'Hidden' service charges on the rise, says insurer

Service charges faced by buyers of newly-built properties are a "hidden cost" reaching an average of £2,777, a survey suggests.

It said buyers of apartments coming onto the market this year are paying significantly more in service charges than those buying older properties.

Insurer Direct Line for Business suggested a third of managers raised these fees in the last two years.

"Trendy" additions such as gyms and cinema rooms add to servicing costs.

Fees

Leaseholders pay a service charge or fees to a management company to cover maintenance of the building. They tend to vary from year to year. Owners who rent out their homes may pass on these costs to their tenants.

The survey suggests that leaseholders of newly-built properties are paying a lot more in these charges than the general average of £1,863.

"Service charges are often a hidden cost, which should be factored in when considering the affordability of a property," said Nick Breton, head of Direct Line for Business.

"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."

The research also suggested that some developers are also requiring freeholders to pay fees for the upkeep of private roads or communal gardens in private estates.

In a separate survey, by legal firm Slater and Gordon, one in five tenants said they never expected to see their deposit cheque again after handing it over when renting a home.

Samantha Blackburn, a property lawyer from the law firm, said it was "crucial" that all tenants read their contract thoroughly before signing, to avoid any surprises or disputes in the future.