Annual service charges in older tall buildings can exceed £7,000 on average. For a buyer, that is not merely another figure in the management pack. It may affect affordability, mortgageability, future saleability and whether the flat represents a sensible long term purchase.
The latest industry data provides a useful warning against treating service charges as a routine leasehold expense. The headline figure is striking, but the more important conveyancing question is what lies behind the charge and what the buyer may be required to pay next.
What the 2026 figures show
The Property Institute’s 2026 Service Charge Index examined 2,137 residential estates covering 117,052 homes. The data came from 13 managing agents and 95 per cent of the homes in the sample were leasehold flats.
The average budgeted service charge for 2026 was £2,880 per leaseholder. That headline concealed substantial variation. The lowest tenth of buildings averaged £1,525, while the highest tenth averaged £8,680.
Building age and height produced an especially sharp contrast. Buildings over 18 metres high and more than 25 years old carried an average service charge of £7,337 per leaseholder. The equivalent average for newer tall buildings was £3,706, while older buildings under 11 metres averaged £2,387.
These are averages across a particular dataset, not a tariff or prediction for every leaseholder. Most of the 2026 figures are budgets rather than final expenditure, and the amount payable by an individual owner depends on the apportionment provisions in the lease. Nevertheless, the figures demonstrate why the current charge alone cannot safely be treated as a minor detail.
Have service charges really levelled out?
Across the full sample, average service charges increased by 5.8 per cent between 2024 and the 2026 budget. The index compared that with cumulative inflation of 6.1 per cent over the same period. That may suggest some stabilisation at market level, but it does not mean that an individual leaseholder’s costs have stopped rising.
Different buildings face different pressures. A lift replacement, roof renewal, fire safety project, insurance problem or historic failure to build adequate reserves can transform the position of one block while the wider average remains relatively steady.
The composition of the charge is therefore as important as its total. Repairs and maintenance represented just over one fifth of budgeted spending. Reserve fund contributions increased by 26 per cent from 2024 and accounted for 16.4 per cent of the 2026 budget. Building Safety Act compliance costs increased sharply in percentage terms, although they represented only 1.5 per cent of total budgeted expenditure.
A high reserve contribution is not automatically bad
A large service charge can indicate expensive services or inefficient management, but it may also reflect responsible preparation for major works. A properly funded reserve can reduce the risk of owners receiving an unaffordable demand when a roof, lift or external structure needs substantial work.
Conversely, a low current charge is not necessarily reassuring. It may mean that the building has few facilities and is inexpensive to run. It could also mean that maintenance has been deferred or that the reserve fund is inadequate.
The buyer needs to know what has been collected, what has been spent, what remains in reserve and whether planned expenditure is likely to exceed the available funds. A single annual figure cannot answer those questions.
What should be investigated before exchange?
A conveyancer reporting on a leasehold purchase should help the buyer understand the legal and financial structure behind the service charge. Depending on the property, relevant material may include:
- the service charge provisions and apportionment formula in the lease;
- the latest completed accounts and the current budget;
- the balance and permitted use of any reserve or sinking fund;
- recent deficits, arrears and balancing charges;
- planned major works and any section 20 consultation documents;
- fire safety, cladding and Building Safety Act information;
- buildings insurance costs and any unusual excesses or exclusions;
- disputes involving the landlord, managing agent or other leaseholders;
- the facilities and services for which the buyer will be paying; and
- any information suggesting that the charge may rise materially after completion.
Not every future cost can be predicted. The management pack is a snapshot and even a healthy reserve fund may prove insufficient. The purpose of the investigation is to give the buyer a realistic picture of the known position, the limitations of the available information and the financial exposure created by the lease.
Service charges and the mortgage lender
The buyer and lender do not necessarily ask the same question. A buyer needs to decide whether the charge is affordable and whether the services represent reasonable value. A lender is principally concerned with the quality and saleability of its security.
A high or rapidly increasing charge can narrow the pool of future buyers, affect valuation and make the flat harder to sell. Planned major works, an unresolved deficit or inadequate management arrangements may also require further investigation or referral under the particular lender’s instructions.
Our recent article on service charges, major works and lender requirements considers the mortgageability question in greater detail. The important point is that satisfying the present lender does not remove the need to advise the buyer about affordability and future marketability.
The report to the buyer must provide context
Simply reproducing the current service charge figure is not enough. A buyer may see a charge of £3,000 and assume it is high without appreciating that it includes heating, insurance, a concierge and a substantial reserve contribution. Another buyer may see a charge of £1,200 and assume it is low without being told that the building requires major works and has almost no money set aside.
The report should connect the figures with the building. Relevant context includes its age, height, condition, facilities, management structure, reserve position and planned expenditure. Where information remains unavailable or uncertain, that limitation should be made clear before the buyer becomes legally committed.
What if the problem only emerges after purchase?
Some owners discover the real service charge exposure only after completion. The first warning may be a substantial balancing demand, a major works consultation or difficulty finding a buyer or mortgage lender.
The original purchase papers may show what information was available at the time, what enquiries were raised and what the buyer was told. The lease, management pack, accounts, budget, replies to enquiries and Report on Title may all be relevant. The issue is not simply whether the annual figure appeared somewhere in the file, but whether known financial risks and material limitations were explained in a way the buyer could understand.
Did the real service charge problem become apparent only after you bought?
When I Bought explains why the information and advice provided during the original purchase may matter when service charges or major works later cause difficulty.
The lesson from the figures is not that every older tall building should be avoided. It is that the headline service charge must be treated as the beginning of the investigation rather than the end. Buyers need to understand both what they are paying today and what the building’s condition, management and long term financial planning may require them to pay tomorrow.