Personal Finance

Sadiq Khan: leaseholders in England should have the right to withhold service charges

Leaseholders hit with large and unjust service charges should have the right to refuse to pay up, Sadiq Khan has said, amid concerns that the government has backed away from its promises to boost the rights of tenants.

There are 1.4m leasehold properties in London, a quarter of all such properties in the country. The London mayor said that many of the residents affected were suffering from a “shameful abuse of power” by their landlords.

His comments come after the Observer revealed that some of the UK’s largest housing providers were dramatically increasing annual service charges by thousands of pounds, pushing some residents into serious financial distress.

The demand from Khan, who said the right to withhold unfair and unexplained service charges should be attached to the leasehold and freehold reform bill going through parliament, will increase the pressure on levelling up secretary Michael Gove.

He has already been accused of severely diluting the bill, having originally said he wanted to abolish the “feudal” leasehold system.

Khan said that some charges had been “financially crippling” for some people living in flats or in properties where they are shared owners. “At their worst, they amount to the everyday extortion of leaseholders and a shameful abuse of power by landlords and freeholders,” he said.

“While many landlords act responsibly, we need stronger rights for leaseholders to act against those who don’t, with new powers of redress and the ability to withhold service charges that simply aren’t justified.

“If leaseholders face large increases in their service charge without it being clearly explained what it’s paying for, they should be able to do something about it, including having stronger rights in law. I’ll keep campaigning for the end of our current system of leasehold ownership, and the introduction of commonhold as the new default tenure for flat owners in London and across the country.”

Under Khan’s proposals, leaseholders could withhold service charge payments that had not been justified in writing, for example, in a statement of accounts.

He is also calling for the housing ombudsman to be given more powers over the level and increase in service charges and to make it easier and cheaper for leaseholders to take their landlords to court as a last resort.

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The Observer’s investigation found that residents who originally bought shared ownership properties as a way of gaining a foothold on London’s property market have seen increases of more than 40% in their proposed service charges. At least 1,000 people across the country are now threatening to refuse to pay.

In many cases, residents complain that they have been given no details of the evidence behind the rise in their service charge. Some people in shared ownership homes say service charges are now higher than the share of rent they have to pay. There have been reported cases in which residents saw their service charges go up from £125 a month to £417 from the start of this month.

Khan made the comments as he heads into a London mayoral election this week in which housing has been a key issue. His main rival, Susan Hall, has focused on building “family homes that people can actually afford”, but also blocking “unwanted tower blocks that are destroying the character of local communities”.


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