Service charges explained: what you pay and how to challenge it

Last reviewed 16 June 2026 · Written by Max van der Heiden

A service charge is your share of the cost of running, maintaining and insuring the building your flat is in. You pay it to the freeholder or a managing agent. By law the charges have to be reasonable, you are entitled to see how the money is spent, and you can challenge a charge you believe is unfair at a tribunal.

Service charges cause more leasehold arguments than anything else, usually because the bill is bigger than expected and the breakdown is hard to follow. This guide explains what you are paying for, what protections you have, and what to do when a charge does not look right.

What is a service charge?

A service charge is the money you pay towards the cost of looking after the parts of the building you share with other leaseholders. Your individual flat is your responsibility, but the roof, the structure, the hallways, the lift and the gardens are shared, and someone has to pay to maintain and insure them. The service charge is how that cost is divided between the flats.

What you can be charged for, and how your share is worked out, is set by your lease. The lease is the contract, so it is always the starting point. If your lease does not allow a particular cost to be recovered through the service charge, the freeholder cannot simply add it. This is why reading your lease, dull as it sounds, is worth the effort. For the bigger picture of how leasehold works, see our guide on leasehold explained.

What can a service charge cover?

It depends on your lease, but service charges commonly cover buildings insurance, cleaning and lighting of the communal areas, gardening, maintaining lifts and entry systems, repairs to the structure and roof, larger projects such as redecorating the exterior or replacing a roof, the cost of a managing agent, and contributions to a reserve fund for future works. Some charges are predictable and roughly the same each year. Others, particularly major works, can arrive as a single large bill that runs into thousands of pounds per flat.

Do service charges have to be reasonable?

Yes. Under the Landlord and Tenant Act 1985, service charges are only payable to the extent that they are reasonably incurred, and where they pay for works, those works must be carried out to a reasonable standard. This is one of the most important protections you have, because it means a freeholder cannot simply charge whatever they like and expect you to pay it.

“Reasonable” does not mean “the cheapest possible”. A freeholder is allowed to choose a good contractor over a bargain one. But the cost has to be justifiable, and if it is not, you can challenge it. The practical difficulty is usually information, which is why your right to see the figures, covered below, matters so much.

What is a Section 20 consultation?

Before a freeholder carries out expensive works, the law forces them to consult you first. This is called a Section 20 consultation, after the relevant section of the 1985 Act. It applies in two situations. The first is qualifying works, where the cost to any single leaseholder would be more than £250. The second is a qualifying long-term agreement, meaning a contract lasting more than 12 months, such as a cleaning or lift maintenance contract, where the cost to any leaseholder would be more than £100 a year.

The consultation runs in stages. The freeholder serves a notice describing the proposed work and inviting your comments, and you can nominate a contractor to be asked for an estimate. They then obtain estimates, share them with you, and invite comments again before awarding the contract. If they pick a contractor that is not the cheapest or your nominee, they have to explain why.

Here is the part that gives the process teeth. If the freeholder fails to consult properly, the amount they can recover from each leaseholder is capped at £250 for the works, no matter what the real cost was. For a major project that can leave the freeholder unable to recover a very large shortfall, which is exactly why the consultation is taken seriously. The freeholder can ask the tribunal to waive the requirement, called dispensation, but generally only where there was genuine urgency such as an emergency repair. We cover the detail in our guide to the Section 20 consultation process.

What is a reserve or sinking fund?

A reserve fund, sometimes called a sinking fund, is money collected from leaseholders over time and set aside for big future costs, such as a new roof or major redecoration. The idea is sensible. Spreading the cost of a large job over many years is far easier to bear than a sudden five-figure bill. Whether your building can hold a reserve fund, and how it works, depends on your lease. Money held in a reserve fund is generally held on trust, which means it has to be kept for the purpose it was collected for and not simply absorbed by the freeholder.

What can you see about how the money is spent?

You have a legal right to understand what you are being charged for. Under the current rules you can ask the freeholder for a written summary of the costs that make up the service charge, and once you have that summary you can ask to inspect the accounts, receipts and other documents behind it. A demand for payment also has to include certain information to be valid, including a summary of your rights and the landlord’s name and address. If those details are missing, you may not have to pay until they are provided.

There is also a powerful time limit that many leaseholders have never heard of. If a cost was incurred more than 18 months before it is demanded, and you were not notified within that 18 months that you would have to pay it, the freeholder generally cannot recover it at all. If a bill suddenly appears for work done a couple of years ago, this rule is worth checking.

Can you challenge or withhold a service charge?

You can challenge a service charge you believe is unreasonable by applying to the First-tier Tribunal (Property Chamber). The tribunal can decide whether a charge is payable and whether it is reasonable, and it deals with these cases regularly, so you are not breaking new ground by going to it. You do not need a solicitor to apply, although for a large or complex dispute many people choose to get advice.

Withholding payment is more delicate, and you should be careful. Simply refusing to pay can put you in breach of your lease, which in the worst case a freeholder could try to use against you. The safer route is usually to pay under protest or to apply to the tribunal to have the charge determined, rather than to stop paying and hope. If you are considering this, get advice first. Our guide on how to challenge a service charge walks through the options in detail.

What is changing for service charges?

The rules are moving in leaseholders’ favour, though much of the change is not in force yet, so be careful about what you read online. The Leasehold and Freehold Reform Act 2024 contains a package of transparency measures, including a standardised service charge demand form so every bill looks the same and is easier to follow, a yearly report setting out what has been spent, stronger rights to information, and an end to freeholders pocketing hidden insurance commissions. These are designed to make charges easier to understand and to challenge.

As things stand, these measures have been passed but not yet switched on. They need further regulations before they take effect, and the government has been consulting on the detail. There is also a proposal to raise the Section 20 thresholds, which have not changed since 2003, from £250 to £600 for works and from £100 to £300 a year for long-term contracts, but that too is not yet law. Our leasehold reform tracker keeps the current position up to date.

Frequently asked questions

Can my service charge go up every year?

It can, because the cost of insurance, maintenance and works changes over time. But any increase still has to be reasonable, and you are entitled to see what is driving it. A rise you cannot get a clear explanation for is worth questioning.

What happens if I do not pay my service charge?

Unpaid service charges are a debt, and a freeholder can take steps to recover them, ultimately including action against your lease in serious cases. There are protections that stop this for small or recent debts, and a charge has to be properly due and, if disputed, determined as payable first. Because the stakes can be high, get advice rather than simply withholding payment.

Do I have to pay for works I do not benefit from?

Generally you pay the share set by your lease for the building’s shared costs, even if a particular item is not one you personally use. Whether a specific cost is recoverable from you at all comes back to what your lease actually says, so the lease is always the place to check.

Who decides how my share is worked out?

Your lease does. It sets out the proportion of the total each flat pays, which might be an equal share, a percentage, or based on floor area. The freeholder cannot change your share at will.

What to do next

If a service charge is worrying you, start by digging out your lease and checking what it allows the freeholder to charge for and how your share is calculated. Then ask for the breakdown and, if you need to, the summary of costs and the documents behind it. Check the dates, because the 18-month rule can rule out older costs. If the charge still looks unreasonable once you understand it, read how to challenge a service charge and consider an application to the tribunal. And if the underlying problem is poor or expensive management rather than one bad bill, it may be worth looking at taking over the building through Right to Manage.

This guide provides general information about leasehold service charges in England and Wales. It is not legal advice, and every lease is different. For advice on your own situation, consult a qualified solicitor or a specialist such as the Leasehold Advisory Service (LEASE). Sources: Landlord and Tenant Act 1985; Service Charges (Consultation Requirements) (England) Regulations 2003; Commonhold and Leasehold Reform Act 2002; Leasehold and Freehold Reform Act 2024; GOV.UK leasehold guidance. Last reviewed [date]; reviewed whenever the law changes.