In April, Pete Wilks attended a property tribunal in central London for a showdown with one of the country’s biggest developers. He was alleging that an international property firm, Lendlease, was imposing unfair service charges of as much as £7,000 a year on affordable flats.
The charges, he claimed, were subsidising exclusive facilities for premium apartments in the same development, including a concierge service, gym and cinema room.
Wilks, who went into the tribunal without legal representation, said he had been warned by a Lendlease representative that he would probably be liable for the company’s legal costs if he lost.
In a 38-page ruling, the property tribunal found Wilks and fellow residents at the Elephant Park development, a block of affordable shared-ownership homes in south London, had been repeatedly overcharged and were indeed subsidising the exclusive facilities. Lendlease now faces payouts for service charge refunds that are likely to run into hundreds of thousands of pounds.
“They were charging us for a gym we’re not allowed to use and roof terraces that we don’t have access to,” Wilks said. “It was five years of overcharging.”
Michael Zreika, 51, another resident, said he had been unable to obtain a new mortgage at a more competitive rate because of the high service charges. “There has been no transparency over these charges, and we’ve been paying a fortune,” he said.
The ruling is one of the most significant in the battle between residents and some of the country’s biggest housing providers over claims of unfair service charges. Ministers now face calls to introduce new measures to combat what has been described as a national scandal.
The Observer has revealed in a series of investigations how some of the country’s biggest housing providers have increased service charges by thousands of pounds on homes marketed as affordable, plunging residents into crisis.
“This is a brilliant victory which exposes huge abuse in the service charging system,” said Suzanne Muna of the Social Housing Action Campaign (SHAC). “We have found almost all service charge accounts are riddled with inaccuracies.” SHAC has compiled what it claims is a series of service charge abuses across the country and is looking at potential legal action against the government over the issue.
There are common complaints of unreasonable charges, a failure to provide proper accounts and a lack of clarity on what residents are being charged for. The Observer revealed in March how residents at one development of affordable homes were required to use a “poor door” rather than the entrance with a concierge service, which they claimed they were subsidising with service charges of as much as £8,000 a year.
Rebecca Paul, a Conservative MP who has been campaigning for reform, said the current system trapped many residents in properties they could not afford. She added: “People can enter into these arrangements not realising they are on the hook for a service charge which can just go up and up, and there’s not much they can do.”
The alleged abuses can involve residents in various types of accommodation, including shared-ownership homes and rented properties in housing association schemes.
Wilks moved into his block in Elephant Park in December 2020, buying a share of an affordable two-bedroom home in the £2.5bn regeneration project in south London. Lendlease is the estate's freeholder, and the affordable homes were marketed by the housing association L&Q.
Wilks’s monthly service charge rose from from £233 in April 2021 to £580 in September 2024. He challenged L&Q and Lendlease but was unable to get detailed information on the justification for the increases.
The tribunal found that service charges for various invoices for the development were distributed among the blocks according to their proportion of the total footage of the developments, without excluding the exclusive facilities for premium apartments.
The tribunal found that residents had been overcharged for security staff who also provided some concierge services, and for two building managers. There had also been excessive charges for electricity and building insurance.
The claim was lodged against H4 Residents Management Company, the managing agent for Wilks’s block and a Lendlease subsidiary. Wilks said in his evidence that the residents in premium apartments were charged a fixed amount that covered the service charges, so any reduction in the service charge costs would benefit Lendlease as the landlord.
The tribunal found it more likely than not that the reason for transferring the costs to the affordable homes was to reduce the liabilities on the Lendlease rented properties.
Wilks will get a refund from Lendlease for 2020-21 to 2024-2025 of more than £2,500. He estimates the total refunds for his apartment block and another block on the development will be more than £250,000, and the total refund for all affected blocks at Elephant Park are likely to be in excess of £500,000.
A spokesperson for Lendlease said: “We understand how important trust and clarity are when it comes to service charges and, following the tribunal’s outcome and our own review, we’ve already taken steps to strengthen our processes and ensure they’re fair and transparent.
“We regret the impact this matter has had on residents and will complete actions recommended by the tribunal as quickly as possible.”
The firm said it had appointed a new managing agent, improved communications with residents and improved internal governance procedures.
It said it would provide revised accounts and service charges for affected properties, but specific figures on refunds were still to be calculated.
Lendlease said it was “unable to verify” whether Wilks had been warned by a representative that he would likely be liable for Lendlease’s legal costs if he lost the case.
Matt Foreman, executive group director of customer services at L&Q, said: “We welcome the outcome of this tribunal. We’re grateful for the effort Mr Wilks has put into securing this. We’ve also reduced our 2020-2025 management fee for L&Q residents by 25% in recognition of their experience.”
A spokesperson for the Ministry of Housing, Communities and Local Government said too many leaseholders were being asked to pay “sky-high” charges, adding: “We are tackling this by working towards costs becoming more transparent and easier for leaseholders to challenge.”
Photograph by Andy Hall for The Observer