Under s.18 Landlord and Tenant Act 1985, a service charge is an amount payable by a leaseholder as part of or in addition to rent, which varies or may vary according to the relevant costs. Service charges are only payable to the extent they are reasonably incurred and the services or works carried out are of a reasonable standard.
Service charge disputes are one of the most common sources of conflict between leaseholders and managing agents in England and Wales. The Leasehold Reform Act 2024 has strengthened leaseholder rights significantly — but many leaseholders remain unaware of what constitutes an illegal or unreasonable charge, or how to challenge one.
This guide explains the legal framework, what makes a service charge unlawful, how to challenge charges at the First-tier Tribunal (Property Chamber), and how AI tools are helping leaseholders understand their lease before disputes escalate.
What Makes a Service Charge Illegal or Unreasonable?
- Section 20 breach — Major works costing more than £250 per leaseholder require statutory consultation. Without it, recovery is capped at £250 per leaseholder regardless of actual cost.
- Administration charges without authorisation — Charges for consents, notices, or breaches must be expressly authorised by the lease. If not, they cannot be demanded.
- Reserve fund misuse — Sinking fund contributions collected for future major works cannot be applied to routine maintenance without lease authorisation.
- Late demands — Under s.20B LTA 1985, service charges are not payable if demanded more than 18 months after the cost was incurred, unless the leaseholder was notified within that period.
- Absent summary of rights — A demand for service charges is not payable unless accompanied by a summary of leaseholder rights (prescribed form). A demand missing this summary can be withheld.
How to Challenge a Service Charge
- Request a summary of costs (s.21 LTA 1985) — You have the right to inspect accounts and receipts for the last accounting year. The landlord must comply within one month. Failure is a criminal offence.
- Write a formal dispute letter — Identify the specific charge you dispute, state the legal basis (e.g., s.20 breach, unreasonableness under s.19 LTA 1985), and request a response within 28 days.
- Apply to the First-tier Tribunal (Property Chamber) — The FTT has jurisdiction to determine whether a service charge is payable and, if so, in what amount. Applications can be made online; the FTT fee is £100 (£200 if over £1,000 is in dispute).
- Consider a Residents' Association — A recognised tenants' association has additional rights including the right to receive accounts, nominate contractors for Section 20 consultations, and challenge charges collectively.
- Ground rent on new long leases reduced to a peppercorn (zero)
- Enfranchisement and lease extension made easier and cheaper for qualifying leaseholders
- Building Safety Act 2022 remediation costs cannot be passed to leaseholders for qualifying buildings
- New transparency requirements for service charge demands and accounts