The average service charge per leaseholder in the UK now sits at £2,880, and for those in the highest-cost buildings, that figure can climb to £8,680 a year. That means the money you hand over for maintenance, insurance, and building management is a serious household expense — and one where legal costs have historically been a hidden, and often unfair, burden. I’ve been writing about property finance for years, and the single biggest complaint I hear from leaseholders isn’t about the amount of the charge itself — it’s about being forced to pay their landlord’s legal fees when they try to challenge a bill they believe is unreasonable.
That dynamic is finally changing. The Leasehold and Freehold Reform Act 2024 scraps the presumption that leaseholders must pay their landlord’s legal costs, which has been a major barrier to challenging poor practice. If you’re a leaseholder wondering whether you can dispute a service charge without risking a huge legal bill, or a landlord trying to understand what you can and cannot recover, the rules have shifted significantly. Here’s what you actually need to know.
If you’re also managing a commercial property, you might find it useful to read about how service charges are apportioned between tenants — the same principles of fairness and transparency apply. And if you’re facing a dispute that feels too complex to handle alone, speaking with a tenant landlord lawyer can help clarify your position before you commit to a tribunal application.
What the new legal cost rules mean for leaseholders and landlords
The most important change is straightforward: landlords can no longer recover tribunal or court costs through the service charge unless a tribunal specifically orders otherwise. Under the old system, a leaseholder who challenged an unreasonable charge and won could still be left with a bill for the landlord’s legal fees — which made the risk of disputing anything feel enormous. That deterrent effect was real, and it kept many legitimate challenges from ever being made.
What I’d do if I were a leaseholder right now is review any recent service charge demands for compliance with the new format rules. If a demand doesn’t include the prescribed information — the landlord’s and your name and address, the total amount based on the annual budget, the period it covers, payment deadlines, and a summary of your rights — it may be unenforceable. That’s a powerful check you can run yourself without spending a penny on legal advice. For landlords, the priority should be updating your demand templates and making sure your managing agent understands the new requirements, because a non-compliant demand could mean you can’t recover the money at all.
If you’re unsure whether a specific charge is reasonable, reading up on service charge precedents in UK property law can give you a clearer picture of what tribunals have already decided.
Why the change to legal cost recovery matters for your finances
The government’s own consultation documents describe service charges as “the single biggest subject of enquiry” among leaseholders seeking advice from the Leasehold Advisory Service. That tells you this isn’t a niche issue — it’s the main source of friction in millions of leasehold relationships. The new rules on legal costs are designed to remove what the government calls “a significant barrier to challenging poor practice.”
Consider a scenario where your building’s managing agent charges £500 for a routine admin task that should cost £50. Under the old rules, challenging that fee at tribunal meant risking not only your own legal costs but also the landlord’s — which could easily run into thousands. The new rules flip that calculation. Now, the landlord can only recover costs if the tribunal specifically orders it, which means the financial risk of challenging an unreasonable charge sits mainly with the party that imposed it.
That said, the change doesn’t apply uniformly across all building types. Buildings under 11 metres in height have average service charges of £2,418, while those over 18 metres average £4,447 — and the legal cost risk was always higher in larger, more complex buildings where disputes are more common. What I notice is that leaseholders in older buildings (over 50 years old, averaging £5,208 in charges) are the ones who stand to benefit most, because those buildings tend to have more frequent major works and more opaque cost structures.
If you’re a landlord, you might want to look at how building insurance costs are handled in service charges, because the new rules also require you to disclose any commission you receive on insurance policies — and failure to do so means you can’t recover the premium through the service charge.
Where leaseholders and landlords get the new rules wrong
Assuming the old cost-recovery rules still apply
The most common mistake I see is landlords continuing to include legal cost clauses in their service charge demands as if nothing has changed. Under the Leasehold and Freehold Reform Act 2024, those clauses are no longer enforceable unless a tribunal specifically orders cost recovery. If you’re a landlord and your demand still says “legal costs may be added to the service charge,” you’re likely relying on an unenforceable term. If you’re a leaseholder and you see that language, you can challenge it.
Ignoring the new format requirements for service charge demands
A demand that doesn’t follow the prescribed format may be unenforceable. That means no name and address for both parties, no budget breakdown, no payment deadline, or no summary of your rights — and the landlord can’t collect. The government’s 2025 consultation identified a lack of standardised, readable demand formats as one of four main problems the new rules aim to fix. My advice: keep every demand you receive, and if it doesn’t meet the format requirements, raise it in writing immediately.
Overlooking the 18-month rule for cost recovery
Landlords cannot recover costs incurred more than 18 months before the demand is issued, unless they serve a prescribed notice within that window. This rule already existed under the Landlord and Tenant Act 1985, but the new rules tighten it. If you’re a leaseholder and you receive a demand for work done two years ago, check the date carefully. If you’re a landlord, make sure your billing cycle is tight enough that you never exceed the 18-month limit.
Failing to disclose insurance commissions
Under the new rules, landlords must disclose any commission or payment they receive in connection with building insurance policies. If they don’t, they cannot recover the insurance premium through the service charge. This is a straightforward requirement, but it’s easy to overlook if your managing agent handles insurance renewal without your oversight. I’d recommend asking for a written breakdown of all commissions before you approve any insurance renewal.
→ Scroll right to see all columns
| Requirement | What must be included | Consequence of non-compliance |
|---|---|---|
| Service charge demand format | Names, addresses, total amount, budget, period, deadlines, rights summary | Demand may be unenforceable |
| Annual accounts (4+ dwellings) | Income/expenditure, balance sheet, reserve fund, major works summary | Must be certified by qualified accountant |
| Insurance commission disclosure | Any commission or payment received | Premium cannot be recovered through service charge |
| Legal cost recovery | Only if tribunal specifically orders it | Cannot be passed through service charge otherwise |
If you’re dealing with a dispute that involves multiple issues — say, an unenforceable demand combined with undisclosed insurance commissions — a small claims lawyer can help you decide whether to take the case to tribunal or pursue it through the county court.
How to protect yourself under the new service charge rules
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Check every service charge demand against the new format requirements
Start by comparing each demand you receive against the prescribed format. Does it include the landlord’s name and address? Your name and address? The total amount demanded, based on the annual budget? The period it covers? Payment deadlines and consequences for non-payment? A summary of your rights? If any of these are missing, write to the landlord or managing agent pointing out the omission and stating that the demand may be unenforceable. Keep a copy of your letter. If the landlord tries to take enforcement action, you have a clear paper trail.
Request your annual statement of accounts within six months of the year-end
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 accounting year. This must include an income and expenditure account, a balance sheet, details of the reserve fund balance, and a summary of any major works carried out. If you don’t receive it, request it in writing. If the landlord fails to provide it, you can apply to the First-tier Tribunal (in England) or the Leasehold Valuation Tribunal (in Wales) for an order compelling them to do so.
Review historic records going back up to six years
Landlords must now provide access to contracts with suppliers, invoices and receipts for work carried out, insurance policies and commission details, fire risk assessments, and historic records going back up to six years. Only genuinely commercially sensitive information can be withheld. If you suspect a charge is unreasonable, ask to see the underlying invoice. If the landlord refuses without a valid reason, that refusal itself may be grounds for a tribunal application.
Understand the emerging impact of Building Safety Act compliance costs
The TPI Service Charge Index 2026 report shows that Building Safety Act compliance costs recorded the highest year-on-year growth from 2024, at 53%. That’s a massive increase, and it’s likely to continue as more buildings undergo fire risk assessments and remediation work. If you live in a building over 18 metres, your service charge is already averaging £4,447, and compliance costs will push that higher. What I’d do is ask your landlord or managing agent for a specific breakdown of Building Safety Act costs in your next service charge demand, so you can see exactly what you’re paying for and challenge anything that seems disproportionate.
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1Check the demand formatCompare each demand against the prescribed format requirements. If anything is missing, write to the landlord stating the demand may be unenforceable.
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2Request the annual accountsIf you haven’t received the statement of accounts within six months of the year-end, request it in writing. For buildings with 4+ dwellings, it must be certified by a qualified accountant.
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3Review historic recordsAsk for invoices, contracts, and insurance commission details going back up to six years. Only commercially sensitive information can be withheld.
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4Challenge unreasonable costs at tribunalUnder the new rules, you can challenge costs without risking paying the landlord’s legal fees. Apply to the First-tier Tribunal (England) or Leasehold Valuation Tribunal (Wales).
If you’re a landlord, a property lawyer can help you update your service charge templates and ensure your billing processes comply with the new rules before you issue your next demand.
Frequently asked questions about landlord service charge legal costs
Can my landlord still add legal costs to my service charge if I lose a tribunal case? ▾
What happens if my landlord issues a service charge demand that doesn’t follow the new format? ▾
Does the 18-month rule apply to all service charge costs? ▾
Can I see the invoices my landlord’s managing agent has paid on my behalf? ▾
What should I do if my landlord refuses to disclose their insurance commission? ▾
Are the new rules different for buildings in Scotland? ▾
If you’re a leaseholder and you’re struggling to get your landlord to comply with the new rules, a real estate lawyer can help you prepare a tribunal application or negotiate a resolution before costs escalate.
The shift in legal cost recovery is the most significant change to leaseholder rights in years, but it only works if you know what to look for. Start by checking your most recent service charge demand against the new format requirements. If something’s missing, challenge it. If a cost seems unreasonable, ask to see the invoice. The rules are now on your side — but you still have to use them.
If this was useful, you might also want to read Commercial Property Investment vs Renting: Which Is Right for Your UK Business?
Sources and Further Reading
Tips for Renting a Food Hall Lease in the UK — Practical guidance on lease terms and service charge considerations for food hall operators.
From Startup to Scale-Up: Finding the Perfect UK Commercial Space — How service charge structures differ for growing businesses and what to negotiate in your lease.
Strengthening leaseholder protections over charges and services consultation. UK Government, 2025.
New Rules for Service Charge Accounting. Cox Hinkins, 2025.
TPI Service Charge Index 2026 Report. The Property Institute, 2026.
