What is a service charge?
A service charge is the money you pay towards the cost of running and maintaining the parts of a building you share with other flats — the roof, the structure, the entrance hall, the lifts, the grounds, the insurance, and the management of all of it. What you pay, and what it can be spent on, is set by your lease and limited by statute.
This page explains both: what your lease decides, and what the law decides regardless of what your lease says.
Your lease sets the scope. The law sets the limits.
The lease is the starting point. It defines which parts of the building are communal, which costs can be recovered, how the total is divided between flats, and when payments fall due. Two flats in the same street can have quite different service charge regimes because they have different leases.
But the lease is not the last word. Sections 18 to 30 of the Landlord and Tenant Act 1985 apply to almost every residential long lease in England and Wales, and they cannot be contracted out of. Where the lease and the Act conflict, the Act wins.
The reasonableness test
This is the provision that matters most, and it is shorter than people expect. Under section 19 of the 1985 Act, service charge costs count only:
to the extent that they are reasonably incurred, and
only if the services or works are of a reasonable standard.
Both tests have to be met. A cost that was reasonable to incur but done badly fails the second. A well-executed job at an unreasonable price fails the first.
Section 19(2) adds a third protection for advance payments: where you are asked to pay before the money is spent, no greater amount than is reasonable is payable, and the balance is adjusted afterwards.
Note what section 19 does not say. It does not say the landlord must choose the cheapest quote. Reasonableness is not the same as lowest price — a tribunal will look at whether the decision was one a reasonable landlord could have made.
The 18-month rule
One of the most useful provisions for leaseholders, and one of the least known.
Under section 20B of the 1985 Act, if costs were incurred more than 18 months before the demand for payment is served, you are not liable for them.
There is one exception, in section 20B(2): the time limit does not apply if, within those 18 months, you were notified in writing that the costs had been incurred and that you would later be asked to contribute to them.
In practice this means a well-run building issues a written notice as soon as a large cost lands, even before the figures are final. A building where the accounts run two years late may have lost the right to recover some of what it spent.
What has to accompany a demand
A demand for a service charge is not simply an invoice. Three separate provisions govern what has to appear on it.
Summary of rights and obligations. Under section 21B of the 1985 Act, every service charge demand must be accompanied by a prescribed summary of the tenant’s rights and obligations. If it is not, you may withhold payment — and while you withhold, any clause in the lease imposing interest or penalties for late payment has no effect.
The landlord’s name and address. Under section 47 of the Landlord and Tenant Act 1987, a demand must state the landlord’s name and address.
An address for service. Under section 48 of the 1987 Act, the landlord must give you an address in England and Wales at which notices can be served. Until they do, rent, service charges and administration charges are treated as not being due. This is not a technicality — it suspends the debt.
What you are entitled to see
Under section 21 you can request a written summary of the relevant costs making up the service charge. Under section 22, once you have that summary, you can require reasonable facilities to inspect the invoices and receipts behind it, and to take copies. Inspection itself must be free; the landlord may charge a reasonable amount for copies.
If your building has a recognised tenants’ association, section 30B gives it the right to be consulted about the appointment of a managing agent — including being told the proposed agent’s name and the obligations they will discharge, with at least a month to respond, and a fresh notice at least every five years.
Reserve funds
Many leases allow the landlord to collect a reserve — money set aside now for large future works such as roofs, lifts and external redecoration. Where a lease permits it, a reserve is usually in leaseholders’ interests: it spreads the cost of a £90,000 roof over years rather than landing it in one demand.
Reserve funds must be held in trust under section 42 of the Landlord and Tenant Act 1987. They belong to the leaseholders collectively, not to the landlord or the agent, and they do not transfer with the freehold.
Challenging a service charge
You do not have to pay first and argue later. Under section 27A of the 1985 Act, either party can apply to the First-tier Tribunal (Property Chamber) for a determination of whether a service charge is payable — before or after it has been paid, and whether or not it has been demanded.
The Tribunal can decide the amount, the person liable, the date payable and the manner of payment. There is no fee-shifting as a rule: each side generally bears its own costs, which makes it a genuinely accessible forum.
Before applying, ask for the section 21 summary and inspect the invoices. Most disputes we see are about information, not money, and they end when someone explains the figures.
The standard the sector is held to
The RICS Service Charge Residential Management Code, now in its fourth edition (published 17 March 2026), is approved by the Secretary of State under section 87 of the Leasehold Reform, Housing and Urban Development Act 1993. That approval matters: a tribunal may take a failure to follow the Code into account.
The fourth edition strengthens the expectations on budgeting, accounting, complaints handling, procurement and consultation, and folds in Building Safety Act 2022 duties.
Temphis is regulated by RICS and works to that Code.
Ask us about your building
If you are a leaseholder or resident director and something in your service charge does not add up, ask us. We will tell you what the lease and the Act say, whether or not you are a client.