Nearly two-thirds of UK commercial tenants have faced unexpected service charge costs that weren’t clearly explained upfront, according to recent industry data. That means if you’re renting a shop, office, or industrial unit, there’s a good chance you’re paying for things you didn’t know about — or being charged in ways that don’t follow the rules. I’ve been covering commercial property for years, and the single most common question I get from tenants is: “How do I know if I’m being charged fairly?” The answer has just become a lot clearer, thanks to the biggest shake-up in service charge accounting in decades.
These aren’t just technical tweaks. They change what you can challenge, when you can challenge it, and how much you might get back. The new rules for service charge accounting are reshaping how landlords, managing agents, and tenants operate across the UK. Here’s what you actually need to know.
What service charge accounting fees actually cover
Let’s get the jargon out of the way first. Service charge accounting fees are the costs of preparing, auditing, and managing the financial side of your service charge — the budgets, the year-end statements, the reconciliations, and the compliance paperwork. They’re not the same as the service charge itself, which covers things like cleaning, repairs, and insurance. The accounting fees are the cost of proving the numbers are right.
What I tend to notice is that tenants rarely question these fees because they’re buried inside a larger service charge demand. But under the new RICS Service Charge Code, these accounting costs must be clearly itemised and justified. If your landlord can’t show you what they’re paying their accountant, you have grounds to ask why.
Why the new rules matter for your bottom line
The government’s 2025 consultation identified four main problems the new rules aim to fix: a lack of standardised demand formats, inconsistent or delayed annual accounts, limited access to supporting documents, and high costs when disputes reached tribunal. The result was the Leasehold and Freehold Reform Act 2024 (LAFRA 2024) and the updated RICS Service Charge Code, which together represent the biggest overhaul of service charge regulation in decades.
Here’s what that means for you. If your landlord issues a service charge demand that doesn’t follow the prescribed format under LAFRA 2024, that demand may be unenforceable. The demand must now include the names and addresses of both parties, the total amount based on the annual budget, the period it covers, payment deadlines, and a summary of your rights. If any of that is missing, you can push back.
Consider this scenario: your building’s roof was repaired in January 2025. The managing agent must notify you and demand payment before July 2026. If they wait until September 2026 without serving a prescribed notice, they cannot recover those costs through the service charge. That’s the 18-month rule, and it’s strict.
My first move if I were a tenant right now would be to request the last three years of service charge accounts and check every line item against these deadlines. You’d be surprised how often landlords miss them.
Where tenants and landlords get tripped up
The most common mistakes fall into predictable patterns. Here’s what to watch for.
Percentage-based management fees that should have been fixed
From 1 April 2026, RICS mandates that management fees must be fixed at the start of the service charge year. No more percentage-of-budget or percentage-of-actual-spend calculations. If your lease currently allows percentage-based fees, that clause will become non-compliant. Landlords who continue using percentage-based fees after that date are in breach of professional standards, and tenants can challenge those charges at tribunal.
Commingled funds that hide your money
Service charge money must be held in ring-fenced accounts — separate from the landlord’s own funds. If your landlord is pooling your payments with their general account, you lose transparency and you lose the interest that should be credited back to the service charge. RICS states that interest earned, after bank charges and tax, should be credited to the service charge account. A common commercial rent trap is assuming this is being handled correctly when it isn’t.
Late accounts without proper notice
Budgets must be issued at least one full calendar month before the service year starts. Year-end statements must be delivered within four months of the year-end. If your landlord is late, they must inform you promptly with revised timelines and reasons. If they don’t, you may have grounds to withhold payment or challenge the costs. The RICS standard is clear: delays without explanation are non-compliant.
Non-recoverable costs slipped into the charge
The RICS standard explicitly lists costs that must not be recovered through the service charge: landlord investment costs including asset management and rent collection, void property costs such as rates and insurance for empty units, and initial capital costs like original fit-out. If you see these in your service charge, they shouldn’t be there. A tenant-landlord lawyer can help you review your service charge demands if you’re unsure.
→ Scroll right to see all columns
| Cost type | Recoverable? | Notes |
|---|---|---|
| Cleaning, repairs, security, utilities | Yes (if lease permits) | Standard operational costs |
| Insurance premiums | Yes | Commissions must be disclosed |
| Fixed management fees | Yes | Must be fixed, not percentage-based from 2026 |
| Capital improvements | No | Not recoverable through service charge |
| Void property costs | No | Rates, insurance, marketing for empty units |
| Landlord’s general overheads | No | Asset management, rent collection, reversionary costs |
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How to prepare service charge accounts that comply with the new rules
Whether you’re a landlord, a managing agent, or a tenant who wants to understand what compliance looks like, here’s the practical playbook.
Issue budgets a full calendar month before the service year
This isn’t a suggestion — it’s a requirement under the RICS standard. Your pre-year budget must include a detailed line-item breakdown covering maintenance, cleaning, utilities, reserve funds, and insurance. It needs explanatory commentary justifying any increases or allocations. And it must be delivered at least one full calendar month before the next service year starts. If you’re a tenant and you haven’t received it by then, you have grounds to ask why.
Deliver year-end statements within four months
The year-end statement must include an income versus budget comparison with variance explanations, a balance sheet summary showing opening and closing reserves, a manager’s certificate signed and dated as a compliance statement, and an independent review report in line with ICAEW TECH 09/14. If your landlord is late, they must notify you promptly. If they don’t, the accounts may not be compliant.
Ensure an independent review is completed
ICAEW TECH 09/14 provides a structured review engagement that offers assurance without the cost of a full audit. A compliant review includes examination of supporting documents and reconciliations, analytical procedures like variance and budget checks, confirmation that funds are ring-fenced, and evaluation of cost apportionment methodology. If your service charge accounts don’t include this review, they’re not meeting the standard.
Disclose all commissions and rebates
Under LAFRA 2024, landlords must disclose any commission or payment they receive in connection with building insurance policies. If they fail to disclose this, they cannot recover the insurance premium through the service charge. The same applies to any rebates or other payments received. If you’re a tenant, ask for a full disclosure statement. If you’re a landlord, get it documented before the year-end.
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1Request the last three years of accountsCheck every line item against the recoverable costs table above. Flag anything that looks like a capital improvement, void cost, or landlord overhead.
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2Verify the independent reviewLook for the ICAEW TECH 09/14 review report. If it’s missing, ask why. If the lease requires a statutory audit, that must be done instead.
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3Check the 18-month rule on every chargeFor any cost older than 18 months, confirm a prescribed notice was served within the window. If not, the cost is irrecoverable.
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4Confirm ring-fenced accountsAsk your landlord or managing agent for confirmation that service charge funds are held in a discrete or virtual account, with interest credited back.
Frequently asked questions about service charge accounting fees
Can I challenge a service charge demand that doesn’t follow the new format? ▾
What happens if my landlord misses the four-month deadline for year-end accounts? ▾
Are RICS service charge standards legally binding? ▾
Can my landlord still charge a percentage-based management fee? ▾
Who pays for the independent review of service charge accounts? ▾
What should I do if I find non-recoverable costs in my service charge? ▾
Sources and Further Reading
Essential tips for a self-contained office lease — Practical advice on lease terms, service charges, and what to negotiate before you sign.
The empty shopfront crisis — How void property costs affect service charges and what councils are doing about it.
New rules for service charge accounting. Cox Hinkins, 2025.
How to prepare service charge accounts that comply with RICS guidelines. Veritus Consultancy, 2025.
The new RICS service charge standard: what it is and changes for 2026. Stevens & Bolton, 2025.
