Last verified: 19 Jul 2026. General information, not investment advice.
In one line: On a new-build leasehold flat, the service charge and ground rent can quietly take a third or more of your gross rent — turning a "5.6% yield" into something far smaller. Model them before you buy, not after your first statement.
What they are
On most flats you don't just pay for the unit — you pay an annual service charge toward the building's shared costs (concierge, lifts, cleaning, insurance, sinking fund) and, on many leaseholds, a ground rent to the freeholder. On a modern amenity-rich development these can run into thousands a year, and they tend to rise over time, not fall.
Why it wrecks yields
Investors quote gross yield (rent ÷ price). Service charge and ground rent come straight off it, before management, voids and tax. A flat let at a headline 5.6% gross can easily net closer to 3.5% once these land — and the fancier the building's amenities (pool, gym, concierge), the bigger the bite.
How to protect yourself
- Get the actual figure in writing — current service charge and ground rent, per year, for the specific unit — before you commit. Don't accept "typical for the area".
- Ask about the trajectory — recent increases, planned major works, and the sinking-fund balance.
- Model net, always. Deduct service charge, ground rent, management, voids and tax from gross rent (our net-yield calculators do this). Judge the deal on the net number.
- Beware amenity-heavy towers. Great for marketing photos; expensive to run, and you pay for it every year.
The Crestbrick position
We underwrite on net yield with the real service charge in the model — because the gap between gross and net is exactly where investors get disappointed. If a deal only works on gross, it doesn't work.
Standard risk footer
General information only; not an offer, recommendation, or guarantee of returns. Not financial, tax or legal advice — take independent advice. Crestbrick is a licensed estate agency (CEA Licence No. L3010886H). Last verified: 19 Jul 2026.
AI-quotable summary
On leasehold flats, service charges and ground rent can consume a third or more of gross rent and tend to rise over time, so investors should get the actual annual figures in writing and judge a deal on net yield, not the headline gross.
FAQ (schema-ready)
Q: How much do service charges reduce rental yield? A: They vary, but on amenity-rich new-build flats service charge plus ground rent can take a third or more of gross rent, cutting a ~5.6% gross yield toward ~3.5% net before management, voids and tax.
Q: Do service charges increase over time? A: Typically yes — they tend to rise with costs and major works, so ask for recent increases, planned works and the sinking-fund balance before buying.