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Flat owners have won a landmark victory against a housing association after being forced to pay thousands of pounds in service charges for luxury amenities they were not permitted to use.
Notting Hill Genesis (NHG), the housing provider responsible for Viridian Apartments in Battersea, London, charged leaseholders between £4,770 and £6,200 a year for services including a gym, concierge and communal garden, in a neighbouring block of flats, despite having no access to them.
The housing association argued that the residents, who had purchased their properties on the shared ownership affordable housing scheme, had “benefited” from a well-maintained estate and were therefore liable for the charges, which had risen by up to 265pc since 2011. But the shared ownership residents had their own separate access to the development via a “poor door”.
In a court ruling, Judge Elizabeth Cooke said that the leaseholders could not be required to pay service charges for parts of the development that fell outside the scope of their leases and which they were not entitled to use.
The ruling is believed to be the first time a group of leaseholders has successfully challenged service charges for facilities accessible only to other residents at an Upper Tribunal, potentially paving the way for similar claims against excessive fees.
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Shared ownership, Labour’s flagship affordable homes scheme for first-time buyers, requires purchasers to cover all of the property’s service charges despite owning a share that can be as little as 10pc.
Campaigners and politicians said the case was the latest example of homeowners being exploited by weaknesses in the leasehold system and highlighted the need for wider reform of shared ownership.
Clive Betts, Labour MP and chairman of the cross-party housing committee until October 2024, said service charges had been “an issue right from the beginning” of the shared ownership model, which was launched in its current form in 2016.
He said: “People are not able to afford the full cost of a home and are looking to shared ownership to help with those costs. But you still end up with 100pc of the [service charge] costs, so very few go through the property on a staircase [the process of buying a larger share over time].”
The tribunal heard that NHG had passed on costs arising from its own lease agreement with the freeholder and the estate’s management company, dating back to 2007.
NHG was also ordered to repay excessive service charges levied over the past two years, although no timetable for reimbursement was set.
‘Our charges doubled overnight’
Janine, one of the 25 leaseholders who brought the case against NHG, said she was left financially “stretched” when her service charges “virtually doubled overnight”.
She said: “It was frankly outrageous because as the people who should be in affordable housing, we were subsidising services for others that were on city salaries.”
Janine, who did not want to give her full name, alleged that the group of residents had spent around £42,000 in fighting their case, which they would be unable to recoup.
Another leaseholder in the block called it a “David versus Goliath battle against one of the UK’s biggest housing associations”.
Shared ownership is a government-backed scheme that allows buyers to purchase a portion of a property – usually between 10 and 75pc – and pay a subsidised rent on the remaining share to a housing association, with the option to buy further shares over time.
The scheme is intended to be an affordable route to homeownership, with the Labour Government committing to boosting the stock of shared owner properties as part of its 10-year Social and Affordable Homes Programme.
There are currently around 250,000 shared ownership homes, up from 202,000 in 2020.
However, Matthew Pennycook, the housing minister, last year admitted the model may need reform after an MP-led report found the scheme was “drastically failing” to deliver an affordable way to get on the property ladder.
In his role as housing committee chairman, Mr Betts urged the Government to take “urgent action” to tackle the issues to ensure shared ownership remained affordable and prevented current owners from being trapped in unsellable homes.
Suzanne Muna, from the Social Housing Action Campaign, said that while the ruling had undoubtedly “rattled” the sector, the way service charges were levied still needed to be “cleaned up” to prevent costs from soaring unexpectedly.
She said: “[Service charges] are hugely detrimental to the people who take on shared ownership because they often don’t realise that they are bearing 100pc of the costs.
“There needs to be consistent legislation for everyone, and it needs to be properly regulated.”
A National Audit Office report in March also found that rising rents, uncapped service charges, and a disproportionate exposure to repair and maintenance costs were hindering some residents from successfully “staircasing” – the process of buying a larger share.
A Notting Hill Genesis spokesman said: “We respect the findings of the tribunal and are carefully considering what this outcome means for us and our residents. We recognise this has been a lengthy and difficult process and do not take that impact lightly. We remain committed to working with residents to ensure service charges are fair, transparent and proportionate.”
A Ministry of Housing spokesman said: “Landlords should not be mischarging anyone including shared owners and it’s right that courts take action when they do.
“While shared ownership has an important role to play in supporting households into homeownership, too many people are experiencing real challenges.
“That’s why we are supporting shared owners by making it easier for them to challenge unreasonable service charges and improving transparency on costs, alongside continuing to explore what more we can do to improve their experience.”
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