The Property Institute – Service Charge Index

April 2024

On 18 April 2024, the Property Institute published a residential service charge index.

It’s full of numbers, and commentary on it is better suited to an accountant than to a barrister, and so Andrew Potts FCA has jotted down a few thoughts:

The publication of an annual residential service charge index should be seen as very welcome as an industry guide for service charge costs, however it is important that the limitations of this first residential service charge index are acknowledged and are considered in future publications:

-       The sample is very small (108 estates)

-       Emphasis has been placed on the size of the building (under 18m and over 18m)

-       Other cost drivers such as age and location of the building, although identified, do not appear to have been factored into the index

-       The cost descriptions included within the cost categories adopted are not clear, for example, it is unclear which cost category cleaning of the common parts and window cleaning are included, what is included within onsite staff costs and general expenses

-       The index has been published by the TPI for its members (who will be primarily managing agents) and Leaseholders will understandably consider that the results of the index reflect the interests of managing agents to justify increases in costs

-       Comparisons between different buildings even in the same vicinity are difficult not only because of size and age of the buildings and building management systems, but also the configuration and number and size of flats / apartments

To ensure that the index has credibility in future years

-       The index should be published, as guidance, by an independent body, and it should not be used as a tool for Landlords and their managing agents to justify increases in service charge costs

-       The data sample of buildings will need to be increased significantly

-       The acknowledged differentiating cost driver of the location, in particular London, of the building should be considered with the cost analysis made between buildings located in London and the rest of the UK

-       The age of the buildings should be considered

-       The use of industry standard cost categories should be encouraged to ensure that the categorisation of costs is consistently applied and the data is meaningful