If you’re a tenant in a UK commercial or residential property, the service charge budget you receive each year can feel like a black box. You see a total figure, but how it’s built — and whether every line is justified — is often unclear. The latest data from the TPI Service Charge Index 2026 shows the average service charge per leaseholder now sits at £2,880. That’s a 5.8% increase over two years, just below cumulative inflation. For anyone paying that bill, understanding what’s inside it isn’t just useful — it’s essential for protecting your bottom line.
I’ve been covering property costs and leasehold rights for years, and the one question that comes up more than any other is simple: “Can they charge me for that?” The answer is rarely straightforward, because the rules have changed. New legislation and professional standards are reshaping what landlords can recover, how they must present their budgets, and what you’re entitled to see. Here’s what you actually need to know.
If you’re looking for a practical way to track what you’re being charged, a simple spreadsheet or a dedicated expense tracker notebook can help you log demands against budgets and spot discrepancies early. But the real power comes from knowing your rights — and that starts with understanding the new rules.
What a service charge budget actually covers
Most people assume the service charge just covers cleaning and gardening. In reality, it’s far broader — and that’s where confusion sets in. Service charges are payments you make to cover the cost of maintaining and managing shared areas. That includes building insurance, lift maintenance, roof repairs, and the management fee charged by the agent. But the TPI data shows that costs vary dramatically depending on the building’s height and age. Buildings under 11m average £2,418, while those over 18m average £4,447. Buildings over 50 years old average £5,208 — more than double the £2,508 for buildings under 25 years.
What I’d do is look at the budget line by line. If you see a figure that seems high for your building type or age, ask for the supporting quote or contract. The new rules give you that right, and using it early can prevent disputes later. For a deeper look at how these charges work in a commercial setting, you might find this guide to commercial service charges helpful.
Why the new rules matter for your wallet
The changes introduced by the Leasehold and Freehold Reform Act 2024 (LAFRA 2024) and the updated RICS professional standard aren’t just paperwork. They directly affect what you pay and how you can challenge it. The government’s 2025 consultation identified four main problems: a lack of standardised demand formats, inconsistent annual accounts, limited access to supporting documents, and high dispute costs. The new rules aim to fix all of them.
Take the 18-month rule. Under the Landlord and Tenant Act 1985, landlords cannot recover costs incurred more than 18 months before the demand is issued, unless they serve a prescribed notice within that window. The new rules tighten this further. If your landlord tries to bill you for work done two years ago without proper notice, you can push back. That’s a real protection, not a theoretical one.
Consider a scenario: you’re in a building over 18m tall, and your service charge jumps by 20% because of Building Safety Act compliance work. Under the new rules, the landlord must provide a written statement of accounts within six months of the year-end, certified by a qualified accountant if the building has four or more dwellings. If that statement doesn’t arrive, or isn’t certified, you have grounds to question the entire charge.
What I notice is that tenants often accept these increases without question, assuming they have no choice. But the new rules give you leverage. If your landlord hasn’t disclosed insurance commission, for example, they cannot recover the insurance premium through the service charge at all. That’s a significant financial consequence for non-compliance. For more on handling disputes when they arise, this article on landlord disputes covers the legal options available.
Where tenants and leaseholders go wrong
Most mistakes happen not because tenants are careless, but because the system has been opaque for so long. Here are the most common errors I see — and how to avoid them.
Accepting a budget without checking the format
Under LAFRA 2024, service charge demands must follow a prescribed format. They must include the names and addresses of both landlord and leaseholder, 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. Yet many tenants pay without checking. If you receive a demand that looks like a simple invoice with no breakdown, you can — and should — ask for a compliant one. The budget must accompany the demand at the start of the service charge year. If it doesn’t, that’s a red flag.
Not requesting supporting documents
You are entitled to see contracts with suppliers, invoices and receipts, insurance policies and commission details, fire risk assessments, and historic records going back up to six years. Most tenants never ask. That’s a missed opportunity. If your service charge includes a large line for “major works,” request the contractor quotes and the tender process documentation. If the landlord can’t produce them, you may have grounds to challenge the cost. A document organiser folder can help you keep all correspondence and invoices in one place, making it easier to track what you’ve requested and received.
Ignoring the 18-month rule
Landlords cannot recover costs incurred more than 18 months before the demand is issued, unless they serve a prescribed notice within that window. If you receive a demand for work completed two years ago with no prior notice, you are not obliged to pay it. I’ve seen tenants pay these out of fear, not realising the law is on their side. If you’re unsure whether a charge falls within the time limit, check the date of the invoice or work completion against the date of the demand.
Overlooking non-recoverable costs
The new RICS standard 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 plant installation, future redevelopment costs including feasibility studies, and negligence-related costs arising from poor maintenance. If your budget includes any of these, you can object. The standard is not legislation, but RICS members and regulated firms must comply unless they have a clear justification for departing from it.
→ Scroll right to see all columns
| Non-recoverable cost category | Examples | What you can do |
|---|---|---|
| Landlord investment costs | Asset management, rent collection, enhancing reversionary interest | Object in writing, citing the RICS standard |
| Void property costs | Rates, insurance, marketing for empty units | Request removal from your service charge apportionment |
| Initial capital costs | Original fit-out, new plant, improvement beyond repair | Ask whether the work was capital or revenue in nature |
| Negligence-related costs | Avoidable overspending, poor maintenance, failed equipment | Request the maintenance records and inspection reports |
If you’re dealing with a complex dispute, speaking to a tenant landlord lawyer can clarify whether a specific charge is recoverable under your lease and the new rules. It’s a small investment that can save you hundreds or thousands.
How to review and challenge your service charge budget
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Reviewing a service charge budget doesn’t require a law degree. It requires a methodical approach and knowledge of what to look for. Here’s how I’d do it.
Check the timing and format of the demand
The landlord must issue the budget at least one month before the service charge year starts. If you receive it late, note the date. Under the RICS standard, any delay must be accompanied by an explanation. The demand itself must follow the prescribed format under LAFRA 2024. If it doesn’t, write to the landlord stating that the demand is non-compliant and therefore potentially unenforceable. Keep a copy of your letter. If the issue isn’t resolved, you can raise it at tribunal.
Scrutinise the apportionment matrix
The budget should include an apportionment matrix showing how total costs are split between occupiers. This is a requirement under the new RICS standard. If your building has multiple tenants, check that your share matches the square footage or other basis stated in your lease. A common error is using an outdated or incorrect apportionment. If you spot a discrepancy, ask for the lease schedule that defines the service charge proportion.
Verify management fees and insurance commissions
Management fees may 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. If your budget shows a percentage-based fee, that’s a breach of the RICS standard. Similarly, any commission or rebate received by the landlord or manager on insurance policies must be declared. If it isn’t, the landlord cannot recover the insurance premium through the service charge. Ask for a written declaration of all commissions received.
Look for ESG and sustainability costs
The RICS standard states that ESG expenditure should only be included where it constitutes a genuine service. All other ESG initiatives must be funded by the landlord. If your budget includes a line for “green improvements” or “sustainability projects,” ask whether these are genuine services or landlord-led initiatives. If they’re the latter, they shouldn’t be on your bill. For more on how sustainability is affecting property costs, this investor guide on sustainability and rent prices offers useful context.
- 1Request the full budget and supporting documentsWrite to the landlord or managing agent asking for the annual budget, the apportionment matrix, and all invoices and contracts for the largest cost lines. You’re entitled to these under LAFRA 2024.
- 2Compare the budget to the previous year’s actualsLook for significant increases. If building safety compliance costs jumped 53% nationally, a similar rise in your budget may be justified — but you should still see the invoices.
- 3Check for non-recoverable costsReview the budget against the list of non-recoverable costs in the RICS standard. If you spot landlord investment costs, void costs, or capital improvements, object in writing.
- 4Raise disputes through Alternative Dispute Resolution firstThe RICS standard encourages ADR before court action. It’s faster and cheaper. If you can’t resolve the issue, tribunal is the next step — but landlords can no longer recover tribunal costs through the service charge unless a tribunal orders otherwise.
What I’d do in your position is start the review as soon as the budget arrives. Don’t wait until the end of the year. The earlier you flag issues, the easier they are to resolve. If you’re in a commercial property, the tenant improvement lease tips guide covers how to negotiate better terms before you sign.
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 the annual statement of accounts within six months? ▾
Can my landlord charge me for improvements like a new roof or lift? ▾
What should I do if I think my service charge is too high but I can’t afford a lawyer? ▾
Does the new RICS standard apply to my lease if it was signed before 2026? ▾
Understanding your service charge budget isn’t about being difficult — it’s about being informed. The rules have shifted in your favour, but only if you use them. Start with the budget when it arrives, check the format, request the documents, and challenge anything that doesn’t add up. If this was useful, you might also want to read Serviced Offices vs Traditional Leases: Which Wins for UK Startups?
Sources and Further Reading
Essential Tips for a Self-Contained Office Lease in the UK — Practical advice on lease terms, break clauses, and what to watch for before signing.
Maximise Your Business Potential with Adaptive Leasing in the UK — How flexible lease structures can help growing businesses manage property costs.
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.
