Over the past few years, I’ve watched service charge disputes become one of the most common and stressful issues for leaseholders across the UK. The numbers back that up — the latest TPI Service Charge Index, based on data from over 117,000 homes, shows the average service charge per leaseholder in 2026 is budgeted at £2,880. That’s a significant annual cost, and for many, it’s rising faster than they expected. What I’ve noticed is that the real frustration isn’t always the amount itself — it’s the lack of clarity about what you’re paying for and whether you’re being charged interest on money that should be working for you, not your landlord.
That £2,880 figure is just the average. In the highest-cost buildings, leaseholders are paying up to £8,680 a year. When you’re paying that kind of money, every detail matters — especially whether the interest on your service charge fund is being handled properly. The new rules under the Leasehold and Freehold Reform Act 2024 (LAFRA 2024) and the updated RICS Service Charge Code are the biggest shake-up in decades, and they directly affect how interest on your money is treated. Here’s what you actually need to know.
What Tenant Service Charge Interest Actually Means
The most important thing to understand is that the money you pay into a service charge fund isn’t the landlord’s money — it’s yours, held in trust to cover the costs of maintaining the building. When that money sits in a bank account, it earns interest. Under the old system, that interest sometimes disappeared into the landlord’s pocket. The new rules change that completely.
What this means in practice is that every pound of interest your fund earns should reduce the amount you and your fellow leaseholders need to pay the following year. If you’re in a building with a large reserve fund, that interest can add up to a meaningful sum. I’d always recommend checking your annual statement to see whether interest income is listed as a credit. If it’s not there, that’s a red flag worth pursuing.
Why This Matters More Than Ever
The timing of these changes is critical because service charge costs are rising across the board. The TPI data shows that Building Safety Act compliance costs jumped 53% year-on-year from 2024, and reserve fund contributions rose 26%. When costs are climbing that fast, every bit of interest your fund earns becomes more important — it’s money that can offset those increases rather than lining someone else’s pockets.
Consider a building with 50 leaseholders, each paying £2,880 a year. That’s a total fund of £144,000. If that money earns even 2% interest over the year, that’s nearly £2,900 that should be credited back to the service charge account. Over a decade, that’s almost £30,000 in interest that belongs to the leaseholders, not the landlord. The new rules make that clear, but only if you know to look for it.
What I’ve seen in practice is that many leaseholders simply don’t know this rule exists. They pay their service charge, assume the landlord is handling everything fairly, and never think to ask about interest. That’s exactly why the reforms were needed. The government’s 2025 consultation identified a lack of standardised, readable demand formats and inconsistent annual accounts as two of the four main problems. The new rules fix both, but you still need to know what to look for.
Where People Go Wrong With Service Charge Interest
Even with the new rules in place, I see the same mistakes coming up again and again. Here are the most common ones, and what you can do about them.
Assuming Interest Is Automatically Handled Correctly
The biggest mistake is trusting that every landlord and managing agent is following the rules. The RICS standard is clear — interest must be credited to the service charge account — but not every property is managed by a RICS-regulated firm. If your building is managed by a small agent or a landlord who handles things directly, they may not even know the rules have changed. The fix is simple: check your annual statement. If you don’t see a line for interest income, ask for it in writing. Under LAFRA 2024, you have the right to request supporting documents, and the landlord must respond promptly.
Not Knowing the 18-Month Rule
This is one of the most powerful protections leaseholders have, and it’s widely misunderstood. The 18-month rule means a landlord cannot demand payment for costs incurred more than 18 months before the demand is issued, unless they served a prescribed notice within that window. For example, if a roof repair was done in January 2025, the landlord must demand payment by July 2026. If they wait until September 2026 without serving the notice, you don’t have to pay. I’ve seen cases where landlords try to bundle old costs into a new service charge year, hoping leaseholders won’t notice. Now you know to check the dates.
Overlooking Insurance Commission Disclosures
Under LAFRA 2024, landlords must disclose any commission or payment they receive from building insurance policies. If they fail to do so, they cannot recover the insurance premium through the service charge. This is a big deal because insurance costs have been rising sharply, and some landlords were pocketing commissions on top of passing the full premium to leaseholders. If your service charge demand doesn’t include a clear disclosure of insurance commissions, you may have grounds to challenge it.
| Requirement | What It Means | Deadline |
|---|---|---|
| Standardised service charge demands | Must include landlord/leaseholder names, total amount, period covered, payment deadlines, and rights summary | At start of service charge year |
| Annual accounts (4+ dwellings) | Income/expenditure account, balance sheet, reserve fund details, major works summary | Within 6 months of year-end |
| Interest credited to service charge | Interest on held funds must go back to the service charge account after bank charges and tax | At each reconciliation |
| Insurance commission disclosure | Must disclose any commission received; failure means premium cannot be recovered | With each insurance renewal |
Not Challenging Unreasonable Administration Fees
Administration charges — fees for providing information, granting consents, or handling paperwork — must be reasonable under LAFRA 2024. Some landlords were charging £100 or more just to confirm a leaseholder’s payment history. If you’re asked to pay an admin fee that seems excessive, you can challenge it. The law now requires these fees to follow prescribed limits set by secondary legislation. If your landlord can’t justify the fee, you don’t have to pay it.
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How to Protect Yourself and Your Service Charge Interest
Knowing the rules is one thing. Acting on them is another. Here’s what I’d do if I were a leaseholder right now.
Review Your Annual Statement for Interest Credits
Your first step is to get your hands on the most recent service charge accounts. Under the new rules, landlords of buildings with four or more dwellings must provide a written statement within six months of the year-end. Look for a line item that says “interest income” or “bank interest credited.” If it’s there, check that the amount makes sense given the size of your reserve fund. If it’s not there, write to your managing agent or landlord and ask why. You have the right to request supporting documents, including bank statements showing the interest earned. If they refuse, you can escalate to the First-tier Tribunal (Property Chamber) in England or the Leasehold Valuation Tribunal in Wales.
Check Your Service Charge Demand Format
Under LAFRA 2024, service charge demands must follow a prescribed format. If your demand doesn’t include the landlord’s and leaseholder’s names, the total amount, the period covered, payment deadlines, and a summary of your rights, it may be unenforceable. I’d recommend comparing your latest demand against this checklist. If anything is missing, you can write to the landlord and state that the demand does not comply with the new rules. They’ll need to reissue it correctly before you’re obliged to pay.
Understand the 18-Month Rule for Major Works
If your building has had major works — roof repairs, new lifts, cladding remediation — check when the costs were incurred. The landlord must demand payment within 18 months of the cost being incurred, or serve a prescribed notice within that window. If they miss the deadline, the cost is not recoverable through the service charge. This is particularly relevant for buildings undergoing Building Safety Act compliance work, where costs can be substantial. If you receive a demand for work done more than 18 months ago, ask for proof that the prescribed notice was served. If they can’t provide it, you don’t have to pay.
Dispute Unreasonable Costs Through the Tribunal
One of the most important changes under LAFRA 2024 is that landlords can no longer recover tribunal or court costs through the service charge unless a tribunal specifically orders otherwise. This removes a major barrier to challenging unfair charges. If you believe a service charge cost is unreasonable — whether it’s an inflated management fee, an undisclosed insurance commission, or a charge for work that wasn’t done — you can apply to the First-tier Tribunal. The cost of applying is relatively low, and you no longer risk having to pay the landlord’s legal fees if you lose. If you need guidance on the process, speaking with a tenant landlord lawyer can help clarify your position before you file.
Keep Records of Everything
This might sound obvious, but it’s the single most effective thing you can do. Keep every service charge demand, every annual statement, every email exchange with your managing agent. Under the new rules, you have the right to access historic records going back up to six years. If a dispute arises, having a complete paper trail makes it much easier to prove your case. I’d recommend scanning everything and storing it in a dedicated folder. A small home safe is also useful for keeping physical copies of important documents like your lease and tribunal correspondence.
Can my landlord keep the interest on my service charge fund? ▾
What happens if my landlord doesn’t follow the new service charge rules? ▾
How do I check if my service charge interest is being handled correctly? ▾
What is the 18-month rule for service charges? ▾
Can I dispute a service charge without risking paying the landlord’s legal fees? ▾
The new rules around tenant service charge interest are a genuine step forward for leaseholder rights. The key is knowing what to look for and being willing to ask questions when something doesn’t add up. Start with your annual statement, check for interest credits, and don’t be afraid to challenge anything that seems off. If this was useful, you might also want to read Maximising Value for Money on Landlord Service Charges in the UK.
Sources and Further Reading
Tips for Navigating Tenant Service Charge Exemptions in the UK — A practical guide to understanding when and how service charge exemptions apply, and how to negotiate them effectively.
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, 2026.
