UK Leasehold Service Charges FAQ

Service charges are payments made by leaseholders to cover the costs of maintaining and managing a leasehold property. Under the Landlord and Tenant Act 1985, these charges must be reasonable and properly incurred.

Service charges typically cover:

• Building maintenance and repairs
• Communal services (lighting, cleaning, lifts)
• Building insurance
• Management company fees
• Reserve fund contributions

The average UK leaseholder pays £2,300 annually in service charges as of 2024. However, costs vary significantly by:

• Location: London averages £3,500+, while northern regions average £1,200
• Property type: New builds often have higher charges
• Building amenities: Concierge, gym, pool increase costs
• Age of building: Older buildings may need more maintenance

Service charges have increased 41% since 2019, significantly outpacing 23% inflation.

No, service charges are separate from mortgage payments. They are ongoing costs of owning a leasehold property that you must budget for independently.

Service charges are typically paid:

• Annually in advance
• Half-yearly (two payments per year)
• Monthly by direct debit

Some mortgage lenders may consider service charges when assessing affordability, but they won't include them in your mortgage payments.

UK leaseholders have significant rights under the Landlord and Tenant Act 1985:

• Right to reasonable charges (Section 19): Service charges must be reasonably incurred and reasonable in amount
• Right to information (Sections 21 & 22): Request written summary of costs and inspect supporting documents
• Right to consultation (Section 20): Landlords must consult on major works over £250 per property
• Right to challenge: Apply to First-tier Tribunal to determine reasonableness

Section 20 of the Landlord and Tenant Act 1985 requires landlords to consult leaseholders before undertaking major works or long-term agreements that would result in service charge costs exceeding:

• Major works: £250 per leaseholder per property
• Long-term agreements: £100 per leaseholder per year

The consultation process involves:

• Notice of intention (30 days for comments)
• Estimates from contractors (30 days for comments)
• Notice of reasons for selection

Important: If proper consultation doesn't occur, leaseholders may only be liable for £250 per property, regardless of actual costs.

You can challenge service charges through several routes:

• 1. Request information: Use Section 22 rights to request detailed breakdown and supporting documents
• 2. Informal discussion: Raise concerns with managing agent or landlord
• 3. First-tier Tribunal: Apply to Property Chamber for determination of reasonableness
• 4. County Court: For debt recovery disputes or damages claims

Common grounds for challenge:

• Costs not reasonably incurred
• Amount unreasonable
• Work not required or poor quality
• Lack of Section 20 consultation
• Charges outside lease terms

Strong evidence is crucial for successful challenges:

• Financial evidence: Service charge demands, accounts, invoices, receipts
• Comparative evidence: Quotes from alternative contractors, market rates
• Photographic evidence: Before/after photos, quality of work, damage
• Correspondence: Letters, emails with managing agent or landlord
• Expert reports: Surveyor or specialist reports on work quality/necessity
• Lease documentation: Your lease terms and any variations

Use your Section 22 rights to inspect landlord's documents and accounts - this often reveals overcharging or poor procurement practices.

The First-tier Tribunal (Property Chamber) process involves:

• 1. Application (£100-£500 fee): Submit application with evidence and grounds
• 2. Case management (4-8 weeks): Tribunal reviews and may request additional information
• 3. Directions (2-4 weeks): Tribunal sets timetable and requirements
• 4. Evidence exchange: Both parties provide statements and documents
• 5. Hearing or paper determination: Tribunal considers case
• 6. Decision (2-4 weeks): Written determination issued

Typical timeline: 4-8 months from application to decision

Costs: Generally each party pays own costs, but tribunal may award costs for unreasonable behavior.