Section 20B Notice: The 18-Month Rule Explained
A comprehensive guide to Section 20B of the Landlord and Tenant Act 1985, the 18-month rule for service charges, notification requirements, and how leaseholders are protected from historic demands.
What Is Section 20B?
Section 20B is a provision within the Landlord and Tenant Act 1985 that places a strict time limit on when landlords and managing agents can demand service charge payments from leaseholders. It establishes what is commonly referred to as the 18-month rule, one of the most important protections available to leaseholders in England and Wales.
The Core Principle
Under Section 20B, a service charge demand is not payable if it is served more than 18 months after the costs to which it relates were incurred, unless the leaseholder was notified in writing within that 18-month period that those costs had been incurred and that they would be required to contribute.
This provision exists to prevent leaseholders from being confronted with unexpected historic charges that they had no opportunity to budget for. Without this safeguard, landlords could accumulate years of expenditure and present leaseholders with large retrospective demands that are difficult to verify or challenge.
Statutory Framework
Section 20B sits alongside other key provisions of the Landlord and Tenant Act 1985 that collectively regulate service charges in leasehold properties. Together, these provisions establish a framework of reasonableness, transparency, and fairness that governs the relationship between landlords and leaseholders in respect of service charge expenditure.
How the 18-Month Rule Works
Understanding exactly how the 18-month rule operates is essential for both landlords and leaseholders. The timing mechanism under Section 20B has specific trigger points that determine when the clock starts and when the deadline for issuing a service charge demand expires.
When the Clock Starts
The 18-month period begins from the date the costs are incurred. This is typically the date on which the landlord or managing agent becomes liable to pay for the works or services, not the date on which the works were carried out or the date the invoice was received. In practice, this is usually the date the supplier's invoice falls due for payment.
What Constitutes ‘Costs Incurred’
The phrase “costs incurred” has been the subject of tribunal and court interpretation. Costs are generally considered to be incurred when the landlord becomes legally obligated to pay them, rather than when the payment is physically made. This distinction is crucial because delays in payment by the landlord do not extend the 18-month window available to demand those costs from leaseholders.
When a Demand Must Be Served
The service charge demand must be served on the leaseholder within 18 months of the costs being incurred. If this deadline passes without a valid demand or written notification being served, the leaseholder is no longer liable for those particular costs. For detailed guidance on service charge structures and demands, see our service charge guide.
- The 18-month period runs from the date costs are incurred, not when works are completed
- Each individual cost item has its own 18-month deadline
- The demand must be properly served on the leaseholder, not merely prepared
- On-account demands may satisfy Section 20B if they cover the relevant costs
- Year-end service charge accounts must be issued with the 18-month rule in mind
The Written Notification Exception
Section 20B contains an important exception to the 18-month rule. Where a landlord or managing agent is unable to issue a final service charge demand within 18 months, they can preserve their right to recover costs by serving a written notification on the leaseholder within that period.
Purpose of the Notification
The written notification serves to put the leaseholder on notice that costs have been incurred and that a demand for contribution will follow. This gives the leaseholder awareness of the forthcoming liability and an opportunity to make financial provision. The notification effectively pauses the 18-month time bar so long as it meets the statutory requirements.
Requirements for a Valid Notification
To be effective, the Section 20B notification must satisfy the following requirements:
- It must be in writing and served on the leaseholder
- It must be served within 18 months of the costs being incurred
- It must state that costs have been incurred
- It must indicate that the leaseholder will be required to contribute through the service charge
- It should describe the nature of the costs with sufficient clarity
It is important to note that the notification does not need to specify the exact amount the leaseholder will be asked to pay. It simply needs to provide enough information for the leaseholder to understand the nature and approximate scope of the expenditure. For a broader understanding of service charge law and the legal framework, visit our service charge law guide.
Practical Considerations
In practice, managing agents often issue Section 20B notifications as a precautionary measure where year-end accounts are delayed, where costs relating to insurance claims or complex works have not yet been finalised, or where disputes with contractors are ongoing. Keeping an audit trail of all notifications sent is essential for evidencing compliance if challenged.
Impact of Section 20B on Leaseholders
Section 20B provides one of the most powerful protections available to leaseholders in relation to service charges. Understanding how this provision works in practice can help leaseholders identify non-compliant demands and challenge charges that fall outside the statutory time limits.
Protection From Historic Charges
The primary protection offered by Section 20B is that leaseholders cannot be made to pay for costs that are more than 18 months old at the time of demand, unless proper written notification was given. This prevents the accumulation of historic service charge arrears that leaseholders were never informed about and had no opportunity to query or dispute at the relevant time.
How to Check Compliance
Leaseholders who receive a service charge demand should take the following steps to check Section 20B compliance:
- Identify the date each cost item was incurred by the landlord or managing agent
- Compare that date with the date the service charge demand was served
- Check whether the gap exceeds 18 months for any individual cost item
- If it does, check whether you received a prior written Section 20B notification
- If no notification was received, you may have grounds to dispute those charges
If you believe your service charge demand does not comply with Section 20B, you should raise this with your landlord or managing agent in writing in the first instance. If the matter is not resolved, you may be able to apply to the First-tier Tribunal (Property Chamber) for a determination. For further guidance on dealing with service charge arrears and disputes, see our service charge arrears guide.
Section 20B and Major Works
The interaction between Section 20B and major works is one of the most complex areas of service charge law. Large-scale projects such as roof replacements, external redecoration, or structural repairs frequently span several months, creating multiple trigger dates for the 18-month rule.
Interaction With Section 20 Consultation
Major works that exceed the qualifying threshold also require compliance with Section 20 consultation requirements. Managing agents must therefore coordinate two separate statutory obligations simultaneously: the consultation process under Section 20 and the timing requirements under Section 20B. Failure to comply with either can result in limitations on the amount recoverable from leaseholders. See our Section 20 consultation guide for full details.
Timing Complexities for Large Projects
For large projects, costs are typically incurred in stages as interim and final invoices are submitted by contractors. Each invoice creates a separate 18-month deadline under Section 20B. This means that early invoices on a long-running project may approach or pass the 18-month deadline before the project is complete and final accounts can be prepared for leaseholders.
Practical Solutions
- Issue interim service charge demands as costs are incurred during the project
- Serve Section 20B written notifications promptly for any costs that cannot be immediately demanded
- Maintain detailed records of all contractor invoices with dates costs were incurred
- Coordinate the Section 20 consultation timetable with Section 20B deadlines
- Consider issuing on-account demands at the start of major works to cover anticipated costs
Managing Agent Compliance With Section 20B
For managing agents and block management companies, compliance with Section 20B is a fundamental operational requirement. Failure to comply results in the permanent loss of the right to recover legitimate expenditure, directly impacting the financial health of the buildings under management.
Systems and Processes Needed
Effective Section 20B compliance requires robust systems that track the date every cost is incurred, calculate the 18-month deadline automatically, flag approaching deadlines for action, and generate notifications or demands within the required timeframe. Modern block management software should include these features as standard.
Demand Scheduling
Service charge demand scheduling must be designed around Section 20B deadlines. Annual service charge accounts should be prepared and distributed well within the 18-month window. Where delays are unavoidable, written notifications must be issued as a safeguard. Proactive demand scheduling is a hallmark of competent property management.
Audit Trail and Record Keeping
Maintaining a comprehensive audit trail is critical. Managing agents should retain copies of all service charge demands, Section 20B notifications, proof of service, contractor invoices with dates, and internal records showing when each cost was incurred. This documentation is essential if compliance is challenged at a First-tier Tribunal. Learn more about professional block management standards and practices.
- Implement automated deadline tracking for all service charge expenditure
- Prepare year-end accounts within 6 months of the accounting period end
- Issue Section 20B notifications immediately when delays are anticipated
- Train all staff on the importance of the 18-month rule
- Conduct regular audits to ensure no costs are approaching the deadline without action
Frequently Asked Questions About Section 20B
What is the 18-month rule for service charges?
The 18-month rule, set out in Section 20B of the Landlord and Tenant Act 1985, prevents landlords from recovering service charge costs from leaseholders unless a demand for payment is served within 18 months of the costs being incurred. This time limit protects leaseholders from receiving unexpected historic charges long after the expenditure took place.
Can a landlord recover costs after 18 months?
A landlord can only recover costs after the initial 18-month period if they have served a written notification on the leaseholder within that 18-month window. The notification must inform the leaseholder that costs have been incurred and that they will be required to contribute through their service charge. Without this written notification, the right to recover is lost entirely.
What counts as a valid Section 20B notification?
A valid Section 20B notification must be in writing and must be served on the leaseholder within 18 months of the costs being incurred. It should clearly state that costs have been incurred, describe the nature of those costs, and inform the leaseholder that they will be required to contribute to them through the service charge. The notification does not need to specify the exact amount but must give sufficient detail for the leaseholder to understand the nature of the expenditure.
Does Section 20B apply to major works?
Yes, Section 20B applies to all service charge costs including major works. This creates a particular complexity for large-scale projects where works may span many months. The 18-month period runs from when each individual cost is incurred, not from when the project as a whole is completed. Managing agents must carefully track invoicing timelines alongside Section 20 consultation requirements to ensure full compliance.
What happens if Section 20B is not complied with?
If Section 20B is not complied with, the landlord or managing agent loses the right to recover those particular service charge costs from leaseholders entirely. The leaseholder is under no legal obligation to pay any demand served outside the 18-month time limit where no prior written notification was given. This applies regardless of the reasonableness of the charges or whether the works were necessary.
How do I check if my service charge demand complies with Section 20B?
To check compliance, identify when the costs on your service charge demand were actually incurred by the landlord or managing agent. Then check whether the demand was served within 18 months of those costs being incurred. If any costs fall outside the 18-month window, check whether you received a prior written notification about those costs within the 18-month period. If neither condition is met, you may have grounds to challenge the demand.
Need Help With Section 20B Compliance?
Whether you are a leaseholder checking a service charge demand or a freeholder needing professional management, our team can help ensure full Section 20B compliance.