Soaring service charges drive sharp rise in ‘Right To Manage’ applications

4 min read
  • Analysis of Companies House data reveals applications to set up ‘Right To Manage’ (RTM) and flat management companies have risen by 20 per cent in the last year
  • Three in five landlords of leasehold properties in England and Wales would consider setting up an RTM company to take over the running of the building where their property is located
  • Landlords in England and Wales with leasehold flats are seeing steep increases in service charges – up over 21 per cent in some areas

 

Soaring service charges for leasehold flat owners are driving an increasing number to take over management of their building, by setting up ‘Right To Manage’ (RTM) or flat management companies, according to new research1 from Direct Line. Applications to Companies House2 to set up such companies in England and Wales3 have risen by 20 per cent in the past year.

A survey of landlords in England and Wales reveals leasehold flats service charges are soaring, increasing by an average of ten per cent per year, with one in fourteen (seven per cent) seeing increases of 21 per cent and more. Those who pay a service charge to their freeholder can now expect a bill averaging £1,580 per year, with one in five (20 per cent) landlords paying over £2,000 a year in service charges. This is significantly more than the average monthly rent in England (£850)4.

On average, landlords in Greater London pay the highest service charge at £1,994, more than the median monthly London rent, experiencing an 11 per cent increase in the charges they pay in the past two years.  

Rising service charges are driving more leaseholders in England and Wales to establish RTM and flat management companies, which allow them to take over the management of their building from their freeholder, as part of a group of other leaseholders of neighbouring properties.

Almost two thirds (60 per cent) of leasehold landlords in England and Wales would consider setting up an RTM or flat management company, to take over the management of the building in which a property they own is located. A further 17 per cent said they would consider joining one if someone else in their building established it.

Sarah Casey, Landlord product manager at Direct Line business insurance commented:

“Rising mortgage rates and steep increases in service charges have put landlords under real pressure of recent months. As a result, it is not surprising to see an increase in the number of flat owners teaming up with other leaseholders in their blocks to form Right to Manage companies.

“By taking control of the management of their block in this way, landlords can have more say in what work gets done, when it is done, and at what cost.”

To help landlords deal with issues such as challenging service charges and legal advice, all Direct Line landlord policies come with a Legal Advice Helpline, provided by DAS Legal Expenses Insurance Limited, which provides unlimited access to a team of specialist legal advisors, who are available 24 hours a day, seven days a week, all year round in England and Wales. For uncommon and certain country-specific areas of law, the 24/7 helpline will refer you to specialist advisers, available Mon-Fri, 9am-5pm, excluding bank holidays. Landlords also receive access to online legal templates, guides and interactive tools with DAS Businesslaw. Allowing landlords to quickly draft, duplicate, download and electronically sign a comprehensive range of documents, including letter templates.

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Notes to Editors

1 Censuswide survey of 1,004 residential landlords (aged 18+) in the UK between 28th March 2024-2nd April 2024. Censuswide abide by and employ members of the Market Research Society which is based on the ESOMAR principles and are members of The British Polling Council.

2 Freedom of information request submitted to Companies House by Direct Line in March 2024.

3 Right To Manage and flat management companies can only be set up in England and Wales

4 Private rental market summary statistics in England - Office for National Statistics (ons.gov.uk)

 

Direct Line Group  

Unni Henry  

PR Manager 

Email: unni.henry@directlinegroup.co.uk  

About Direct Line business insurance

Launched in 2007 Direct Line business insurance now has over half a million customer policies, providing a flexible range of insurance products for the landlord, van and small business sectors.

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Direct Line business insurance and U K Insurance limited are both part of Direct Line Insurance Group plc.

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