A service charge demand arrives once a year as a single figure with almost nothing behind it. You have more right to question it than most leaseholders realise and the reform everyone is waiting for is further off than the headlines suggest.
The annual service charge demand is one of the strangest documents in British home ownership. It asks for a large sum of money, it arrives with very little explanation and almost nobody who receives one feels able to argue with it.
Part of that is the language. Part of it is that leasehold is genuinely complicated. And part of it is that most leaseholders have no idea how much they are actually entitled to ask for.
You can ask for a great deal. This is what the money is for, what your rights are and where the reform everyone keeps mentioning has actually got to.
The short version
- A service charge pays for the building and the shared parts, not for anything inside your own flat
- Ground rent is a separate payment that buys you nothing, though most new leases since June 2022 have it set at a peppercorn
- A healthy reserve fund is the difference between a planned roof and a surprise bill for thousands
- If your share of one set of works exceeds £250 the landlord must consult you first, or they cannot recover more than that
- You have a legal right to a summary of the costs and to inspect the receipts behind them
- Most of the Leasehold and Freehold Reform Act 2024 that deals with money is still not in force
What the service charge is for
The lease sets out what the landlord has to do and what you have to contribute towards it. Broadly the charge covers:
- Day to day running: cleaning the common parts, lighting them, lift maintenance, gardening, door entry systems, refuse
- Repairs and maintenance to the structure, roof, gutters, external walls and shared pipework
- Buildings insurance for the whole block, which is why leaseholders normally need contents cover only
- The reserve fund, if the lease provides for one
- The management fee, which is what the managing agent charges to run all of it
Your share is fixed by the lease, often by floor area or simply by dividing equally. It is not negotiable job by job.
What it does not cover is anything inside your own four walls. Your boiler, your windows in many leases, your kitchen and your own plumbing are yours. Where the boundary sits is defined in the lease and it is worth reading that section properly before you assume.
Ground rent is a different thing entirely
Service charge buys you services. Ground rent buys you nothing at all: it is a payment to the freeholder simply for the land the building sits on.
Two things worth knowing.
For most new residential leases granted since 30 June 2022, ground rent is a peppercorn, which means legally nothing is payable. That came in with the Leasehold Reform (Ground Rent) Act 2022. It does not apply retrospectively, so an older lease keeps whatever ground rent it was written with.
Escalating ground rents are the ones that cause damage. A lease with a rent that doubles every ten or fifteen years reaches absurd numbers within a normal lifetime. It can make a flat difficult to mortgage and therefore difficult to sell. If you are buying, look at the ground rent review clause specifically rather than the current figure, because the current figure is not the problem.
A cap on existing ground rents has been consulted on and talked about for years. It is not law. Do not buy a flat on the basis that it is about to be.
The reserve fund and why an empty one is bad news
A reserve fund, sometimes called a sinking fund, is money collected each year and set aside for large, predictable jobs: the roof, the lift, redecorating the common parts, the windows.
Buyers instinctively prefer a block with a low service charge. That instinct is often exactly wrong.
A block with a low charge and no reserve has not avoided the cost of a new roof. It has postponed collecting for it. When the roof needs doing the whole amount arrives at once, split between however many flats there are. Bills of several thousand pounds per flat are entirely routine. The person who owns the flat when the bill lands is the one who pays it, not the person who owned it while the roof was wearing out.
So when you are looking at a flat, ask two questions rather than one. What is the annual charge and what is in the reserve fund. A slightly higher charge with a well funded reserve and a maintenance plan is a better position than a cheap one with nothing behind it.
What you are entitled to see
This is the part most leaseholders do not use.
A written summary of the costs. You can require the landlord to supply a summary of the service charge costs for the last accounting period, certified by an accountant where there is more than a handful of flats.
The receipts. Having had the summary, you can require facilities to inspect the invoices and receipts behind it. Not a description of them. The documents.
The 18 month rule. Costs generally cannot be recovered from you if they were incurred more than 18 months before they were demanded, unless you were notified in writing within that period that they had been incurred and would be charged for. A bill that appears out of nowhere for work done three years ago is worth questioning on exactly this ground.
Reasonableness. Service charges are only payable to the extent that they are reasonably incurred and the work is of a reasonable standard. That is a legal test rather than a matter of opinion. The First-tier Tribunal (Property Chamber) exists to decide it. Applying is designed to be possible without a solicitor.
Start politely and in writing. Ask for the breakdown, then the summary, then the receipts. Most disputes end at the first or second step, usually because somebody has made an ordinary mistake.
Where leasehold reform has actually got to
This is worth being precise about, because the headlines have been running well ahead of the law for two years.
The Leasehold and Freehold Reform Act 2024 passed. Parts of it are in force. The parts that deal with money are, as things stand, not.
In force: the requirement to have owned your flat for two years before you can extend the lease or buy the freehold was abolished in January 2025, so you can now start on the day you complete. Changes to the right to manage came into force in March 2025, including the rule that lets leaseholders claim it in mixed use buildings where the non-residential part is up to 50% of the floor area and a change to who bears the costs of a claim.
Not in force: the abolition of marriage value, the move to 990 year lease extensions and the cap on ground rents. That means marriage value is still payable on extensions of leases under 80 years and the valuation rules are the old ones.
The practical consequence is the important bit. If your lease is heading towards 80 years remaining, waiting for the reform is a gamble against a clock, because dropping below 80 years is what makes an extension markedly more expensive under the current rules. Take advice on your own lease rather than waiting for a change whose timetable is still measured in years.
If you think a charge is wrong
Work through it in order and keep everything.
Ask the managing agent for the breakdown in writing. Be specific about which line you are querying. A surprising proportion of queries end here, because service charge accounting involves apportionments that are easy to get wrong.
If that does not resolve it, exercise the right to a summary of costs, then to inspect the receipts.
If it still does not, the First-tier Tribunal can determine whether the charge is payable and reasonable.
Throughout, keep every demand, every statement of account, every section 20 notice and every reply. A dispute about a charge from three years ago is decided on paperwork. The leaseholder who kept theirs is in a completely different position from the one who did not.
Keep the lease and the demands together
homehogs holds the lease, the service charge demands and the notices against the property itself, so the year you need to prove what was charged is not the year you find out the emails have gone.
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