What external factors affect my service charge?

In recent years, we have seen an increase in service charge costs. It’s important to note that service charges are not revenue – they are used to meet real expenditure and costs incurred, so if costs to run a development increase, so do service charges.  

According to The Property Institute’s Service Charge Index published in 2024, there was an increase in service charges of 41% between 2019 and 2024 outpacing inflation.  

The Service Charge Index looked at a sample of over 108 service charge information across 10 property management companies operating in the UK. It included buildings of all heights and ownership models, including some freehold estates. 

Over the five-year data period (2019 and 2024) on average:  

• Building insurance costs rose 92% 

• Utilities costs rose 73%  

• Health & Safety costs rose 40%  

• On-site staff costs increased 37%  

• Repair and maintenance costs rose 36%  

• Contributions to reserve funds, which is largely driven by rising costs in materials and labour, increased 34%  

Management fees increased 21%  

The introduction of the Building Safety Act (BSA) in 2024 also added further financial pressure, with some estates incurring over £50,000 in BSA-related costs. Buildings over 18 metres saw a 49% rise in service charges, compared to 42% for those under 18 metres. 

Despite these increases, management fees rose more modestly, increasing by just 21% over the same five-year period, below the cumulative inflation rate of 23%. The report emphasises that service charges are not profit-generating; they reflect actual expenditures, with any surplus or deficit returned to leaseholders. Property managers are working to contain costs amid inflationary pressures and the while also complying with new fire and structural safety regulations affecting buildings of all heights.