupulous managing agents to print money.” Roger Edwards, OHG tenant
In the cases highlighted, the landlord either denied that there was a problem, or claimed that it arose accidentally. The article acknowledges however that tenants also believe fraudulent activity lies at the heart of the overcharging.
Time for Action
The FT articulates the difficulties that tenants experience in trying to get their landlord to provide an accurate service charge bill. The onus is entirely on the tenant to fight the battle each year as a new demand is posted through their letterbox. As Marriage says:
It is an exhausting and at times infuriating process that can take years and is often navigable only for residents with professional backgrounds in areas such as law and accounting. For residents without such expertise, challenging service charge errors is routinely described as a Herculean task.Madison Marriage, The Financial Times
The article is welcomed by SHAC, giving long overdue, national exposure of the service charge scandal. It ends with a call for system change, for example with the establishment of a service charge regulator. This would need to be a body with the power to force a meaningful penalty on any landlord who transgresses. At the moment, many housing associations have grown so large that they are effectively unaccountable to any government body.
Service Charge Strikes
The service charging system is not just broken, it is upside-down. Tenants are expected to pay the bill and then challenge any problems later, no matter how extortionate the increase. If they refuse to pay, they are at least notionally in the wrong. In other walks of life, it is by contrast expected that an error on a bill is challenged before paymment.
But increasingly tenants are rejecting this approach and taking matters into their own hands, withholding payments while they challenge unreasonable demands. This helps address the power imbalance between landlord and tenant, and has had some success. For more details, see the SHAC Rent and Service Charge Strike Group.
1 August 2021
The views expressed in this article are the author’s own.