About service charges
How service charges are calculated
Fixed and variable service charges
Most service charges are variable. This means they can go up or down without a limit, based on the actual costs of the services.
Some older leases still have a fixed service charge, where you pay the amount that it says in the lease, regardless of the actual costs to the landlord.
How your share is calculated
Service charges are usually split between leaseholders in a building. How your share is calculated should be set out in your lease.
There are many ways this could be done. For example, your share may be based on:
- the size of your property
- the number of rooms in your property
- the rateable value of your property
- how different leaseholders benefit from different services
- the number of leaseholders in the building (an equal split)
Sometimes the lease just states that each leaseholder must pay a “fair” or “just” proportion of the service charge.
When service charges are paid
Your lease will normally give dates of the time over which service charges are calculated (the service charge period), and how often you must pay.
The service charge period is often a year, but you might need to pay more often, such as every 6 months or every 3 months.
Your lease will say whether you must make payments in advance and, if so, whether the payments are based on the previous year’s costs or an estimate of the costs in the year to come. Most modern leases allow for service charges to be paid in advance, based on estimates.
If you pay in advance, you will often need to pay a final charge at the end of the year, if the actual costs are higher than the payments.
If the payments made in advance are higher than the actual costs, depending on what it says in the lease the extra money may be:
- used to reduce next year’s charge
- refunded to leaseholders
- paid into a reserve fund or sinking fund
Some leases, usually older ones, say that service charges are paid after the end of the service charge period, when the landlord has already incurred the costs (in arrears). In this case, the landlord may have to borrow money to pay for the services. The lease may then allow them to recover the costs of the services and any interest charged.
- Last updated:
- 19 December 2025
- Next review:
- 19 December 2027
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Topic - Building management