This guide, Service charges explained, provides a complete overview of your leasehold service charges in 2026. However, leasehold law is undergoing significant reform, so keep an eye on these pages for updates.
Service charges explained: What are service charges?
Service charges are payments made by leaseholders to cover the cost of maintaining and managing a building. They are usually set out in your lease and commonly include costs such as:
- repairs and maintenance
- buildings insurance
- cleaning and gardening
- managing agent fees
Service charges are a central part of leasehold ownership and can vary significantly between properties.
For a complete overview of your leasehold property rights, see: Leasehold Property Guide in England and Wales (2026)
What does “reasonable” mean?
By law, a landlord can recover only reasonable service charges. This principle comes from Section 19 of the Landlord and Tenant Act 1985. In simple terms:
- costs must be necessary
- costs must be reasonable in amount
- works must be carried out to a reasonable standard
What can service charges include?
The specific items depend on your lease, but commonly include:
Day-to-day costs
- cleaning of common areas
- lighting and utilities
- minor repairs
Major works
- roof repairs
- structural works
- lift replacement
Insurance
- buildings insurance arranged by the landlord
Management fees
- managing agent costs
- administration charges
The key point is: the lease must allow recovery of the cost. If it does not, the landlord cannot charge for it.
What are sinking funds?
Many leases allow landlords to collect money in advance to build a reserve fund (also known as a sinking fund).
What is a sinking fund for?
It is used to pay for large, infrequent expenses such as:
- major repairs
- redecorating
- replacing lifts or roofs
Why they exist
Sinking funds help:
- spread the cost of major works
- avoid large one-off bills
- ensure all leaseholders contribute fairly over time
Are they refundable?
Usually not. In most cases, contributions are not returned when you sell your flat. However, the lease terms should always be checked carefully.
Can service charges increase?
Yes. There is generally no legal cap on service charges. However:
- they must remain reasonable
- they must comply with the lease
Large increases are often linked to:
- major works
- rising insurance costs
- changes in management
Service charges explained: How to challenge service charges
Leaseholders have the right to challenge service charges if they believe they are unreasonable or not payable.
Common grounds for challenge
- costs are too high
- work was unnecessary
- poor quality work
- charges not permitted by the lease
- failure to follow consultation requirements
Applying to the tribunal
Disputes are usually handled by the First-tier Tribunal (Property Chamber). The tribunal can decide:
- whether a charge is payable
- whether it is reasonable
- who should pay
See also the Government’s guidance on leasehold service charges.
Consultation requirements for major works
If the landlord plans major works, they must usually follow a consultation process under Section 20 of the Landlord and Tenant Act 1985.
Why consultation matters
If the landlord fails to consult properly, the amount they can recover may be limited. This is often a key issue in disputes.
Service charges and management issues
High or unreasonable service charges are often linked to wider management problems. In these situations, leaseholders may consider alternative solutions.
Right to manage (RTM)
Leaseholders can take over management without buying the freehold.
See my helpful guide on Right to Manage (RTM): Take control of your building
Collective enfranchisement
Leaseholders can buy the freehold and take full control.
Discover more in my Collective Enfranchisement Guide
What if your landlord is not managing properly?
If management is poor, leaseholders may:
- challenge service charges
- apply for RTM
- apply to appoint a manager through the tribunal
Find out more about the Appointment of a Manager
Can you refuse to pay service charges?
This is very risky. Even if you dispute a charge:
- non-payment can lead to legal action
- interest and costs may be added
In most cases, it is safer to:
- pay under protest
- challenge the charge through the proper legal route
How to protect yourself as a leaseholder
Understand your lease
Your lease determines:
- what can be charged
- how costs are shared
Request information
Leaseholders have rights to request:
- service charge accounts
- supporting documents
Seek early advice
Disputes are often easier to resolve early.
Service charges explained: Key takeaways
- Service charges must be reasonable and permitted by the lease
- There is no fixed limit, but legal protections exist
- Leaseholders can challenge charges at a tribunal
- Sinking funds help manage long-term costs
- Wider issues may require management changes
This guide is based on general principles of English and Welsh law, is intended for informational purposes only, and does not constitute legal advice or establish a professional relationship.
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