The Vital Importance of Transparency in Service Charge Accounting

Most disputes about service charges are not really about the amount. They are about not being able to see how the amount was arrived at. This is a guide to what leaseholders in England and Wales can actually require a landlord or managing agent to produce today, what the deadlines are, and what changes when the Leasehold and Freehold Reform Act 2024 provisions come into force.

What you can require today

These rights sit mainly in the Landlord and Tenant Act 1985 and apply whatever your lease says. A lease cannot take them away.

A written summary of costs (s.21). A leaseholder, or the secretary of a recognised tenants association, can request a written summary of the relevant costs behind the service charge. Where the service charge covers more than four dwellings, the summary has to be certified by a qualified accountant.

Inspection of the receipts (s.22). Within six months of getting that summary you can require facilities to inspect the accounts, receipts and other documents behind it, and to take copies. This is the right that matters most in practice, because it moves the argument from assertion to evidence.

The summary of rights and obligations (s.21B). Every service charge demand must be accompanied by a summary of the leaseholder’s rights and obligations in the prescribed form. If it is not, you may withhold payment of that demand until it is provided, and no late payment consequences arise in the meantime.

Reasonableness (s.19). Service charges are only recoverable to the extent that the costs were reasonably incurred and, where they relate to works, the works were of a reasonable standard.

A tribunal determination (s.27A). Any leaseholder can apply to the First-tier Tribunal for a determination of whether a service charge is payable, by whom, to whom, how much and when. You do not need permission and you do not need to have paid first.

Your money is held on trust (s.42, Landlord and Tenant Act 1987). Service charge contributions are held on statutory trust for the leaseholders who paid them. They are not the landlord’s working capital and not the agent’s.

The 18-month rule, and why it is the one to know

Under section 20B, if a cost was incurred more than 18 months before it is demanded, it is not recoverable from the leaseholder at all — unless, within those 18 months, the leaseholder was notified in writing that the cost had been incurred and that they would subsequently be required to contribute to it.

This catches badly run buildings regularly. Works are done, invoices sit unbilled while an agent changes or accounts fall behind, and by the time a demand goes out the money cannot lawfully be recovered. If you are a director being asked to approve a late demand, check the dates before you approve it.

Section 20 consultation

Separately, consultation is required before qualifying works where any one leaseholder would contribute more than 250 pounds, or before a qualifying long-term agreement where any one leaseholder would contribute more than 100 pounds a year. Failing to consult caps recovery at those figures regardless of the actual cost, unless the tribunal grants dispensation.

What changes in 2027

Position as at September 2026. The Leasehold and Freehold Reform Act 2024 contains a package of service charge transparency measures that are not yet in force. The Government consulted during 2025, published the consultation outcome in July 2026, and has said regulations are expected later in 2026 with leaseholders seeing changes during 2027.

What is coming: a standardised service charge demand form, so demands are comparable between buildings and between years; an annual report to leaseholders covering the condition of the building and planned major works; service charge accounts in a standard format signed off by a qualified professional; and wider rights to request information, going back up to six years.

None of that is enforceable yet. Until it is, the 1985 Act rights above are what you have, and they are stronger than most leaseholders realise.

What good looks like now

A well-run building should not need any of these rights to be exercised. In practice that means a budget issued before the year it covers with the assumptions visible, demands that arrive on the lease timetable with the s.21B summary attached, year-end accounts that reconcile to the budget with variances explained, reserve fund movements shown separately, and service charge money in a ring-fenced client account.

At Temphis we run budgets, expenditure and works through the Blockman and MyBlockman portals so leaseholders can see the position without having to ask for it, and we publish our fee schedule rather than quoting differently building by building.

Frequently asked questions

Can I refuse to pay if I have not been given a breakdown?

Not simply for want of a breakdown. But you may withhold payment where a demand did not come with the prescribed summary of rights and obligations under s.21B, and you can challenge reasonableness at the tribunal under s.27A whether or not you have paid.

How far back can I ask for information?

The s.21 summary covers the last accounting period, or the twelve months up to the request if accounts are not made up. The wider six-year information right is part of the 2024 Act package and is not in force yet.

What if the managing agent simply ignores the request?

Failure to comply with a s.21 or s.22 request without reasonable excuse is a summary offence. In practice, a tribunal application under s.27A tends to produce the documents faster.

Does the 18-month rule apply if we were told about the cost?

No. Written notification within the 18 months that the cost had been incurred and would be recharged preserves recoverability. The notification has to be specific enough to identify the cost.

Who audits the service charge accounts?

Where the charge covers more than four dwellings, a s.21 summary must be certified by a qualified accountant. Standardised, professionally certified accounts for all buildings are part of the reforms expected in 2027.

We are RTM directors. Do these obligations fall on us?

Yes. An RTM company steps into the landlord’s management obligations, which includes the consultation and accounting duties. See Right to Manage.

If your building is not getting this

Temphis manages around 1,000 units across 50 residential buildings and is regulated by RICS, a member of The Property Institute and registered with The Property Ombudsman. If your accounts do not reconcile or your questions are not being answered, changing managing agent takes four to six weeks. Ask us for a free review.