Service charges are one of the biggest ongoing costs for leaseholders and commercial tenants in the UK, yet the rules around them have been notoriously difficult to pin down. The government’s own consultation on the Leasehold and Freehold Reform Act 2024 identified that opaque and unaffordable service charges represent the single biggest subject of enquiry among those seeking advice from the Leasehold Advisory Service. That tells you everything about how broken the system has felt for millions of people.
I’ve been following this area for years, and what I keep seeing is the same pattern: leaseholders receiving large, unexplained bills with very little ability to question them. The new rules under the Leasehold and Freehold Reform Act 2024 (LAFRA 2024) and the updated RICS Service Charge Code 2025 are designed to fix that. If you own or rent commercial space, understanding these changes isn’t optional — it’s the difference between paying fair costs and being overcharged without recourse. Here’s what you actually need to know.
What a Service Charge Agreement Actually Covers
The most important thing to understand is that a service charge agreement isn’t a single document — it’s the combination of your lease terms and the statutory rules that now govern them. Under the new regime, landlords must issue a budget alongside the demand at the start of the service charge year. That budget must clearly set out the names and addresses of both parties, the total amount demanded, the period it covers, payment deadlines, and a summary of your rights. If any of that is missing, the demand may be unenforceable.
What I’d do if I were reviewing a service charge agreement right now is check whether the demand includes a proper budget breakdown. If it doesn’t, that’s your first red flag. The new rules are designed to give you the information you need to challenge costs you believe are unreasonable, but you can only use those rights if you know what to look for. For a deeper look at how lease structures affect your obligations, you might find our guide on mall anchor lease terms for new tenants useful.
Why the New Rules Matter for Your Bottom Line
The core problem the reforms address is that for years, managing agents could charge for work with minimal documentation, reserve funds were sometimes poorly handled, and the cost of taking a dispute to tribunal put many leaseholders off pursuing legitimate complaints. The government’s consultation identified four main problems: a lack of standardised demand formats, inconsistent or delayed annual accounts, limited access to supporting documents, and high dispute costs. The new rules tackle all four.
Consider this scenario: your landlord issues a demand for £5,000 in service charges, but the breakdown is vague. Under the old rules, you’d have to pay and then try to challenge it later, often at significant personal cost. Under the new rules, if the demand doesn’t follow the prescribed format, it may be unenforceable. That’s a fundamental shift in power. For commercial tenants, the RICS updates are equally significant — budgets must now be issued at least one month before the service charge year starts, and year-end accounts must be provided within four months.
What I notice is that many tenants don’t realise they can now request historic records going back six years. If you suspect you’ve been overcharged in the past, that right is your most powerful tool. For more context on how different property types handle these costs, our article on high street vs industrial estate leases covers the key differences.
Where People Go Wrong with Service Charge Agreements
Not Checking the Format of the Demand
The most common mistake I see is tenants paying a service charge demand without checking whether it meets the new prescribed format. Under LAFRA 2024, if the demand doesn’t include the landlord’s and leaseholder’s names and addresses, the total amount, the period covered, payment deadlines, and a summary of your rights, it may be unenforceable. Paying a non-compliant demand sets a bad precedent and makes it harder to challenge future charges.
Ignoring the 18-Month Time Limit
Many leaseholders don’t realise that costs incurred more than 18 months before a demand is issued cannot be recovered unless a prescribed notice was served within that window. If you receive a demand for work done two years ago, you have grounds to challenge it. The fix is simple: check the date of the work against the date of the demand. If it’s outside the 18-month limit, raise it with your landlord or managing agent immediately.
Overlooking Insurance Commission Disclosure
Under LAFRA 2024, landlords must disclose any commission or payment they receive from building insurance policies. If they fail to do so, they cannot recover the insurance premium through the service charge. This is a significant protection, but only if you know to ask for it. If your service charge demand doesn’t include a clear statement about insurance commission, request it in writing. If they can’t provide it, you may not have to pay that portion of the charge.
Assuming Tribunal Costs Are Covered
One of the biggest barriers to challenging unfair charges was the fear of having to pay the landlord’s legal costs if you lost. The new rules change that: landlords cannot recover tribunal or court costs through the service charge unless a tribunal specifically orders otherwise. This removes a major deterrent to legitimate challenges. If you’re considering a dispute, this change alone makes it far less risky.
→ Scroll right to see all columns
| Requirement | Residential (LAFRA 2024) | Commercial (RICS 2025) |
|---|---|---|
| Demand format | Prescribed format required | Standardised budget and reconciliation |
| Budget timing | At start of service charge year | At least one month before year start |
| Annual accounts deadline | Within 6 months of year end | Within 4 months of year end |
| Fund holding | Trust accounting required | Discrete or virtual accounts required |
| Management fees | Must be reasonable | Fixed fee, not percentage-based |
What I’d do if I were in your shoes is start by requesting the last three years of service charge accounts and supporting invoices. If your landlord can’t provide them, that’s a strong indicator they’re not complying with the new rules. For more on how to handle disputes, our guide on negotiating a lease buyout covers similar ground on protecting your position.
How to Navigate the New Service Charge Rules
Writing about topics like this takes real time and research. If you buy something through an Amazon link on this page, I may earn a small commission — at no extra cost to you. It’s one of the things that makes it possible to keep BritWealth free to read. I only link to products that are genuinely relevant to the article.
Review Your Lease for Service Charge Clauses
Your lease is the starting point. It should specify what costs are recoverable through the service charge, how they’re apportioned, and what happens if you dispute them. Under the new RICS standard, certain costs cannot be recovered through the service charge at all — including landlord investment costs, void property costs, initial capital costs, future redevelopment costs, and negligence-related costs. If your lease includes these, the new rules may override it. Check your lease against the RICS list and flag any discrepancies with your landlord.
Request the Budget and Supporting Documents
Under the new rules, you have the right to access contracts with suppliers, invoices and receipts, insurance policies and commission details, fire risk assessments, and historic records going back six years. Only genuinely commercially sensitive information can be withheld. If you’re a commercial tenant, the RICS standard also requires an apportionment matrix showing how costs are split between occupiers. Request all of this in writing at the start of each service charge year. If your landlord delays or refuses, that’s grounds for a formal complaint.
Challenge Non-Compliant Demands Immediately
If a demand doesn’t meet the prescribed format, don’t pay it without question. Write to your landlord or managing agent explaining why the demand is non-compliant and request a corrected version. Under the new rules, a non-compliant demand may be unenforceable, so you have leverage. If the issue isn’t resolved, you can escalate to the First-tier Tribunal (Property Chamber) in England or the Leasehold Valuation Tribunal in Wales. The key is to act quickly — don’t let months pass before raising the issue.
Understand the Future-Phase Changes
The government’s consultation, which runs until September 2025, includes proposals to reform the major works regime and introduce mandatory qualifications for managing agents. These changes are still in development, but they signal a continued shift toward greater accountability. If you’re entering into a new lease or renewing an existing one, consider including clauses that require compliance with future regulatory changes. This protects you from being locked into outdated terms as the rules evolve.
-
1Check the Demand FormatVerify the demand includes all required elements: names, addresses, total amount, period, payment deadlines, and rights summary. If anything is missing, request a corrected version before paying.
-
2Request Supporting DocumentsAsk for contracts, invoices, insurance policies, and fire risk assessments. You’re entitled to records going back six years. Only commercially sensitive information can be withheld.
-
3Verify the 18-Month RuleCheck the date of the work against the date of the demand. If costs were incurred more than 18 months before the demand, they may not be recoverable unless a prescribed notice was served.
-
4Dispute Non-Compliant ChargesWrite to your landlord explaining why the charge is non-compliant. If unresolved, escalate to the First-tier Tribunal. Under the new rules, you won’t have to pay the landlord’s legal costs if you lose.
What I’d do if I were starting from scratch is use a tenant landlord lawyer to review my lease before the next service charge year begins. A professional review can identify clauses that don’t comply with the new rules and give you a clear action plan. For more on the practical side of commercial leases, our article on 10 tips for renting commercial space in the UK covers the essentials.
Frequently Asked Questions
Can I refuse to pay a service charge demand that doesn’t follow the new format? ▾
What happens if my landlord doesn’t provide annual accounts within six months? ▾
Are the new rules different for commercial and residential properties? ▾
Can my landlord charge me for their legal costs if I dispute a service charge? ▾
What should I do if I think I’ve been overcharged in previous years? ▾
Sources and Further Reading
Essential advice for renting commercial space in the UK — A practical guide covering lease terms, negotiations, and common pitfalls for new tenants.
Tips for renting a manufacturing facility lease in the UK — Specific advice for industrial tenants on service charges, maintenance obligations, and lease length.
New rules for service charge accounting. Cox Hinkins, 2025.
Strengthening leaseholder protections over charges and services consultation. UK Government, 2025.
The new RICS service charge standard: what it is and changes for 2026. Stevens & Bolton, 2025.
