The average UK leaseholder now pays £2,880 a year in service charges, according to the latest TPI Service Charge Index. That figure alone doesn’t tell the full story. What matters more is whether you’re getting real value for that money — and whether you’re being charged for costs you shouldn’t be paying at all.
I’ve been writing about property costs for years, and one pattern keeps coming up: landlords and tenants often don’t share the same understanding of what service charges should cover. The gap between what’s charged and what’s justified can be significant. New professional standards from RICS and updated codes of practice are trying to close that gap, but only if you know what to look for.
Here’s what you actually need to know.
If you’re a landlord, getting service charges right protects your relationship with tenants and reduces disputes. If you’re a tenant, understanding the rules helps you challenge unfair costs. Either way, the starting point is knowing what the new standards require. For a broader view of how these costs fit into your overall property strategy, you might find our guide on managing commercial space service charges useful. A tenant landlord lawyer can also help clarify what your lease actually allows.
What the new service charge standards actually mean for you
The most significant shift in service charge governance in nearly a decade arrived on 31 December 2025. That’s when the updated RICS professional standard for commercial property service charges came into force. It’s not legislation, so it can’t override your lease. But it sets a benchmark that RICS members and regulated firms must follow unless they have a very good reason not to.
What I’d do first is check whether your current service charge budget includes any of the costs the new Standard says should be excluded. Things like asset management fees, rent collection costs, and expenses related to void units are now explicitly non-recoverable through the service charge. If you’re paying for them, you’re overpaying.
The Standard also changes how management fees work. They can no longer be a percentage of the total service charge budget. Instead, they must be fixed at the start of the year. That alone can save tenants thousands if your landlord was using a percentage-based model. For landlords, it means more predictable income from management fees — but also more scrutiny.
Why the rising costs of building safety and insurance matter to your bottom line
Building Safety Act compliance costs jumped 53% year-on-year, the highest growth of any service charge category. That’s not a small adjustment. It’s a direct result of post-Grenfell safety requirements, and it’s hitting leaseholders in buildings of all ages and heights.
Here’s a scenario: you own a flat in a building over 18m tall. Your service charge is already above average at £4,447. Now add a 53% increase in safety compliance costs on top. Without proper budgeting and communication from the landlord, that kind of jump can feel like a shock. The new Code of Practice tries to address this by requiring clearer explanations of cost changes in advance.
Reserve funds also saw a 26% increase. That’s the money set aside for major future works like roof replacements or lift overhauls. The updated Code now requires landlords to report what they’re doing with these funds upfront, rather than just presenting a number. If your landlord isn’t providing that detail, you’re entitled to ask for it.
What I notice is that tenants in older buildings often assume high charges are inevitable. They’re not always wrong — buildings over 50 years old average £5,208 compared to £2,508 for those under 25. But a well-managed older building can still offer better value than a poorly managed newer one. The key is transparency. If you’re a tenant, ask for a detailed cost breakdown. If you’re a landlord, providing one builds trust and reduces disputes. For more on how Brexit has affected property costs and regulations, our article on Brexit’s impact on UK commercial renting covers the wider picture.
Where landlords and tenants get service charges wrong
Most disputes come down to a handful of recurring mistakes. Here’s what they are and how to fix them.
Paying for costs that should be the landlord’s responsibility
The updated RICS Standard is clear: landlord investment costs, void property costs, initial capital costs, and future redevelopment costs must not be recovered through the service charge. Yet many leases still contain wording that allows landlords to pass these on. If your service charge includes items like asset management, rent collection, or marketing of empty units, you’re being charged for something the Standard says you shouldn’t be.
What to do: review your service charge budget against the list of non-recoverable costs in the Standard. If you spot something that shouldn’t be there, raise it with your landlord in writing. If they push back, a real estate lawyer can help you assess whether the lease actually allows it.
Not checking the apportionment matrix
Service charges are split between tenants based on an apportionment matrix — a formula that determines each tenant’s share. The new Standard requires this matrix to be included with both the budget and the year-end reconciliation. If you’re not seeing it, you can’t verify whether your share is fair.
I’ve seen cases where a tenant in a smaller unit was paying the same proportion as a tenant in a much larger one. That’s not necessarily wrong if the lease says so, but it’s worth checking. The matrix should show total costs and how they’re weighted between occupiers. If it doesn’t, ask for it.
Ignoring the four-month reconciliation deadline
Both the RICS Standard and the new Code of Practice require year-end reconciliations within four months of the year end. If your landlord is late, they need to explain why. A delayed reconciliation means you’re in the dark about whether you’ve been overcharged or undercharged for months longer than necessary.
What I’d do: mark the date on your calendar. If the reconciliation doesn’t arrive within four months, follow up in writing. The new rules are designed to give you clarity sooner — use them.
Overlooking reserve fund reporting
Reserve funds grew 26% year-on-year, yet many landlords still don’t explain what they’re doing with the money. The updated Code requires clearer reporting on reserve and sinking funds, including what work is planned and how the money is being used. If your service charge includes a reserve fund contribution but you’re not seeing a breakdown, that’s a red flag.
For a deeper look at how service charge caps work and when they apply, our post on navigating tenant service charge caps covers the key points.
→ Scroll right to see all columns
| Building height | Average service charge | Key driver |
|---|---|---|
| Under 11m | £2,418 | Lower safety compliance costs |
| 11–18m | £3,507 | Moderate building safety requirements |
| Over 18m | £4,447 | Full Building Safety Act compliance |
How to maximise value for money on your service charges
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Getting value from service charges isn’t about paying less — it’s about paying only for what you should be paying for. Here’s how to do it.
Request a full cost breakdown with supporting commentary
The new Code of Practice says budgets should no longer be just numbers in isolation. They should include commentary that explains what each cost covers and highlights any material changes from the previous year. If your landlord sends you a budget with no explanation, ask for one.
What to look for: line items that seem vague, like “management fees” or “general repairs.” The more detail you have, the easier it is to spot discrepancies. If you manage multiple properties, analysing service charge data across sites can reveal inconsistencies and opportunities for savings. Independent service charge reviews and audits are becoming more common for exactly this reason.
Check whether ESG costs are genuine services
The new Standard says landlords should only include Environmental, Social, and Governance (ESG) expenditure in the service charge where it constitutes a genuine service. All other ESG initiatives should be funded by the landlord. If you’re being charged for sustainability projects that don’t directly benefit the building’s operation, challenge it.
What I’d do: ask for a breakdown of any ESG costs in your service charge. If the landlord can’t explain how it’s a genuine service, it shouldn’t be on your bill.
Use the four-month reconciliation window to your advantage
Once the reconciliation arrives, you have a limited window to review it. Don’t wait. Compare the actual costs against the budget. Look for categories where spending exceeded the budget significantly. If you find discrepancies, raise them immediately.
- 1Mark the deadlineFour months from the year end. If it doesn’t arrive, ask why.
- 2Compare budget vs actualLook for categories where spending exceeded the budget by more than 10%.
- 3Check for non-recoverable costsCross-reference against the list in the RICS Standard.
- 4Raise discrepancies in writingUse email so there’s a record. Reference the relevant clause in the Standard.
Consider an independent service charge audit
Independent audits are becoming more common, and for good reason. They help validate costs, identify discrepancies, and ensure compliance with both lease terms and the Code. If your service charge is on the higher end — say, above £3,500 — the cost of an audit is likely worth it.
For landlords, commissioning an audit voluntarily can prevent disputes before they start. It shows tenants you’re serious about transparency. For more on how lease wording affects what you can recover, our article on tenant estoppel certificates explains a related area where clarity matters.
Frequently asked questions about landlord service charges
Can my landlord charge me for empty units in the building? ▾
What happens if my landlord doesn’t provide a reconciliation within four months? ▾
Are management fees still allowed as a percentage of the service charge? ▾
My building is over 50 years old — are high service charges unavoidable? ▾
What should I do if I think I’ve been overcharged? ▾
The new standards and codes are a genuine step forward for transparency in service charges. But they only work if you use them. Check your budget against the non-recoverable costs list. Ask for the apportionment matrix. Hold your landlord to the four-month reconciliation deadline. Those four actions alone will put you ahead of most tenants and landlords.
If this was useful, you might also want to read top tips for renting a boutique retail lease in the UK.
Sources and Further Reading
High street vs industrial estate: which is right for your UK business? — Compares cost structures and service charge expectations across different property types.
Understanding heritage leases for your commercial space — Explains how listed building status affects service charge obligations and repair costs.
TPI Service Charge Index 2026 Report. The Property Institute, 2026.
The new RICS service charge standard: what it is and changes for 2026. Stevens & Bolton LLP, 2026.
Decoding the new service charge code: what commercial property occupiers need to know. BDC Magazine, June 2026.
