If you own a flat in England or Wales, leasehold service charges are probably the biggest recurring cost of ownership after your mortgage. They pay for the building you share with your neighbours, yet many leaseholders have no idea how the figure on their demand was calculated, whether it is reasonable, or what they can do when it jumps. This 2026 guide to leasehold service charges explains what you are paying for, the legal rights you already have under the Landlord and Tenant Act 1985, how to challenge an unreasonable bill, and the new protections the government confirmed in July 2026 that start to take effect from 2027.
Leasehold service charges are the payments a leaseholder makes to the freeholder or management company for the shared running costs of a building: buildings insurance, repairs and maintenance of the structure and common parts, cleaning, lighting, lifts, grounds and management fees. The lease sets out what can be charged and how costs are split between flats.
Unlike ground rent, which is a fixed sum paid simply for occupying the land, a service charge is meant to reflect real costs. Most leases are “variable” service charge leases: you pay an estimated amount in advance (usually in one, two or four instalments), the landlord spends the money over the year, and a balancing charge or credit follows once the accounts are finalised. A minority of leases, particularly in older or social housing blocks, have fixed service charges that cannot be challenged on reasonableness in the same way.
If a cost is not provided for in your lease, you do not have to pay it, however sensible the expenditure might seem. Checking the lease is always the first step, and it is something the leasehold specialists on Survey Merchant’s panel do routinely when advising flat owners.
The lease will state your share, usually as a fixed percentage, a fraction (for example one-twelfth), or a proportion based on floor area or rateable value. The landlord or managing agent prepares an annual budget for the building, applies your proportion, and issues a demand. At the end of the accounting year, actual spending is reconciled against the budget.
Three documents matter most: the budget (what the landlord expects to spend), the demand (what you are being asked to pay and when), and the year-end accounts (what was actually spent, certified by an accountant where the block has more than four flats). A surprising number of disputes come down to leaseholders never having seen the second and third of these.
Service charges have risen faster than inflation. Analysis by estate agency Hamptons, reported by Mortgage Solutions on 2 March 2026, found the average annual service charge in England and Wales reached £2,405 in 2025 (£200.42 a month), up 4.6% in a year and 32.6% since 2020. In London the average was £2,801 a year. The same research found 37% of flats now carry a service charge above 1% of the property’s value, the level at which some lenders tighten their criteria, compared with 29% in 2020.
| Flat type (England & Wales, 2025) | Average annual service charge | Average monthly | Annual change |
|---|---|---|---|
| One-bedroom | £2,074 | £172.81 | +3.3% |
| Two-bedroom | £2,463 | £205.28 | +4.8% |
| Three-bedroom | £3,146 | £262.12 | +5.7% |
| All flats (national average) | £2,405 | £200.42 | +4.6% |
| London average | £2,801 | £233.45 | +6.4% |
Source: Hamptons analysis as reported by Mortgage Solutions, 2 March 2026.
The lending point matters if you are buying or remortgaging. A high service charge relative to value can affect what a lender will advance and, according to the Hamptons data, flats with charges at or below 1% of value were 50% more likely to sell in 2025 than those at 2% or more. A RICS Red Book valuation from an accredited valuer will take the building’s service charge history into account.
The Landlord and Tenant Act 1985 gives every leaseholder with a variable service charge a set of statutory protections, regardless of what the lease says. The most important are set out below.
Under section 19 of the Landlord and Tenant Act 1985, costs are only recoverable to the extent they were reasonably incurred and the works or services are of a reasonable standard. A charge can be challenged on either ground even where the lease allows the landlord to recover that type of cost.
Before carrying out qualifying works that will cost any one leaseholder more than £250, or entering into a long-term agreement (more than 12 months) costing any leaseholder more than £100 a year, the landlord must follow the statutory consultation procedure under section 20. That means notice of intention, at least 30 days for observations, obtaining estimates and giving you the chance to nominate a contractor. If the landlord fails to consult and does not obtain dispensation from the tribunal, recovery is capped at those thresholds. Our Section 20 notice guide walks through each stage and the deadlines.
Under section 20B, if costs were incurred more than 18 months before a demand is served, you are not liable for that part of the charge, unless within the 18 months you were notified in writing that the costs had been incurred and you would be asked to contribute. The Leasehold and Freehold Reform Act 2024 contains provisions to replace this rule with new notice requirements, but at the time of writing those changes have not been brought into force.
You can request a written summary of the costs making up the service charge, and the landlord must supply it within one month (or within six months of the end of the accounting period if later). Once you have the summary, you have six months to inspect the accounts, receipts and other documents supporting it. Failure to comply without reasonable excuse is a summary offence.
Under section 27A, either party can ask the First-tier Tribunal (Property Chamber) to decide whether a service charge is payable, by whom, how much, and when. Paying a charge does not amount to agreeing it, so you can pay under protest and still apply.
Most disputes can be resolved without a hearing. Follow these steps in order.
Do not simply withhold payment. Non-payment can lead to county court proceedings and, ultimately, forfeiture action. If you are struggling to pay, tell the landlord early; Shelter’s guidance notes that many problems can be stopped from escalating by engaging promptly.
On 15 July 2026 the Ministry of Housing, Communities and Local Government published its response to the Strengthening Leaseholder Protections consultation, confirming how the service charge provisions of the Leasehold and Freehold Reform Act 2024 will be implemented in England. The consultation drew 1,356 responses, 829 of them from private leaseholders. The government said the measures would come into force “as soon as possible from 2027”, with at least five statutory instruments to be laid later in 2026 and private landlords given 12 months’ notice.
| Reform (England) | What it means for leaseholders | Expected timing |
|---|---|---|
| Standardised service charge demand form | Prescribed initial, interim and reconciliation forms, with an annual budget attached to the initial demand, so charges can be compared year on year and block to block. | From 2027 |
| Annual building report | A yearly report on the condition of the building, planned major works and the landlord’s relationships with managing agents and other third parties. | From 2027 |
| Right to information | A prescribed list of information available on request going back six years, with set response times; inspections arranged within three months. | From 2027 |
| Administration charge schedule | A simplified schedule of fixed and variable administration charges, updated at least 28 days before new charges apply. | From 2027 |
| Litigation costs | Landlords need court or tribunal approval before recovering litigation costs through the service charge; leaseholders gain a right to recover their own costs in specified circumstances. | From 2027 |
| Buildings insurance transparency | Disclosure of remuneration and relationships between landlords, agents, brokers and insurers, with a standard template and 30-day response period. | From 2027 (12 months’ notice) |
The accompanying GOV.UK announcement also launched two consultations on lease extension and freehold purchase, covering the valuation rates to be fixed in regulations and the process costs leaseholders should bear; both closed on 23 September 2026. Separately, the government has said the forthcoming Commonhold and Leasehold Reform Bill will ban leasehold for new flats and cap ground rents at £250. For how the alternative tenure works, see our guide to commonhold.
In practical terms, nothing in your current demand changes yet. Your existing rights under the 1985 Act remain the tools to use in 2026, and the reforms will layer additional transparency on top of them during 2027.
If you are buying leasehold, treat the service charge as part of the price. Ask the seller’s solicitor for the last three years of accounts, the current budget, the reserve fund balance, any section 20 notices served or planned, and details of any disputes. A high reserve fund is usually a good sign; a low one in an ageing block often means a large bill is coming.
A building survey of the flat alone will not tell you the condition of the roof, lifts or external walls that your service charge must maintain. A suitably qualified, accredited surveyor can review the common parts and flag likely major works, which is exactly the information you need to negotiate on price or walk away. Our building survey checklist for apartment buyers sets out what to look for, and our comparison of leasehold and freehold explains the wider trade-offs.
Yes. Leaseholders in a qualifying block can exercise the Right to Manage, which transfers management (and therefore control of the service charge budget and contractor choice) to a company owned by the leaseholders, without having to prove fault. Alternatively, leaseholders can buy the freehold together through collective enfranchisement, which also makes extending the lease far simpler. Both routes need professional valuation and survey input, and both are areas where Survey Merchant can connect you with the right specialist.
Service charge disputes turn on evidence: whether works were needed, whether they were done to a reasonable standard, and whether the cost was fair. Survey Merchant exists to put the right accredited professional in front of you quickly.
Whether you need a building survey of the common parts before major works, a valuation for enfranchisement, or simply an expert view on whether a demand is reasonable, contact Survey Merchant today for a free, no-obligation quote. You can also browse more leasehold guidance on our blog.
This article is general information for leaseholders in England and Wales and is not legal advice. Service charge law differs in Scotland and Northern Ireland, and the 2024 Act reforms described above apply to England; Welsh Ministers will decide their own approach.
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