Nearly two-thirds of leaseholders in England and Wales have faced a service charge increase in the past year, with some bills rising by over 20%. That figure, drawn from the TPI Service Charge Index 2026 report, covers more than 117,000 homes across 2,137 estates. For anyone renting a flat or a commercial unit, it means the cost of shared upkeep — lifts, gardens, cleaning — can jump sharply with little warning.
I’ve been writing about property costs for years, and the one question that keeps coming up is simple: “Can they really charge me for that?” The answer has changed recently. The Leasehold and Freehold Reform Act 2024 (LAFRA 2024) and the updated RICS Service Charge Code 2025 have introduced the biggest shake-up in service charge regulation in decades. If you’re a tenant or leaseholder, these rules give you more rights than you probably realise. Here’s what you actually need to know.
Before we get into the detail, it’s worth understanding how these charges fit into your broader rental picture. If you’re new to commercial leases, you might find our guide on decoding commercial leases helpful for context. And if you’re dealing with a dispute, speaking to a tenant landlord lawyer can clarify your options before costs spiral.
What the service charge cap actually covers
The term “service charge cap” is a bit misleading. There isn’t a single fixed cap on what you can be charged. Instead, the new rules create a framework of limits and protections. The most important one is the 18-month rule. Under the Landlord and Tenant Act 1985, and now tightened by LAFRA 2024, a landlord cannot recover costs incurred more than 18 months before the demand is issued — unless they served a prescribed notice on you within that period. That’s a hard deadline. If your landlord sends you a bill for work done two years ago, you can challenge it.
Another key limit is on management fees. Under the new RICS standard, management fees can no longer be based on a percentage of the budgeted or actual service charge. They must be fixed at the start of the service charge year. That stops the practice of fees rising automatically when costs go up. My first move if I received a demand with a percentage-based management fee would be to ask for the fixed fee figure and the date it was set.
Why these changes matter for your wallet
The practical effect of these reforms is that you now have more leverage when a charge looks wrong. Take the example of a leaseholder in a block of 20 flats who receives a demand for £3,000 covering roof repairs from three years ago. Under the 18-month rule, that demand is unenforceable unless the landlord served a notice within 18 months of the work. That’s a real protection, not a technicality.
There’s also a regional dimension. The TPI Service Charge Index 2026 report shows that average service charges vary significantly across England, Scotland and Wales. What’s reasonable in central London may be excessive in a smaller city. The new rules don’t set a national cap, but they do require that costs are reasonable and properly documented. If your charge seems out of step with similar properties in your area, you can request the supporting invoices and contracts.
I’ve noticed that many tenants don’t realise they can ask for historic records going back up to six years. That’s a powerful tool if you suspect you’ve been overcharged over multiple years. For more on how property costs affect your business, our article on commercial rent negotiation covers similar ground from the landlord’s side.
Where leaseholders and tenants go wrong
Most disputes I see come down to a few recurring mistakes. Here are the ones that cost people the most money.
Paying demands that don’t follow the new format
Under LAFRA 2024, service charge demands must be in a prescribed format. They must include the names and addresses of both landlord and leaseholder, the total amount based on the annual budget, the period covered, payment deadlines, and a summary of your rights. If any of these are missing, the demand may be unenforceable. Yet many tenants pay without checking. If you receive a demand that looks incomplete, don’t pay it immediately. Ask for a compliant version first.
Not requesting the annual budget upfront
The budget must accompany the demand at the start of the service charge year. If your landlord sends a demand without the budget, you’re entitled to ask for it. Without the budget, you can’t verify whether the charges are reasonable. I always advise tenants to keep a copy of the budget alongside each demand. It’s the only way to track whether actual costs match what was projected.
Ignoring the insurance commission disclosure rule
Landlords must now disclose any commission or payment they receive from building insurance policies. If they fail to disclose it, they cannot recover the insurance premium through the service charge. This is a common oversight. If your service charge includes building insurance, check whether the commission is disclosed. If it isn’t, you have grounds to challenge that portion of the charge.
Overlooking the four-month reconciliation deadline
Under the new RICS standard, year-end accounts and reconciliations must be provided within four months of the end of the service charge year. Any delay must come with an explanation. If your landlord is late providing the reconciliation, you can request an explanation and, if none is given, raise a formal query. A property lawyer can help you draft that query if the landlord is unresponsive.
→ Scroll right to see all columns
| Requirement | Deadline | What happens if missed |
|---|---|---|
| Service charge budget issued | At least 1 month before service charge year starts | Tenant can request it; demand may be unenforceable without it |
| Year-end accounts and reconciliation | Within 4 months of year end | Landlord must provide explanation for delay |
| Cost recovery demand for past work | Within 18 months of cost being incurred | Demand unenforceable unless prescribed notice served |
| Annual statement of accounts (4+ dwellings) | Within 6 months of year end | Must be certified by qualified accountant |
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How to protect yourself from unfair service charges
These steps are based on the new rules. Follow them and you’ll be in a much stronger position if a dispute arises.
Check every demand against the prescribed format
When you receive a service charge demand, compare it against the LAFRA 2024 requirements. Does it include both names and addresses? The total amount based on the annual budget? The period covered? Payment deadlines? A summary of your rights? If anything is missing, write to your landlord and ask for a compliant version. Do not pay until you receive one. The law is on your side here — a non-compliant demand may be unenforceable.
Request and keep the annual budget
The budget must accompany the demand at the start of the service charge year. If it doesn’t, request it in writing. Keep both documents together. Throughout the year, compare actual charges against the budget. If you spot a significant variance, ask for an explanation. This is your best early warning system for unexpected costs.
Ask for supporting documents when something looks off
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. If a charge seems high, ask to see the invoice. If the landlord refuses, that refusal itself may be a breach of the rules. A tenant landlord lawyer can help you enforce that right.
Use alternative dispute resolution before going to tribunal
The new RICS standard encourages parties to use Alternative Dispute Resolution (ADR) before pursuing court action. Tribunal and court costs cannot be recovered through the service charge unless a tribunal specifically orders otherwise. That means taking a dispute to court is expensive for both sides. ADR is faster and cheaper. If you have a disagreement, suggest ADR in writing first. It shows you’re acting reasonably and may resolve the issue without legal fees.
For more on how property costs affect your business location decisions, our guide on understanding rateable value explains another key cost you’ll encounter.
What’s coming next: future changes to watch
The reforms aren’t finished. The government’s 2025 consultation identified four main problems the new rules aim to fix: a lack of standardised demand formats, inconsistent annual accounts, limited access to supporting documents, and high dispute costs. LAFRA 2024 and the RICS Service Charge Code 2025 address the first three. The fourth — dispute costs — is still being worked on. Secondary legislation on administration charges is expected, which will set prescribed limits on fees for things like providing information or granting consents.
For commercial tenants, the RICS standard that came into force on 31 December 2025 is particularly important. It clarifies that certain costs must not be recovered through the service charge, including landlord investment costs, void property costs, initial capital costs, future redevelopment costs, and negligence-related costs. If your landlord tries to include any of these, you have a clear basis to challenge them.
Can my landlord charge me for management fees based on a percentage of the service charge? ▾
What happens if my landlord doesn’t provide the annual budget with the demand? ▾
Can I be charged for costs from more than 18 months ago? ▾
Do the new rules apply to commercial properties too? ▾
What should I do if I think I’ve been overcharged? ▾
The new rules give you more protection than ever before, but only if you use them. Start by checking your most recent demand against the prescribed format. If something’s missing, ask for a corrected version. Keep every document. And if a charge doesn’t add up, request the invoice. That single step resolves most disputes before they start.
If this was useful, you might also want to read Revitalising UK high streets: can lower commercial rents save them?
Sources and Further Reading
Understanding surveyor fees in the UK for commercial space rentals — Explains another cost you’ll encounter when renting commercial space and how to budget for it.
New rules for service charge accounting. Cox Hinkins, 2025.
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, 2025.
