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Wednesday, 3 October 2023

Service charges and other expenses for leaseholders

If you're a leaseholder, you usually have to pay for things like maintenance, services, ground rent, insurance and the landlord’s administration costs. Your lease will tell you about the different charges you have to pay. Find out more about these charges and what to do if you disagree with them.

Charges leaseholders pay

Check your lease to see if charges are fixed or if they are variable

The basic charges you might have to pay as a leaseholder are shown in the sections below. These can be paid to the landlord (sometimes known as the ‘freeholder’) or their managing agents. Your lease will tell you:

  • what you have to pay for
  • when payments are due – for example, every year or quarter
  • how charges are worked out – for example, your share if you live in a block of leasehold flats
  • if the charge is ‘fixed’ or ‘variable’ (it changes)

Service charges

Service charges cover your share of the costs towards maintaining the property. For example, repairs or goods and services like lift maintenance or cleaning. Check your lease to confirm:

  • if you have to pay them
  • what the money is spent on
  • if you pay them to the landlord or a management company

Service charges and your rights

You have the right to:

  • ask for a summary showing how the service charge is worked out and what it’s spent on
  • see any paperwork supporting the summary – for example, receipts
  • be consulted about building work costing you more than £250
  • be consulted about services lasting more than 12 months and costing you more than £100 a year

It’s a criminal offence if the landlord doesn’t provide you with this information. If you aren’t consulted, there’s a limit on how much you have to pay. Download the guide ‘Service charges and other issues’ for more detail.

If you're unhappy about your service charge

If you pay a variable service charge, you might be able to appeal to the Leasehold Valuation Tribunal (LVT). The LVT is an independent legal body that can settle certain types of leasehold dispute without the need to go to court.

If you pay a ‘fixed’ service charge, get professional advice about your options because you can’t appeal to the LVT. For example, you could try mediation or taking over the management responsibilities from the landlord.

Ground rent, insurance and other charges

The other charges you might have to pay are shown below. Download the guide ’Service charges and other issues’ for more detail about them.

Ground rent

You might pay rent to your landlord, known as ‘ground rent’. Your lease will tell you how much, when it’s due (usually every year) and if it can increase.

Ground rent has to be demanded before it becomes payable. A small change was made on 26 April 2023 to the wording of the notice that landlords must use when demanding ground rent. To find out how this change might affect you see the link 'Changes to the ground rent notice'.

If your landlord’s not been charging you ground rent, they can only recover ground rent going back six years.

Building insurance

If you own a leasehold flat, the landlord usually arranges your building insurance. Check your lease to see what’s insured and if it’s paid separately or through your service charge. You have a right to ask the landlord for a summary of the insurance policy.

If you own a leasehold house, you usually have to arrange the building insurance yourself using one of the providers detailed in the lease. You can usually change this arrangement.

Reserve or sinking funds

In addition to your service charge, you might have to pay into a fund to help cover any unexpected maintenance or repairs. For example, replacing the roof. There are rules about how the landlord must manage these funds. Usually, any money paid into these funds isn’t repayable (for example, if you move), but check your lease.

Administration charges

These cover the landlord’s costs for things like:

  • dealing with late payments
  • granting permissions – for example, if you want to alter your property
  • providing information about the lease to third parties

Estate Management Schemes

If you bought the freehold from the landlord, they might still manage certain services or areas of the property, for example, the gardens. This is called an ‘Estate Management Scheme’ and there’s usually a fee.

Disputes about a charge

Don’t withhold a payment without first getting professional advice about your rights and responsibilities

If you don’t pay a charge you're responsible for, your landlord might take you to court to recover the money. To settle the dispute, you could:

  • speak to your landlord
  • use an independent mediator
  • appeal to the Leasehold Valuation Tribunal (LVT)

You can appeal to the LVT about the reasonableness of a charge, the standard of work it relates to and your ‘liability’ (if you should be paying it at all). The LVT can:

  • stop the charge
  • decide how much you have to pay
  • change the lease – for example, how a charge is worked out or what insurance provider you have to use

You can’t apply to the LVT if you’ve agreed to pay the charge or the dispute is already being dealt with, for example, by the court.

Getting help and advice

You can get free advice about service charges and expenses from the Leasehold Advisory Service, Citizens Advice or Shelter.

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