Over the past few years, I’ve watched service charges become one of the most common sources of friction between commercial landlords and tenants in the UK. The numbers back that up — the government’s 2025 consultation identified that a lack of standardised demand formats and inconsistent annual accounts were among the four main problems driving disputes and, in some cases, pushing disagreements all the way to tribunal. If you’re renting commercial space, those charges can easily add 30% or more to your total occupancy costs, yet most tenants sign leases without really understanding what they’re agreeing to pay for.
What I’ve noticed is that the rules have shifted significantly in the tenant’s favour recently, but most business owners don’t know about the changes. The updated RICS Professional Standard for service charges, which took effect on 31 December 2025, sets new benchmarks for transparency, timing, and what can and cannot be charged. Alongside that, the Leasehold and Freehold Reform Act 2024 introduced mandatory formats for demands and strict time limits. If you’re a tenant, these changes give you real leverage — but only if you know they exist. Here’s what you actually need to know.
What Service Charges Actually Cover — And What They Don’t
The first thing to understand is that a service charge isn’t a vague slush fund. It’s a payment you make to cover the cost of maintaining and managing the shared parts of the building you occupy. That typically includes building insurance, cleaning of communal areas, lift maintenance, gardening, roof repairs, and the management fees charged by the managing agent. But here’s the part most people miss: the updated RICS standard explicitly lists costs that cannot be recovered through the service charge. Landlord investment costs, asset management, rent collection, and costs relating to enhancing the landlord’s reversionary interest are all off the table. So are void property costs — rates, insurance, and services attributable to empty units, plus the marketing of those units.
What I’d do if I were signing a new lease today is ask for the apportionment matrix before I signed anything. That single document tells you exactly how the landlord plans to divide costs between tenants, and it’s one of the easiest ways to spot whether you’re being asked to pay more than your fair share. If you’re in a multi-let building, the difference between a fair and an unfair apportionment can run into thousands of pounds a year. For more on how to compare these costs across properties, take a look at this guide to service charge benchmarking.
Why The New Rules Matter For Your Bottom Line
The changes that came into force at the end of 2025 aren’t just administrative tweaks. They fundamentally shift the balance of power between landlord and tenant. Under the updated RICS standard, landlords must issue service charge budgets to tenants at least one month before the start of the service charge year. Year-end accounts and reconciliations must be provided within four months of the end of the service charge year. If there’s any delay, the landlord has to explain why. That might sound basic, but before this standard, many tenants received reconciliations a year or more after the fact, making it nearly impossible to challenge costs while memories were fresh and invoices accessible.
Consider this scenario: you’re a small business renting 2,000 square feet in a suburban office block. Your service charge is £25 per square foot, so you’re paying £50,000 a year on top of your rent. Under the old system, the landlord could send you a reconciliation 14 months after the year ended, with no breakdown of how the total was calculated. You’d have to decide whether to pay up or spend thousands on a dispute. Under the new rules, you get a budget before the year starts, a full reconciliation within four months, and an apportionment matrix showing exactly what each tenant pays. If the numbers don’t add up, you have the information you need to challenge them.
What I’ve seen in practice is that the biggest impact of these changes is on the quality of information tenants receive. Before, many landlords treated service charge accounting as an afterthought. Now, with mandatory formats, prescribed time limits, and the requirement for qualified accountant certification in buildings with four or more properties, the standard of reporting has improved noticeably. If you’re a tenant, that means you can actually hold your landlord accountable. If you’re negotiating a new lease, the updated RICS standard is a vital reference point — it’s not legally binding, but it sets the industry benchmark that any good surveyor or solicitor will use in negotiations. For a broader look at how these costs fit into your overall leasing strategy, this comparison of renting versus buying commercial space is worth reading.
Where Tenants Get Tripped Up
Even with better rules in place, I keep seeing the same mistakes. Here are the ones that cost tenants the most money.
Assuming The Lease Overrides Everything
The updated RICS standard explicitly states that it cannot override the terms of a lease. That means if your lease says you’ll pay for something the standard says shouldn’t be charged, the lease wins. But here’s the nuance: the standard sets the professional benchmark for how service charges should be managed. If your landlord is an RICS member or an RICS-regulated firm, they must comply with the standard unless they have a good reason not to, with clear justification. So while the lease is king, the standard gives you a powerful argument in any negotiation or dispute. If your lease was signed before 31 December 2025, the standard still applies to how the service charge is managed going forward — it’s not retrospective on the lease terms themselves, but it governs professional conduct.
Ignoring The Management Fee Structure
Under the old system, many managing agents charged a percentage of the total service charge as their fee. That created a perverse incentive: the more the service charge cost, the more the agent earned. The updated standard now requires management fees to be fixed at the start of the service charge year. If your current lease still uses a percentage-based fee, you have grounds to challenge it at the next rent review or lease renewal. What I’d do is check your most recent service charge demand. If the management fee is listed as a percentage rather than a fixed amount, flag it with your landlord now — don’t wait for the renewal.
Overlooking Insurance Commission Disclosure
Under LAFRA 2024, landlords must disclose any commission or payment they receive in connection with building insurance policies. If they fail to disclose it, they cannot recover the insurance premium through the service charge. This is a significant change. Insurance premiums have risen sharply in recent years, and the commission on those premiums can be substantial. If your landlord hasn’t disclosed their insurance commission, you may have grounds to withhold that portion of the service charge. For more on how to handle disputes like this, this article on negotiating commercial rent covers similar ground.
Missing The 18-Month Deadline
This is the one that catches most tenants off guard. Under LAFRA 2024, 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 costs from two years ago, it may be unenforceable. But here’s the catch: you need to know the date the cost was incurred, not just the date of the demand. If the landlord’s accounting is unclear, ask for the invoice dates. If they can’t provide them, you have grounds to dispute the charge.
→ Scroll right to see all columns
| Requirement | Old Rules | New Rules (LAFRA 2024 / RICS 2025) |
|---|---|---|
| Service charge demand format | No prescribed format | Mandatory prescribed format with tenant rights summary |
| Budget timing | No requirement | At least 1 month before service charge year starts |
| Year-end accounts | No deadline | Within 4 months of year end |
| Cost recovery time limit | No limit | 18 months from when cost was incurred |
| Management fee basis | Often percentage of total | Must be fixed at start of year |
| Insurance commission disclosure | Not required | Mandatory; non-disclosure means cost cannot be recovered |
How To Protect Yourself — A Practical Guide
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The rules have changed in your favour, but only if you use them. Here’s what I’d do in your position.
Audit Your Current Service Charge Demands
Start with your most recent service charge demand. Does it include the landlord’s and 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, the demand may be unenforceable under LAFRA 2024. If you’re in a building with four or more dwellings, check whether the accounts were certified by a qualified accountant. If they weren’t, that’s another potential breach. If you find issues, raise them in writing with your landlord first. If they don’t resolve them, you may need to escalate to a tenant landlord lawyer who specialises in service charge disputes.
Request The Apportionment Matrix
Under the updated RICS standard, the service charge budget and reconciliation should include an apportionment matrix providing a breakdown of total costs and weighting between occupiers. If your landlord hasn’t provided one, ask for it. The matrix tells you exactly how costs are split — by floor area, by rateable value, or by some other method. If the method seems unfair, you have grounds to challenge it. For example, if you occupy 10% of the building’s floor area but are being asked to pay 15% of the service charge, ask why. The answer might be legitimate — perhaps you use the lift more than other tenants — but it might not be.
Check The Management Fee
Look at the management fee on your service charge demand. Is it a fixed amount, or is it a percentage of the total service charge? If it’s a percentage, the updated RICS standard says it should now be fixed. Raise this with your landlord. If they refuse to change it, you have a strong argument at the next lease renewal or rent review. If you’re negotiating a new lease, insist on a fixed management fee from the start. This is one of those details that seems small but can save you thousands over the term of the lease.
Watch The 18-Month Clock
Keep a record of when each service charge cost was incurred. If you receive a demand for costs older than 18 months, check whether the landlord served a prescribed notice within that window. If they didn’t, the demand is likely unenforceable. This is particularly relevant for major works, which can take months to complete and invoice. If the landlord delays invoicing, the 18-month clock still starts from when the cost was incurred, not when the invoice was issued. If you’re unsure about a specific demand, a property lawyer can review it quickly.
Demand Insurance Commission Disclosure
Ask your landlord in writing for details of any commission or payment they receive in connection with the building’s insurance policy. Under LAFRA 2024, if they fail to disclose it, they cannot recover the insurance premium through the service charge. This is a straightforward request, and if the landlord refuses or ignores it, you have clear grounds to withhold that portion of the charge. Insurance is often one of the largest components of a service charge, so the commission can be significant.
Frequently Asked Questions
Can I challenge a service charge if my lease says I have to pay it? ▾
What happens if my landlord doesn’t provide the apportionment matrix? ▾
Does the 18-month rule apply to all commercial leases? ▾
Can I withhold service charge if I disagree with the amount? ▾
What counts as a “void property cost” that I shouldn’t have to pay? ▾
Do the new rules apply to leases signed before December 2025? ▾
Sources and Further Reading
Tips for renting an industrial unit in the UK — Practical advice on lease terms, service charges, and what to look for before signing.
Lease transfer tips for commercial space — What happens to service charge obligations when you assign or sublet your lease.
UK real estate sector 2026 and beyond. Charles Russell Speechlys, 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.
