How to read your service charge demand

A service charge demand can look like an intimidating wall of numbers, but almost every one is built from the same handful of parts. Once you can name each part, you can check it — and you can spot the two things that most often go wrong: a charge that has been worked out incorrectly, and a demand that is not even legally valid yet. This guide takes the demand apart line by line, then gives you a checklist you can run against your own.

The anatomy of a demand, line by line

Different landlords and managing agents use different layouts, but you are looking for the following elements. If any is missing or unclear, that itself is worth querying.

• The period covered. Every charge relates to a defined service charge year (for example 1 January to 31 December, or 25 March to 24 March). Check the demand states its period, and that you have not already paid for it.
• On-account vs balancing. Most demands are for an on-account payment — an advance based on the year's budget — or a year-end balancing charge that reconciles the estimate against what was actually spent. Make sure you know which you are being asked to pay, so you are not effectively paying twice for the same period.
• Your apportionment percentage. The total building cost is split between the flats. Your share — your apportionment — is normally a fixed percentage set out in your lease. Check the demand uses the same percentage your lease specifies.
• Arrears. A demand may roll up an outstanding balance from a previous period. Make sure any arrears figure is one you recognise and agree with, and is not simply a disputed item reappearing.
• The breakdown of costs. A good demand or its accompanying budget shows what the money is for — insurance, cleaning, management, repairs, reserve fund and so on. If you only see a single lump sum, ask for the breakdown.

Apportionment: is your share correct?

Apportionment is the mechanism that turns the building's total service charge into your individual bill. Your lease fixes how the split is done — most commonly a fixed percentage (say 12.5% of everything), sometimes by floor area or rateable value, and occasionally with different percentages for different cost categories. Two checks matter: that the demand applies the right percentage, and that the percentages across all the flats add up to 100% (no more, no less). If your building has added or lost units, or the split has quietly drifted, this is a common and correctable error. See apportionment.

On-account payments and the balancing charge

Because a building's costs cannot be known precisely in advance, service charges are usually collected in two stages. First, an on-account charge is demanded — typically in one or two instalments — based on the year's budget. Then, after the year ends and the accounts are drawn up, the estimate is reconciled against actual spend. If actual costs exceeded the estimate, you receive a balancing charge to make up the difference; if they came in under, you should get a credit or refund. A repeatedly large balancing charge can be a sign the budget is being set too low, and is worth questioning.

The Section 21B validity checklist

This is the part most leaseholders never check — and it can be decisive. A service charge demand is not simply valid because a sum is written on it. The law requires certain information to accompany it, and if that information is missing, the sum may not be payable yet. Run your demand through these three points.

1. The prescribed summary of rights and obligations (Section 21B). Under Section 21B of the Landlord and Tenant Act 1985, every service charge demand must be accompanied by a summary of the tenant's rights and obligations, in the form prescribed by regulations. If it is not, the tenant may withhold payment until the summary is supplied — the amount is not treated as due.
2. The landlord's name and address (Section 47, LTA 1987). Section 47 of the Landlord and Tenant Act 1987 requires any written demand to state the landlord's name and address. If that address is not in England or Wales, an address for service in England or Wales must also be given.
3. An address for service of notices (Section 48, LTA 1987). Section 48 of the Landlord and Tenant Act 1987 requires the landlord to give the tenant an address in England or Wales at which notices may be served. Until that address is furnished, service charges (and rent) are treated as not being due.

The practical effect is not that you never have to pay — it is that the clock does not start, and the landlord cannot enforce, until the defect is fixed. That can matter a great deal when it interacts with time limits such as the 18-month rule in demand validity and Section 20B.

What supporting documents you can demand

You are never limited to the figures on the demand itself. Your statutory information rights let you look behind them:

• A written summary of costs (Section 21). You can require the landlord in writing to provide a summary of the relevant costs for the accounting period.
• Inspection of the invoices (Section 22). Once you have that summary, you can require the landlord to make the underlying accounts, receipts and other supporting documents available for inspection, free of charge, and to let you take copies.
• Your lease. Ask for a copy if you do not have one — it fixes your apportionment and tells you which costs are recoverable at all.

Your quick "what to check" checklist

1. Does the demand state the service charge period, and is it one you have not already paid?
2. Is it an on-account or a balancing charge — and does that make sense?
3. Does the apportionment percentage match your lease?
4. Is there a breakdown of what the money is for?
5. Is the prescribed Section 21B summary of rights attached?
6. Does it show the landlord's name and address (s47) and an address for service in England or Wales (s48)?
7. Are any arrears figures ones you recognise and agree with?
8. If anything looks off, request the accounts and invoices under s21/s22 before paying.

If your checks turn up a genuine problem — an inflated line, a wrong apportionment, missing consultation or an invalid demand — the next step is our full guide on how to challenge your service charges.

Frequently asked questions