Navigating Service Charge Transparency: What Leaseholders Should Expect
“Transparency” is the word every managing agent uses and very few define. It is worth being precise, because most of what a leaseholder is entitled to is not a courtesy that a good agent extends. It is a statutory right, and several of those rights come with a consequence if the landlord or agent gets it wrong.
Here is what the law actually gives you, and what a well-run block should look like against it.
The demand itself has to carry certain things
A service charge demand is not just an invoice. Three provisions govern what has to be on it, and each has teeth.
Section 21B of the Landlord and Tenant Act 1985 requires a demand to be accompanied by a summary of the tenant’s rights and obligations in the prescribed form. If it is not, the leaseholder may withhold payment, and the usual consequences of late payment do not bite while it is withheld.
Section 47 of the Landlord and Tenant Act 1987 requires the demand to state the landlord’s name and address.
Section 48 of the same Act requires the landlord to give an address in England or Wales at which notices may be served. Until that is done, service charges are treated as not being due. This one catches more freeholders than people expect, particularly where a building has changed hands.
None of this makes the money go away. It changes when it becomes payable, which in a dispute is often the point that matters.
You can ask for the figures, and then ask to see behind them
Two rights sit together and are usually used in sequence.
Section 21 lets a leaseholder, or the secretary of a recognised tenants’ association, make a written request for a summary of the relevant costs. Section 22 then gives a right to inspect the accounts, receipts and other documents supporting that summary, and to take copies, with the facilities for inspection provided free of charge.
The practical point is that a summary on its own settles very little. If a figure looks wrong, the invoices behind it are what tells you whether it is.
The 18-month rule
Section 20B is the provision most likely to save a leaseholder money and most likely to be overlooked. If a cost was incurred more than 18 months before it is demanded, it is generally not recoverable — unless the leaseholder was notified in writing within those 18 months that the cost had been incurred and would be charged.
It is the rule that catches agents who let a year’s accounts drift, discover an unbilled contractor invoice, and try to pick it up two years later. Well-run blocks do not need it, because the accounts close on time.
Consultation before the money is spent
Section 20 consultation is required where any single leaseholder’s share of qualifying works would exceed £250, or £100 in an accounting period under a qualifying long-term agreement. Those thresholds were set in 2003 and have never been uprated, so in practice almost any meaningful work crosses them.
Get the consultation wrong and recovery is capped at those figures unless the tribunal grants dispensation. Our guide to section 20 consultation sets out the notice stages and the timings.
Whose money is it?
This is the part leaseholders most often assume and most rarely check. Under section 42 of the Landlord and Tenant Act 1987, service charge contributions are held on statutory trust for the contributing leaseholders. It is not the landlord’s money and it is not the agent’s money. It is the building’s.
What that should look like in practice: a designated client account for the building, separate from the agent’s own funds and from every other block they manage; reserves identifiable as reserves; and membership of a client money protection scheme. At Temphis, client money is held in ring-fenced client accounts with NatWest, and clients can see budget against actual, reserve balances and arrears through the Blockman portal rather than waiting for a year-end pack.
If you cannot get a straight answer to “which account is our money in, and can I see the balance”, that is the answer.
If you think a charge is unreasonable
The route is an application to the First-tier Tribunal (Property Chamber) under section 27A for a determination of whether a service charge is payable and, if so, how much. Two features of that section are worth knowing before anyone tells you otherwise:
Section 27A(5): having paid a charge is not an admission that it was payable. Paying under protest does not cost you the argument.
Section 27A(6): an agreement in the lease purporting to oust the tribunal’s jurisdiction is void. You cannot be contracted out of this.
There is also section 20C, which lets the tribunal order that the landlord’s costs of the proceedings are not treated as relevant costs in a future service charge, and paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002, in force since 6 April 2017, which does the equivalent job for administration charges. Without those, winning can still leave you paying for the other side’s lawyers through next year’s budget. Our guide to challenging a service charge covers the grounds and the evidence.
What is coming, and what is not here yet
The Leasehold and Freehold Reform Act 2024 contains a much stronger transparency regime: a standardised service charge demand form, a mandatory annual report, and a tightened right to obtain information. Those provisions are not in force. They depend on regulations that have not yet been made, and a written ministerial statement in July 2026 promised a first tranche of statutory instruments later in the year.
It is worth saying plainly, because a good deal of published guidance describes that regime as though it already applies. It does not. The rights set out above are the ones you have today.
Alongside the legislation, the RICS Service Charge Residential Management Code, 4th edition, took effect on 17 March 2026 and sets the professional standard an RICS-regulated firm is measured against.
The short version
Transparency is not a newsletter and a friendly tone. It is: demands that carry what the law requires, accounts that close on time, an account you can name and a balance you can see, consultation before the money is spent rather than after, and a straight answer when you ask to see the invoice.
If your building is not getting that, our page on transferring your block sets out what a proper handover looks like, and how to choose a managing agent covers the questions to ask before you appoint anyone. Or just get in touch.