Service charges in leasehold properties are one of the most common sources of dispute between leaseholders and landlords. The law gives leaseholders strong protections, including the right to challenge unreasonable charges before an independent tribunal. This guide explains those rights and the procedure for challenging a service charge.
A service charge is the amount a leaseholder pays towards the cost of services and works performed by the landlord (or management company) on the building. Service charges typically cover:
The lease defines what can be charged and how it is apportioned between leaseholders.
The main legislation governing service charges is:
Sections 18 to 30. This is the foundational regime. Key provisions include:
This introduced significant protections including requirements for transparency in demands.
This gives leaseholders the right to apply to the First-tier Tribunal (Property Chamber) to determine the reasonableness of any service charge.
Almost any aspect of a service charge can be challenged including:
Section 19(1) of the 1985 Act provides that costs are only payable as service charge if they are:
"Reasonably incurred" looks at whether the decision to spend was reasonable. "Reasonable standard" looks at whether the work performed met that standard.
Section 20 of the 1985 Act requires consultation with leaseholders where the cost would exceed £250 per leaseholder for works or £100 per leaseholder per year for long-term contracts.
The consultation involves multiple stages:
Where the consultation has not been followed, the landlord can only recover up to the threshold amount (£250 per leaseholder for works) unless dispensation is granted by the tribunal.
Section 21 of the 1985 Act gives leaseholders the right to require a summary of relevant costs. This is the starting point for any challenge. Write to the landlord (or managing agent) asking for:
Continue to pay service charge demands while disputing them. Mark the payment as "without prejudice" or "under protest" to preserve your position. Non-payment can lead to forfeiture proceedings against you.
Many disputes can be resolved by negotiation. Set out clearly what you are challenging and why, and ask for a response.
If negotiation fails, apply to the First-tier Tribunal (Property Chamber) under section 27A. This is a specialist tribunal that decides service charge disputes.
You apply on the tribunal's form, specifying which charges are challenged and on what grounds. The fee is modest (around £100, though it changes from time to time).
The tribunal will give directions setting out a timetable for evidence, witness statements and a bundle.
Most service charge disputes are decided at a hearing, though some can be dealt with on paper. The hearing usually takes a few hours, occasionally a full day for complex cases.
The tribunal gives a written decision setting out its findings and the reasoning. The decision is binding and enforceable.
The starting point for any challenge. The lease defines what can be charged.
Annual statements showing what has been spent on what.
Invoices for individual items of expenditure. Where these have been refused, this in itself can be relevant.
Quotes for similar work from alternative contractors, demonstrating that the costs charged are too high.
Photographs of work that was supposedly done, or of poor quality work.
Letters and emails between you and the landlord or managing agent.
For major works disputes, the consultation notices issued (or not issued).
Generally, parties bear their own costs in the First-tier Tribunal. The tribunal has limited power to make costs orders, usually only where one party has behaved unreasonably.
However, the tribunal can make an order under section 20C of the 1985 Act preventing the landlord from passing on the landlord's costs of the proceedings to the leaseholders through the service charge. This is an important protection.
Management fees that are out of line with the market are a common issue.
Landlords sometimes charge inflated insurance premiums. The leaseholder may have a right to challenge the premium and, in some cases, to nominate alternative insurers.
Whether the lease permits reserve funds, and whether the amounts charged are reasonable.
Where work has been done but to a poor standard.
Where the consultation procedure was not followed, charges may be capped.
Where the way costs have been divided between leaseholders does not match the lease.
The tribunal has limited jurisdiction. It cannot:
For broader disputes, separate court proceedings may be needed.
Leaseholders dissatisfied with the management of their building have options beyond service charge challenges:
Leaseholders can take over management of the building through a Right to Manage company under the Commonhold and Leasehold Reform Act 2002.
The First-tier Tribunal can appoint a manager where management has been seriously inadequate.
Leaseholders may have the right to collectively buy the freehold.
Withholding the disputed charge can lead to forfeiture proceedings. Always pay under protest.
Identifying specifically which charges are challenged and why, with evidence, is essential. General complaints rarely succeed.
The right to a summary of costs is one of the most useful tools. Use it before challenging.
Where multiple leaseholders are affected, acting together is often more effective and economical.
For straightforward disputes, leaseholders often deal with them directly with the help of LEASE (the government's free leasehold advisory service). For more complex or higher-value disputes, specialist barrister advice can make a significant difference.
A direct access barrister with leasehold experience can advise on the merits, draft the application and represent you at the tribunal on a fixed fee.
If the issues in this guide apply to your situation, our team can match you with a barrister who works on cases like yours every week. The enquiry is free and you will receive a clear fixed-fee quote before any work begins. Start your enquiry here.