What can be included in service charges

Your lease may have specific terms that say your landlord must do certain work or provide certain services. Or it may have very general wording, for example it may just refer to the costs of repairing and maintaining the structure of the building.

Most modern leases have wording that allows the landlord to recover costs for services that are not specifically listed. For example the lease might refer to “any other costs and expenses reasonably incurred in connection with the building”. This is sometimes called a sweeping-up clause.

Even if there is a sweeping-up clause, some types of charge would need specific wording in your lease.

For most leasehold properties, a service charge will cover things like:

• maintenance and repairs for the common parts of the building, such as entrances, stairs and the roof
• buildings insurance
• cleaning and lighting of communal areas
• maintenance of shared facilities such as any lifts, boilers or alarm systems
• maintenance of any outside space such as gardens
• the costs of the landlord’s health and safety responsibilities for the building such as routine maintenance
• a contribution to a reserve fund or sinking fund, to cover expensive work that is not done every year, such as replacing the roof

Some things such as improvement work, management costs and legal costs should be specified in the lease if they’re included in the service charge.

Improvement work

Most leases in the private sector do not say that leaseholders must contribute to the cost of improving the building.

But leases for buildings owned by local authorities and housing associations often do allow for the cost of improvements to be included in the service charge.

Sometimes it can be hard to say whether work is a repair or an improvement. If you disagree with your landlord about this, it’s possible to apply to a tribunal for a decision on whether you have to pay.

Management costs

Management costs are the landlord or managing agent’s costs for work on managing the building, such as collecting service charges, administering bank accounts, staff costs and office costs.

The landlord, or a managing agent acting on their behalf, can only recover management costs if the lease says they can.

Your lease might say that the landlord can recover a percentage of the service charge to cover these costs, or it might just say a “reasonable or fair” amount.

Legal costs

It’s common for the landlord to include their legal costs of managing the building in the service charge. But they can only do this if the lease contains a specific indemnity clause allowing them to do so.

If the lease does allow them to recover legal costs, depending on the wording, they may not be able to recover costs that are not directly connected to managing the building, such as costs of tribunal proceedings or disputes involving leaseholders.

If you apply to the tribunal for a decision on whether a service charge is reasonable, you can also apply to make sure that your landlord cannot add their legal costs for the tribunal proceedings to the service charges. This is called a Section 20C Application.

You can also apply to the tribunal for your landlord’s legal costs not to be added to your service charges if your landlord applies to them for a decision on whether a service charge is reasonable.

Find out more about applying to the tribunal and limiting service charges

Legal costs and administration charges

Some leases allow the landlord to recover legal costs from an individual leaseholder through an administration charge, rather than the service charge that is paid by all leaseholders.

Find out more about administration charges

The basic rules about service charges are set out in the Landlord and Tenant Act 1985.

Normally, a landlord can claim back any money they have spent on managing the building, but they cannot make a profit.

They do not have to keep costs to a minimum. However, the law says that:

• service charges must be “reasonable”
• where costs relate to work or services, the work or services must be of a reasonable standard

There is no simple definition of what is reasonable. It depends on things like whether the work is necessary, and whether the landlord had suitable procedures for arranging the work and controlling costs.

Both you and your landlord have the right to ask a tribunal to decide whether a service charge is reasonable.

Find out more: challenging unreasonable service charges

You do not have to pay towards costs if they were incurred more than 18 months before you were asked to pay. This is called the 18 month rule.

Under section 20B of the Landlord and Tenant Act 1985, your landlord must issue a demand for service charges within 18 months of when they incurred the costs for the works or services. Costs are incurred when the landlord pays for them or becomes liable to pay for them (such as when they receive an invoice).

There is an exception if they serve a notice on you within 18 months, stating that they have run up the costs for the work or services and that you will eventually have to contribute by paying a service charge. The notice should give a figure for the actual costs, but it does not need to tell you exactly how much you’ll need to pay.

If they issue a service charge demand later than 18 months, and they have not served a notice, then they cannot recover the costs.

Your landlord must consult the leaseholders if they plan works or services that will cost any one leaseholder more than:

• £250 for major works or “qualifying works”
• £100 per year under a services agreement lasting more than a year (a “qualifying long-term agreement“)

This is a specific legal process set out in Section 20 of the Landlord and Tenant Act 1985.

If your landlord has not followed the consultation process, they cannot charge individual leaseholders more than these amounts (£250 or £100) towards the cost of the works or services, unless they get permission from a tribunal. A tribunal will generally only grant this permission if your landlord’s failure to consult did not cause you to lose money or rights.

Charges for these works or services are still service charges, and so they must also meet the rules about reasonableness.

Find out more: Section 20 consultations

The Building Safety Act 2022 introduced protections for some leaseholders affected by the cost of remediating (fixing):

• unsafe cladding
• other historic safety defects
• safety measures related to a defect (such as a waking watch or interim fire alarm)

Find out more about when and how leaseholders have to pay for:

• remediation - buildings in England at least 11 metres high (or at least 5 storeys)
• remediation - buildings in England under 11 metres high (or under 5 storeys)
• remediation - buildings in Wales