As two-year fixed-rate mortgages soar to 6%, what can flat owners expect from their maintenance fees?
Homeowners across the country are currently facing turmoil as it has been reported that the UK is ‘hurtling into mortgage disaster’. With two-year fixed UK mortgage rates rising above a staggering 6%, amid an ongoing cost-of-living crisis, this is of course cause for significant concern. Mortgages are set to rise by £2,900 a year for 800,000 owners, leaving many questioning how they will continue to pay the bills. Meanwhile, flat owners are subsequently wondering how their maintenance fees might be affected. Will these also incur substantial increases? Can their management firm offer any reassurance or support?
Thankfully, we have an expert on hand to answer these important questions. David Goldberg, CEO of POD Management, is sharing his expertise:
‘Unfortunately, there are several factors that will contribute to service charges rising for homeowners. Firstly, inflationary pressures on costs will cause increases across most areas being maintained, as might be expected, but some have increased more markedly. One such cost will be buildings insurance, which has seen above inflation rises due to indexation. Indexation considers the actual cost of rebuilding a property, which, due to inflation and materials shortages, has seen costs spiral. Meanwhile, communal utilities such as electricity and gas have risen significantly, in some cases by as much as 400%. At POD, we oversee careful diligence to ensure our clients are kept on the best rates.
In addition, The Building Safety Act and Fire Safety Reform has implemented new standards which create challenges, generating costs that may get passed on to leaseholders. Finally, with this comes greater professionalisation of the management agent market and, whilst a good thing, has come at a cost.
Although, flat owners will be relieved to hear that steps can be taken to mitigate these factors. For example, solid processes surrounding reinstatement cost assessments can ensure that costs remain realistic, alongside bulk procurement of insurance, and selecting a management firm that doesn’t take commission will all prove to be an asset. These efforts all relate to lower insurance costs and overall expenditures faced by tenants.
At POD Management we also bulk procure utilities and where possible, implement a localised procurement strategy to ensure the very best pricing for our clients. Meanwhile, we have a robust process to ensure that clients don’t go on ‘out of contract’ rates which are unduly penal.
Ultimately, it is vital that landlords and tenants (should all tenants collectively choose their management firm), select an efficient, proactive, transparent and forward-thinking agent. For example, does your chosen firm use intelligent systems and digitised processes to meet customers’ needs at a minimal cost? Do they have strong relationships with contractors providing services to their sites? If they do, agents can typically secure more competitive prices which are, in turn, beneficial to tenants.
Therefore, in short, yes, maintenance fees will naturally rise in accordance with inflation and materials shortages. However, trustworthy, credible agents will take necessary steps to ensure these costs are kept to a minimum and remain reasonable. To find a firm who do just that, be sure to ask questions and look at customer reviews. More specifically, enquire about their processes; how do they proactively keep their prices down? In which areas do they have strong relationships with service providers? Are they efficient at responding to tenant enquiries? Do they take commission? Their answers should help you make an informed decision.
On the part of management agents themselves; we are navigating an extremely challenging financial climate and tenants will be struggling. As such, it is crucial that your communication remains strong and consistent. Tenants are likely to have questions and worries, to which you should respond honestly and fairly. Costs should be kept down where this can be achieved safely (do not cut corners) and reassurance needs to be provided. When inflation does reduce, so too should their maintenance fees. What goes up must come down.’