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Last edited 01 Nov 2020
Service charges may covers costs such as:
- General maintenance and repairs.
- Building insurance.
- Cleaning of common areas.
- Central heating.
- Caretaking and porterage.
- Garden maintenance.
- Management fees.
- The costs that can be charged.
- The proportion payable by the leaseholder.
- The service charge payment period.
- Whether payment is made in advance.
- The method of calculation.
- The value of chargeable works above which the leaseholder must be consulted.
Service charges can be fixed, but increasingly they are calculated based on actual or estimated costs which can vary from year to year. Payment may be in advance, with a ‘sinking fund’ to even-out irregular costs. Such a fund must be in an account held in a trust. At the end of the year an additional payment or credit may be made to balance the charge. Where chares are in arrears, there may be an interest payment.
Service charges are a common cause of dispute between leaseholders and landlords. The Landlord and Tenant Act 1985 sets out the rules for service charges, defining what is considered a service charge and setting out requirements for reasonableness and for prior consultation of leaseholders.
Service charges are not payable until a demand has been made in writing which includes the landlord’s name and address. The landlord must issue demands within 18 months of incurring the cost. Leaseholders have a statutory right to seek a summary of the service charge account.
NB: Leaseholders of flats were given the Right to Manage by The Commonhold and Leasehold Reform Act 2002. This gives leaseholders the right to force the transfer of a landlord's management to a ‘right to manage company’ set up by the leasholders. The right was introduced to empower leaseholders, who generally hold the majority of value in the property.
 Find out more
 Related articles on Designing Buildings Wiki
- Break clauses in leases.
- Correct service charge procedures.
- Ground rent.
- Lease Negotiations - Tenants Checklist.
- Licence to alter.
- Peppercorn rent.
- Rent-free period.
- Rent review.
- Schedule of dilapidations.
- Scott schedule.
- Service charge and 18 month rule.
- Vacant possession.
 External references
- The Leasehold Advisory Service. Service charges and other charges.
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