Understanding Service Charges: A Guide for Commercial Renters in the UK

If you rent commercial space in the UK, you have almost certainly paid a service charge. What you might not know is that the rules governing those charges have just undergone their biggest overhaul in nearly a decade. The updated RICS professional standard, which came into force on 31 December 2025, introduces strict new requirements for how landlords budget, report, and recover costs from tenants. For anyone renting an office, shop, or industrial unit, this changes the balance of power — but only if you know what to look for.

4 months
Deadline for year-end accounts after the service charge year ends
rics.org

1 month
Minimum notice before the service charge year for budget delivery
rics.org

18 months
Time limit for landlords to demand recovery of incurred costs
legislation.gov.uk

Fixed fee
Management fees must now be set, not a percentage of spend
rics.org

I have been following commercial property rules for years, and the single most common question I hear from tenants is: “Can they really charge me for that?” Until recently, the answer was often unclear. The new RICS Service Charge Standard, second edition, aims to fix that by setting a clear benchmark for fairness and transparency. It is not a law, but RICS members and regulated firms must comply or justify any departure. Here is what you actually need to know.

Budgets arrive earlier
Landlords must issue the service charge budget at least one month before the year starts. No more last-minute surprises.

Accounts come faster
Year-end accounts and reconciliations must be delivered within four months of the year-end. Delays need an explanation.

Management fees are fixed
Fees can no longer be a percentage of the total spend. They must be agreed and set at the start of the year.

Commissions must be declared
Any commission, rebate, or payment received by the landlord or manager must be disclosed in the accounts.

What a service charge actually covers in a commercial lease

The most important thing to understand is that a service charge is not a slush fund. It is meant to cover the actual cost of maintaining and running the shared parts of a building — things like cleaning communal areas, lift maintenance, gardening, building insurance, and the managing agent’s fee. Under the new standard, the list of what cannot be recovered has also been made much clearer. Landlords cannot pass on costs related to their own investment activities, void property costs for empty units, initial capital improvements, future redevelopment feasibility studies, or expenses caused by their own negligence.

Service charge
A payment by a tenant to cover the cost of maintaining and managing the shared areas of a commercial building. It is not rent — it is a separate charge for services and upkeep.

If you are looking at a new lease, the first thing I would do is check whether the service charge provisions reference the RICS standard. Many leases were written before the 2025 update, and the terms inside them may still allow things the new standard discourages. That does not mean those terms are automatically void, but it gives you a strong argument at negotiation time. For a deeper look at how lease terms interact with these rules, reviewing key considerations for a commercial expansion lease is a sensible next step.

Why the new service charge rules matter for your business

The practical effect of these changes is that tenants now have far more leverage to challenge questionable charges. Under the old system, managing agents could charge a percentage of the total service spend, which created an incentive to inflate costs. That is now banned. Fees must be fixed at the start of the year. If your landlord tries to levy a percentage-based management fee, you have a clear basis to object.

Consider a scenario where your service charge budget is £50,000 and the managing agent’s fee was previously 10% — that is £5,000. Under the old model, if the actual spend came in at £60,000, the agent’s fee would rise to £6,000 without any additional work. The new standard stops that. The fee is agreed upfront, so the agent’s incentive shifts to controlling costs, not increasing them.

What I tend to notice is that many tenants simply pay the service charge demand without ever seeing the backup. The new rules change that too. Landlords must provide access to contracts, invoices, insurance policies, and fire risk assessments on request. Only genuinely commercially sensitive information can be withheld. If you are being asked to pay a charge that seems high, understanding how to navigate landlord service charge insolvency can also help you protect your position if the landlord runs into financial trouble.

Fixed fees change the game
Under the 2025 RICS standard, management fees must be fixed at the start of the service charge year. A percentage-based fee is no longer acceptable. This single change removes the incentive for agents to inflate total costs.

Where commercial tenants get caught out

Even with better rules in place, tenants still make the same mistakes. Here are the most common ones I see, and how to avoid them.

Paying without checking the budget deadline

Landlords must issue the service charge budget at least one month before the start of the service charge year. If your landlord sends a budget in March for a year that started in January, that is a breach of the standard. You are entitled to an explanation for the delay, and if the budget was never issued on time, you may have grounds to challenge the recoverability of those costs. The first step is to check your lease for the service charge year dates, then compare them to when the budget actually arrived.

Not requesting the apportionment matrix

The new standard requires that the budget and reconciliation include an apportionment matrix — a breakdown of how total costs are shared between occupiers. Without it, you cannot verify whether you are being charged a fair share. If your building has ten tenants and you are paying 20% of the total, but your unit is only 10% of the floor area, something is off. Request the matrix in writing. If the landlord refuses, that refusal itself may be a breach of the standard.

Ignoring the 18-month rule

Landlords cannot recover costs incurred more than 18 months before the demand is issued, unless they served a prescribed notice within that window. This rule has existed under the Landlord and Tenant Act 1985, but the new standard reinforces it. If you receive a demand for work done two years ago, you can push back. The practical step is to keep a record of every service charge demand and the date it covers. If the gap exceeds 18 months, flag it immediately.

Overlooking non-recoverable cost categories

The standard explicitly lists costs that must not be recovered through the service charge. These include landlord investment costs, void property costs for empty units, initial capital costs like new plant or equipment, future redevelopment feasibility studies, and costs arising from the landlord’s own negligence. If your service charge includes a line item for “marketing empty units” or “asset management fees”, those are likely non-recoverable. Compare each line item against the standard’s list. If something does not belong, challenge it in writing.

→ Scroll right to see all columns

Source: Stevens & Bolton RICS guide
Non-recoverable costWhat it includesWhy it matters
Landlord investment costsAsset management, rent collection, enhancing reversionary interestThese are the landlord’s own business expenses, not yours
Void property costsRates, insurance, services, marketing for empty unitsYou should not subsidise empty spaces in the building
Initial capital costsOriginal fit-out, new plant, improvement beyond repairCapital improvements benefit the landlord long-term
Negligence-related costsAvoidable overspending, poor maintenance, equipment mismanagementYou should not pay for the landlord’s mistakes

If you are unsure whether a specific charge is recoverable, speaking with a tenant landlord lawyer can give you a clear answer based on your lease and the new standard. I have seen tenants save thousands simply by asking the right question at the right time.

How to protect yourself under the new service charge rules

Writing about topics like this takes real time and research. If you buy something through an Amazon link on this page, I may earn a small commission — at no extra cost to you. It’s one of the things that makes it possible to keep BritWealth free to read. I only link to products that are genuinely relevant to the article.

The new standard gives you tools, but you have to use them. Here is a practical guide to what you should do, step by step.

Review your lease against the RICS standard

Your lease is the legal document that governs your service charge obligations. The RICS standard cannot override the lease, but it sets a professional benchmark. If your lease allows something the standard discourages — like a percentage-based management fee — you can still negotiate a change at renewal. Start by reading the service charge clause carefully. Look for how the management fee is calculated, what costs are recoverable, and whether there is a dispute resolution process. If the lease is silent on the standard, that is a gap you can fill during negotiations. For a broader view of what to look for in a lease, essential tips for your commercial showroom lease cover many of the same principles.

Request the budget and apportionment matrix on time

Under the standard, the budget must arrive at least one month before the service charge year starts. Mark that date in your calendar. If the budget does not arrive, email the landlord or managing agent requesting it. If it arrives late, ask for a written explanation. The apportionment matrix should be part of both the budget and the year-end reconciliation. Without it, you cannot verify your share. If the landlord refuses to provide it, that is a red flag. A Wi-Fi water leak detector might seem unrelated, but keeping a digital record of all your service charge correspondence in a safe place is just as important as protecting the physical building.

Scrutinise the year-end accounts within four months

Year-end accounts and reconciliations must be provided within four months of the end of the service charge year. When they arrive, compare the actual spend against the budget. Look for large variances and ask for invoices to support them. Check that the management fee matches the fixed amount agreed at the start of the year. If the accounts are late, the landlord must provide an explanation. If no explanation comes, that is a breach of the standard. Keep a log of every document you receive and the date you received it.

Use alternative dispute resolution before court

The standard encourages landlords and tenants to use Alternative Dispute Resolution (ADR) before going to court. If a dispute arises — say, over a specific cost you believe is non-recoverable — your first step should be a formal letter to the landlord outlining your position and referencing the relevant part of the standard. If that does not resolve it, suggest mediation or arbitration. ADR is faster and cheaper than tribunal. Only if that fails should you consider legal action. For a detailed look at how service charge funds should be held and managed, understanding landlord service charge reserve fund rules is worth reading alongside this guide.

Watch for emerging ESG costs

The standard introduces a specific rule on Environmental, Social, and Governance (ESG) expenditure. Landlords can only include ESG costs in the service charge where they constitute a genuine service to tenants. All other ESG initiatives must be funded by the landlord. If your service charge includes a line item for “sustainability reporting” or “carbon offsetting”, ask whether it is a genuine service you receive. If it is a general landlord policy, it should not be on your bill. This is a new area, and I expect disputes to rise as more landlords try to pass on green costs.

  • 1
    Check your lease
    Read the service charge clause. Note how the management fee is calculated and what costs are recoverable. Compare against the RICS standard.

  • 2
    Mark the budget deadline
    The budget must arrive at least one month before the service charge year starts. If it is late, request an explanation in writing.

  • 3
    Request the apportionment matrix
    Ask for the breakdown of how costs are shared between occupiers. Without it, you cannot verify your share.

  • 4
    Review year-end accounts within four months
    Compare actual spend against budget. Check the management fee is fixed. Ask for invoices on large variances.

  • 5
    Use ADR before court
    If a dispute arises, suggest mediation or arbitration first. It is faster and cheaper than legal action.

Frequently asked questions about commercial service charges

Can my landlord charge a management fee based on a percentage of total spend?
No, under the 2025 RICS standard, management fees must be fixed at the start of the service charge year. A percentage-based fee is no longer compliant. If your lease still allows it, you can negotiate a change at renewal.
What happens if my landlord does not provide the budget on time?
The standard requires the budget at least one month before the service charge year starts. If it is late, the landlord must provide an explanation. A pattern of late budgets may indicate poor management and could be grounds for a dispute.
Can I be charged for empty units in the building?
No. Void property costs — including rates, insurance, services, and marketing for empty units — are explicitly listed as non-recoverable under the new standard. If you see these on your bill, challenge them.
What should I do if I think a charge is unreasonable?
First, request the supporting invoices and contracts in writing. The landlord must provide access to these documents. If the charge still seems unreasonable, suggest Alternative Dispute Resolution. A tenant landlord lawyer can advise on whether the charge is recoverable under your lease and the standard.
Does the RICS standard apply to my lease if it was signed before 2025?
The standard applies to RICS members and regulated firms managing the property, regardless of when the lease was signed. It cannot override the lease terms, but it sets a professional benchmark that landlords and agents are expected to follow.
Can I be charged for the landlord’s sustainability initiatives?
Only if the ESG expenditure constitutes a genuine service to you. General sustainability policies or carbon offsetting that benefit the landlord’s portfolio must be funded by the landlord, not passed through the service charge.

Sources and Further Reading

Green leases: are sustainable commercial spaces worth the premium? — Explores how sustainability clauses interact with service charge provisions and whether the premium is justified.

Top maintenance tips for renting a commercial space in the UK — Practical advice on keeping your rented space in good condition and avoiding disputes over repair costs.

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.

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Sam Willy

I’m Sam Willy, one of the bright minds behind BritWealth.com, where I share insights, stories, and fun ideas about a wide range of topics—finance included, but not limited to it! My journey into the world of writing began with a simple hobby: sharing the things that fascinated me. From quirky facts to deeper dives into personal development, I’ve always been curious about the world around me and love passing that knowledge on.
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