If you live in a leasehold flat, your service charge is probably one of your biggest regular bills after the mortgage or rent. The latest industry data shows the average service charge per leaseholder in the UK now sits at £2,880 for the 2026 budget year. That figure alone tells you why understanding where that money goes matters — it’s not a small cost, and it’s one you have limited control over once the lease is signed.
I’ve been writing about property costs for years, and the one question that comes up more than any other is: “How do I know if my service charge is reasonable?” The honest answer is that most leaseholders never really check — they just pay. But new rules under the Leasehold and Freehold Reform Act 2024 (LAFRA 2024) and the updated RICS Service Charge Code 2025 have changed what landlords and managing agents must tell you. If you know what to look for, you can spot problems before they cost you. Here’s what you actually need to know.
One practical step worth taking early is to understand the full scope of tenant service charges before you commit to a property. If you’re still choosing where to live, comparing service charge histories between buildings can save you thousands.
What a Service Charge Budget Actually Covers
Most people assume their service charge just covers cleaning and gardening. In reality, it’s a much broader pot of money. The typical budget includes building insurance, lift maintenance, communal electricity, roof repairs, management fees, and increasingly — building safety compliance costs. The Building Safety Act compliance costs saw the highest year-on-year growth at 53%, which means that line item alone is now a major driver of increases.
What I’d do if I were a leaseholder right now is ask for the budget breakdown before the year begins. Under the new rules, you’re entitled to see an apportionment matrix — that’s the document showing how total costs are split between occupiers. If your building has different sized flats or commercial units on the ground floor, the split matters a lot. A fair apportionment should reflect floor area or a similar objective measure, not a flat per-unit figure that makes smaller flats subsidise larger ones.
Why the New Rules Matter for Your Wallet
The changes introduced by LAFRA 2024 and the RICS Service Charge Code 2025 aren’t just paperwork exercises. They directly affect what you can be charged and when. One of the most important changes is the tightening of the 18-month rule. Under the Landlord and Tenant Act 1985, landlords already couldn’t recover costs incurred more than 18 months before the demand was issued. The new rules make that stricter — if a landlord misses that window, they lose the right to claim the money unless they served a prescribed notice within the 18 months.
Consider this scenario: your building had emergency roof repairs in January 2025, but the managing agent doesn’t send you the bill until August 2026. Under the old rules, that might have been arguable. Under the new rules, that demand is almost certainly unenforceable. That’s a real protection, and it’s one most leaseholders don’t know exists.
Another change that matters is the ban on recovering tribunal or court costs through the service charge. Previously, if a dispute went to tribunal and the landlord won, they could add their legal costs to next year’s service charge — meaning all leaseholders paid for it. Now, landlords cannot recover tribunal or court costs unless a tribunal specifically orders otherwise. That shifts the balance of power significantly.
If you’re in a building with four or more dwellings, your landlord must now provide a written statement of accounts within six months of the end of each service charge year. That statement must include an income and expenditure account, a balance sheet, details of the reserve fund balance, and a summary of major works. Crucially, a qualified accountant must certify these accounts. That’s a big step up from the old system where accounts could be self-certified or simply not provided at all.
Where Leaseholders Commonly Get Caught Out
Even with better rules in place, I see the same patterns repeating. The first is simply not reading the demand. Under LAFRA 2024, service charge demands must now follow a prescribed format that includes the landlord’s and leaseholder’s names and addresses, the total amount, the period covered, payment deadlines, and a summary of your rights. If your demand doesn’t include all of that, it may be unenforceable. But you’d never know unless you checked.
Ignoring the insurance commission disclosure
Landlords often earn commission on building insurance policies. Under the new rules, they must disclose any commission or payment they receive. If they fail to disclose it, they cannot recover the insurance premium through the service charge. That’s a powerful remedy. If your service charge demand doesn’t mention insurance commission, you have grounds to challenge the entire insurance line item.
Not challenging management fees based on a percentage
Under the RICS Service Charge Code 2025, management fees may no longer be based on a percentage of the budgeted or actual service charge. Fees should now be fixed at the start of the service charge year. If your managing agent is charging a percentage, that’s now against professional standards. A fixed fee gives you certainty and removes the perverse incentive for agents to inflate costs to increase their own fee.
Overlooking the reserve fund trap
Reserve funds saw a 26% year-on-year increase. That’s money set aside for future major works. The problem is that some landlords use reserve fund contributions as a way to smooth over poor budgeting — collecting more than needed now to avoid a big bill later. You’re entitled to see the reserve fund balance in the annual accounts. If it’s growing faster than planned works would justify, ask why.
What I’d do if I saw a large reserve fund contribution is compare it against the building’s age. Buildings over 50 years old average £5,208 in service charges, compared to £2,508 for buildings under 25 years. If your building is relatively new but the reserve fund is high, that’s a red flag worth investigating.
| Building Age | Average Service Charge | Key Cost Drivers |
|---|---|---|
| Under 25 years | £2,508 | Insurance, cleaning, management fees |
| 25–50 years | £2,411 | Maintenance, lift repairs, cyclical works |
| Over 50 years | £5,208 | Major repairs, building safety compliance, reserve fund |
How to Take Control of Your Service Charge Budget
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The new rules give you more tools than ever, but only if you use them. Here’s a practical approach to reviewing your service charge budget and challenging anything that doesn’t add up.
Request the full budget breakdown before the year starts
Under the RICS Service Charge Code 2025, landlords must issue service charge budgets at least one month before the start of the service charge year. Don’t wait for it to arrive — ask for it proactively. The budget should include an apportionment matrix showing how costs are split between occupiers. If your building has mixed uses — say, residential flats above a shop — check that the commercial unit is paying its fair share. Some landlords apportion costs unfairly, leaving residential leaseholders subsidising commercial tenants.
If the budget seems high, compare it against the previous year’s actual expenditure. The 2024 and 2025 figures in the TPI report reflect final costs incurred, while 2026 data is based on forward-looking budgets. If the budget is significantly higher than last year’s actual costs, ask for a written explanation. Any delay in providing the budget must be accompanied by an explanation from the landlord.
Scrutinise the year-end accounts within six months
For buildings with four or more dwellings, the landlord must provide a written statement of accounts within six months of the end of each service charge year. That statement must be certified by a qualified accountant. If you don’t receive it, you have grounds to withhold payment — but only after following the proper process. Start by writing to the managing agent requesting the accounts. If they don’t respond within a reasonable time, you can escalate to the First-tier Tribunal (Property Chamber) in England or the Leasehold Valuation Tribunal in Wales.
A tenant landlord lawyer can help you navigate the tribunal process if it comes to that. Many offer initial consultations where you can explain the situation and get advice on whether your case is strong enough to pursue.
Check for non-recoverable costs
The RICS Service Charge Code 2025 explicitly lists costs that must not be recovered through the service charge. These include landlord investment costs like asset management and rent collection, void property costs such as rates and insurance for empty units, initial capital costs like original fit-out or new equipment, future redevelopment costs including feasibility studies, and negligence-related costs arising from poor maintenance or avoidable overspending.
If you see any of these in your service charge demand, challenge them in writing. The landlord must justify why they believe the cost is recoverable. If they can’t, you’re not obliged to pay.
Use the new information rights to access supporting documents
Under LAFRA 2024, landlords must provide access to contracts with suppliers and contractors, invoices and receipts for work carried out, insurance policies and commission details, fire risk assessments, and historic records going back up to six years. If you’re questioning a specific cost — say, a large invoice for lift repairs — request the original invoice and the contract with the lift maintenance company. If the work wasn’t competitively tendered, that’s a legitimate concern.
What I’d do is keep a file of every service charge demand and annual account I receive. If a dispute arises later, having six years of records gives you a much stronger position. A good system for managing service charge records can save you hours of frustration when you need to find a specific document.
Frequently Asked Questions
Can I refuse to pay a service charge demand that doesn’t follow the new format? ▾
What happens if my building has fewer than four dwellings? ▾
Can my landlord charge me for their legal fees if we go to tribunal? ▾
How do I check if my building’s insurance commission is reasonable? ▾
What’s the difference between a reserve fund and a sinking fund? ▾
Sources and Further Reading
Beyond the square footage: hidden value in your lease — A deeper look at what else in your lease might be costing you more than it should, including service charge clauses you may have overlooked.
TPI Service Charge Index 2026 Report. The Property Institute, 2026.
New Rules for Service Charge Accounting. Cox Hinkins, 2025.
The New RICS Service Charge Standard: What It Is and Changes for 2026. Stevens & Bolton, 2026.
