MPs call for spending watchdog to investigate alleged service charge abuse by landlords

(c) James Riding – Inside Housing 5.3.25

A group of 26 MPs have urged the UK spending watchdog to investigate alleged service charge
abuse by landlords.

Mohammad Yasin: “The benefits system is being defrauded by millions of pounds annually
through service charge abuse” (picture: Richard Townshend)
Parliamentarians have demanded that the National Audit Office (NAO) scrutinise councils,
housing associations and private landlords for their service charges, citing inaccurate bills,
overcharging and a failure to provide residents with evidence for costs.

The MPs’ letter to Gareth Davies, comptroller and auditor general at the NAO, came as the
Social Housing Action Campaign (SHAC) submitted a dossier to the organisation on alleged
service charge abuse.

SHAC plans to apply for a judicial review if the NAO refuses to investigate, warning that a chunk
of the service charges are footed by the taxpayer via housing benefit. Inside Housing reported in March 2023 that the government does not know how much it is paying to social landlords in service charges as part of the benefits bill. This latest letter was written by Mohammad Yasin, Labour MP for Bedford, and co-signed by 25 others including Liberal Democrat housing spokesperson Gideon Amos, independent MP Mike Amesbury and Green MP Siân Berry. Mr Yasin wrote:

“There is mounting evidence of the very high proportion of landlord and
freeholder service charge accounts that have been identified as being inaccurate.”

Recent research by SHAC found that more than 70% of disputed service charge cases at the
Firs-tier Property Tribunal lead to costs being reduced or removed in 2024.
Housing benefit covers payments for both service charges and rents. For a proportion of
tenants, rents and service charges are billed separately. Housing associations collect around
£1.9bn of service charges annually, around half of which is covered by housing benefit.

Last year, Fiona Fletcher-Smith, chief executive of L&Q and chair of the G15, denied
accusations of service charge misuse by landlords, saying housing associations do not make a
profit from service charges.

Mr Yasin noted that it would be “impossible” for central government or councils to scrutinise
hundreds of thousands of service charge payments made via housing benefit each year.
He argued that tenants whose service charges are paid via benefits are not incentivised to
challenge inaccuracies. This is because they risk losing their benefits if they alert the
government to inaccuracies without the landlord acknowledging and removing any of the
overcharged items from their demands.

“This makes it impossible for tenants in receipt of housing benefit to report inaccuracies even if
they become aware of them,” he wrote.

Mr Yasin concluded: “It is clear that the benefits system is being defrauded by millions of
pounds annually through service charge abuse. This is not an issue that can be addressed by
individuals, or simply by cutting housing benefit. This would penalise the victims of service
charge abuse rather than the perpetrators.”

He added: “This issue demands a major inquiry into service charge abuse perpetrated by
councils, housing associations and private landlords.”

Suzanne Muna, secretary and co-founder of SHAC, said she had amassed evidence of
“systematic overcharging” by landlords. “We have seen landlords charge for services provided by local councils, which tenants and residents pay twice for because they are covered by their council tax. We have seen charges for lift maintenance in buildings where no lifts exist. We rarely see service charges that are 100% accurate, even though the amounts total thousands of pounds in some cases,” she said.
“It seems that landlords are incapable of putting their own house in order and it now needs
enforcement by a public body,” she added.

A spokesperson for NAO said: “We have received the correspondence from SHAC and will
carefully consider it in line with our remit to audit government spending.”

At the end of last year, the Shared Ownership Council launched a pilot for a voluntary code, with
housing providers taking part required to make sure service charges are transparent and
affordable for customers.

The code, due to come in this year, comes after a national consultation, which drew responses
from more than 1,700 current and prospective shared owners, as well as lenders and housing
providers.