More than a third of flats in England and Wales may be unsellable due to service charges that exceed mortgage lender thresholds, according to parliamentary testimony that will concern landlords looking to exit the sector.
Harry Scoffin, representing campaign group Free Leaseholders, told the Housing, Communities and Local Government Committee that flat owners are unable to complete sales because service charges have risen beyond levels that mortgage lenders will accept.
“There is a crisis in the flats market at the moment. People cannot sell. They cannot move on,” he said during the select committee hearing on the Commonhold and Leasehold Reform Bill.
Lender thresholds breached
The warning follows research from Hamptons showing that 37% of flats now have service charges equivalent to 1% or more of the property’s value – the typical threshold at which mortgage lenders restrict or refuse financing.
“What that means is those flats are unmortgageable. They are unsellable,” Scoffin explained.
Average service charges for flat owners reached £2,405 in the past year, a 4.6% increase from 2024 and the first time charges have exceeded £200 per month. Over the past decade, average charges have risen 55.6% – far outstripping inflation.
This follows Residential Landlord’s coverage of leasehold reform, which aims to give flat owners more control over their properties. The service charge crisis suggests those reforms may not arrive quickly enough for owners trapped in unsellable homes.
Concerns for buy-to-let investors
For landlords who own flats as buy-to-let investments, the implications are stark. Rising service charges eat into rental yields while simultaneously making properties harder to sell when exiting the sector. With conveyancing costs also climbing, the total expense of flat ownership is squeezing margins from multiple directions.
Scoffin expressed concern that proposed reforms prioritising commonhold for new developments could disadvantage existing leaseholders: “Everyone is going to rush to commonhold flats and those of us left in existing leaseholders are going to be trapped.”
He called on the government to expand reforms enabling existing leaseholders to convert to commonhold or purchase their freeholds. The government has stated it is working to end the leasehold system, but implementation timelines remain unclear.
Full details are available in PropertyWire’s coverage of the committee hearing.
Opinion
Landlords planning to sell flats in the coming years should check their service charge position carefully before marketing. A property that was profitable when bought could become a stranded asset if charges have crossed lender thresholds. The government promises reform, but promises do not unlock frozen sales. For now, flat owners – whether investors or occupiers – face a market where a third of stock may already be too expensive to move.
