If you own a leasehold property in the UK, the service charge you pay has likely gone up. According to the TPI Service Charge Index for 2026, the average annual service charge per leaseholder now sits at £2,880. That figure alone tells you why understanding how these charges are adjusted matters — it’s a significant annual cost that can change in ways you might not expect.
I’ve been covering property costs for a while now, and the one question that keeps coming up is simple: “Why did my service charge go up, and can I do anything about it?” The answer is more complicated than most people realise, partly because the rules around service charge adjustments have changed significantly. The updated RICS Service Charge Standard came into force at the end of 2025, and the Leasehold and Freehold Reform Act 2024 (LAFRA 2024) introduced new requirements that affect how landlords calculate, present, and recover these costs. If you’re a leaseholder or a landlord, the landscape has shifted. Here’s what you actually need to know.
What service charge adjustments actually cover
The first thing to understand is that a service charge isn’t a fixed fee. It’s a variable cost that covers the maintenance and management of shared areas in your building. That includes building insurance, cleaning communal hallways, lift maintenance, gardening, roof repairs, and the managing agent’s fee. The new rules for service charge accounting were introduced because the government identified four main problems: inconsistent demand formats, delayed annual accounts, limited access to supporting documents, and high dispute costs. The goal is to make everything more transparent.
What I tend to notice is that most leaseholders assume the budget they’re given at the start of the year is the final figure. It’s not. The budget is an estimate. At the end of the year, the landlord reconciles actual costs against that budget, and you either get a refund or a bill for the difference. That’s the adjustment. Under the new rules, landlords must issue the budget at least one month before the service charge year starts, and the year-end accounts must be provided within four months of the year ending. Any delay needs an explanation.
Why these adjustments matter more now than ever
The numbers from the TPI report show why you can’t afford to ignore this. Buildings under 11 metres tall have an average budgeted service charge of £2,418. For buildings between 11 and 18 metres, that jumps to £3,507. And for buildings over 18 metres, it’s £4,447. Age matters too. Buildings under 25 years old average £2,508, while buildings over 50 years old average £5,208. That’s more than double. If you live in an older, taller building, your service charge is likely to be significantly higher — and the adjustments could be larger.
One scenario that comes up often is the impact of Building Safety Act compliance. The report recorded a 53% year-on-year increase in these costs. That’s not a one-off spike — it reflects ongoing regulatory pressure following the Grenfell tragedy. If your building needs fire risk assessments, cladding remediation, or new safety systems, those costs will flow through to your service charge. The new rules also require landlords to provide access to fire risk assessments and historic records going back six years, so you can see exactly what you’re paying for.
My take is straightforward: if you’re a leaseholder, the best time to understand your service charge is before the adjustment lands. If you’re a landlord, the best time to get your paperwork in order is now. The new rules don’t leave much room for error.
Where leaseholders and landlords get tripped up
The most common mistakes I see fall into a few clear patterns. Here’s what goes wrong and how to fix it.
Ignoring the prescribed format for service charge demands
Under LAFRA 2024, a service charge demand must include the names and addresses of both parties, the total amount based on the annual budget, the period it covers, payment deadlines and consequences for non-payment, and a summary of the leaseholder’s rights. If any of that is missing, the demand may be unenforceable. I’ve seen landlords lose the right to recover thousands of pounds because they used an old template. The fix is simple: use the prescribed format. If you’re not sure what that looks like, get a tenant landlord lawyer to review your next demand before you send it.
Missing the 18-month window for cost recovery
The 18-month rule has existed under the Landlord and Tenant Act 1985, but the new rules tighten it. Landlords cannot recover costs incurred more than 18 months before the demand is issued, unless they serve a prescribed notice within that window. Miss it, and the cost is gone. This catches a lot of landlords who delay sending demands. If you’re a leaseholder and you receive a demand for costs from two years ago, you may have grounds to challenge it. If you’re a landlord, set a calendar reminder at 12 months — don’t wait until the deadline.
Failing to disclose insurance commissions
This is a big one. Under LAFRA 2024, landlords must disclose any commission or payment they receive in connection with building insurance. If they don’t, they cannot recover the insurance premium through the service charge. The RICS Standard goes further, saying landlords should retain commission only where it’s reasonable to reflect work undertaken. I’ve seen cases where landlords were pocketing 20% commissions without telling anyone. That’s no longer allowed. If you’re a leaseholder, ask for a breakdown of insurance costs and commissions. If your landlord can’t provide it, you may not have to pay.
Not providing year-end accounts on time
For buildings with four or more dwellings, the landlord must provide a written statement of accounts within six months of the end of the 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. A qualified accountant must certify these accounts. If your landlord is late, they need to explain why. If they can’t, you may have grounds to dispute the adjustment.
→ Scroll right to see all columns
| Requirement | Deadline | Consequence if missed |
|---|---|---|
| Issue service charge budget | At least 1 month before year starts | Demand may be unenforceable |
| Provide year-end accounts | Within 4 months of year end | Must provide explanation; potential dispute |
| Serve demand for costs incurred | Within 18 months of cost being incurred | Right to recover that cost is lost |
| Disclose insurance commissions | With the demand or accounts | Cannot recover insurance premium |
How to handle service charge adjustments properly
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Whether you’re a leaseholder trying to keep costs down or a landlord trying to stay compliant, the same principles apply. Here’s a practical guide to getting it right.
Review the budget before the year starts
Under the new rules, you should receive the budget at least one month before the service charge year begins. Don’t just file it away. Look at the line items. Is the insurance cost reasonable? Are management fees fixed rather than a percentage of the budget? The RICS Standard now says management fees should be fixed at the start of the year, not based on a percentage of the budgeted or actual service charge. If you see a percentage-based fee, question it. If you’re a leaseholder and something looks off, ask for supporting documents. The landlord must provide contracts, invoices, and receipts.
Understand what can and cannot be charged
The RICS Standard is clear about non-recoverable costs. Landlords cannot charge for investment costs like asset management or rent collection. They cannot charge for void property costs — rates, insurance, and services for empty units. Initial capital costs, like installing new equipment or improvement works beyond repair or replacement, are also excluded unless expressly justified and agreed. Future redevelopment costs and negligence-related costs are out too. If your service charge includes any of these, you have grounds to challenge it. A property lawyer can help you draft the challenge.
Keep records and ask for transparency
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 your landlord refuses, that’s a red flag. I’d recommend keeping a file of every service charge demand, budget, and set of accounts you receive. A small fireproof safe is a practical way to store physical copies, but digital backups work too. If a dispute arises, you’ll have the evidence you need.
Use alternative dispute resolution before going to court
The RICS Standard says parties should seek to resolve differences through 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 going to court is expensive and you probably won’t get the costs back. ADR is cheaper and faster. If you’re in a dispute, suggest mediation or arbitration first. Most professional managing agents will agree because it’s in everyone’s interest.
Prepare for future changes
The rules are still evolving. The LAFRA 2024 provisions are being phased in, and secondary legislation on administration charges is expected. The RICS Standard will be reviewed periodically. What I’d say is this: the trend is toward more transparency and tighter deadlines. If you’re a landlord, invest in good systems now. If you’re a leaseholder, stay informed. The days of opaque service charges are ending.
Frequently asked questions
Can I refuse to pay a service charge increase I disagree with? ▾
What happens if my landlord doesn’t provide year-end accounts on time? ▾
Are service charge adjustments capped by law? ▾
Do the new rules apply to commercial properties too? ▾
Can my landlord charge me for their legal costs if we go to tribunal? ▾
What should I do if I suspect my landlord is overcharging for insurance? ▾
Service charge adjustments don’t have to be a mystery. The new rules give leaseholders more rights than ever before, and they give landlords a clear framework to follow. My advice is simple: read every demand, keep every document, and ask questions early. If something doesn’t add up, challenge it through the proper channels. The system is designed to be fair — but only if you use it.
If this was useful, you might also want to read negotiation secrets to squeeze more value from your UK commercial lease.
Sources and Further Reading
Top advice for corporate service leases in the UK — A deeper look at service charge structures in commercial settings, with practical tips for tenants and landlords.
Essential tips for your commercial showroom lease — Specific guidance on negotiating service charge provisions in showroom and retail leases.
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, 2025.
