Lenders reject flats as service charges breach 1% ‘red line’
Summary
The article reports that some lenders are declining mortgage applications for flats where annual service charges exceed around 1% of the property’s value, citing concerns about resaleability and future affordability. It also highlights data showing service charges are rising for many leaseholders, with a significant proportion of flats now above this threshold.
Why it matters
This affects mortgageability, valuation assumptions and saleability for leasehold flats, all of which are relevant to surveyors advising buyers, sellers and lenders. Surveyors may also need to flag onerous or escalating service charges as a material risk in reports and pre-purchase advice.
Key points
- Some lenders are using a 1% service charge-to-value threshold as a lending benchmark for flats.
- Higher service charges are seen as a risk to future affordability and repossession resaleability.
- Hamptons data cited in the article says 37% of flats had service charges above 1% of value in 2025.
- Propertymark research found 86% of leaseholders saw service charge increases in the last 24 months.
- Government leaseholder measures are expected to come into force from 2027 at the earliest.
This is an RPSA summary of a publicly available article. The full content remains with the original publisher.
