Service Charge Dispute Guide for Leaseholders
A comprehensive guide to resolving a service charge dispute. Whether you are challenging service charges you believe are excessive or want to understand your rights under the Landlord and Tenant Act 1985, this page explains the process, your protections, and how transparent block management can prevent disputes arising in the first place.
What Is a Service Charge Dispute?
A service charge dispute arises when leaseholders disagree with the amount, reasonableness, or legitimacy of the charges levied by a managing agent or freeholder for the maintenance and management of their building. Disputes can relate to the total cost of services, the standard of work carried out, the apportionment between units, or whether the charges were properly demanded in accordance with the lease and service charge law UK requirements.
Unreasonable service charges flats are one of the most common sources of conflict in leasehold properties. Leaseholders may find themselves paying for works that were not carried out to an acceptable standard, services that were never provided, inflated contractor costs, or management fees that bear no relation to the level of service delivered. In each of these situations, the law provides clear protections.
The Landlord and Tenant Act 1985 service charges provisions establish that charges must be reasonably incurred and that the works or services must be of a reasonable standard. Where these conditions are not met, leaseholders have the right to challenge the charges through the legal protections available to them, including an application to the First-tier Tribunal.
Grounds for Challenging Service Charges
Understanding the legal grounds on which you can challenge a service charge dispute is essential before taking action. The Landlord and Tenant Act 1985 and related legislation provide several bases on which leaseholders can question the charges levied against them.
Reasonableness of Costs
Section 19 of the Landlord and Tenant Act 1985 states that service charges are only payable to the extent that they are reasonably incurred. If the costs are significantly higher than market rates, or if a managing agent has failed to obtain competitive quotations, leaseholders may have grounds to challenge.
- Costs must reflect fair market rates for the works or services provided
- The standard of work must be reasonable in relation to the cost charged
- Managing agents should not receive undisclosed commissions or mark-ups on contracts
Consultation Failures
Where qualifying works exceed 250 pounds per leaseholder, the Section 20 consultation process must be followed. Failure to consult properly limits the amount recoverable from each leaseholder to 250 pounds per unit, regardless of the actual cost.
- Section 20 notices must be served before qualifying works commence
- Leaseholders must be given the opportunity to nominate contractors
- Each consultation stage requires a minimum 30-day observation period
Late Demands and the 18-Month Rule
Section 20B of the Landlord and Tenant Act 1985 provides that a leaseholder is not liable to pay a service charge for costs incurred more than 18 months before the demand is served, unless prior written notification was given within that period. This is a complete defence and is often overlooked by leaseholders.
- Demands served more than 18 months after costs were incurred may be unenforceable
- The freeholder must have given written notice within the 18-month window
The First-tier Tribunal Service Charge Process
When a service charge dispute cannot be resolved through direct communication with the managing agent or freeholder, leaseholders can apply to the First-tier Tribunal (Property Chamber) for a formal determination. The tribunal has the power to decide whether charges are reasonable, whether works were carried out to a reasonable standard, and whether the correct procedures were followed.
Applying to the first tier tribunal service charge process does not require a solicitor, although service charge dispute solicitors can provide valuable support in complex cases. The application fee is modest, typically between 100 and 300 pounds, and the tribunal generally operates on the principle that each party bears their own costs, meaning there is limited financial risk for leaseholders making a genuine challenge.
The tribunal process typically involves the following steps.
Submit an Application
Complete the application form (available online) setting out the charges in dispute and the grounds for your challenge.
Directions and Evidence
The tribunal issues directions setting out the timetable for both parties to submit their case statements and supporting evidence.
Hearing or Paper Determination
The tribunal may determine the case on the papers alone, or schedule a hearing where both parties can present their arguments.
Decision
The tribunal issues a written decision determining whether the charges are reasonable and, if not, what amount is payable.
Mediation and Alternative Dispute Resolution
Not every service charge dispute needs to end up at the First-tier Tribunal. Mediation and alternative dispute resolution (ADR) can provide a faster, less formal, and less adversarial route to resolving disagreements between leaseholders and their managing agent or freeholder.
All RICS-regulated and government-approved managing agents are required to belong to a property redress scheme, which provides a free complaints resolution service for leaseholders. If you are unable to resolve a service charge dispute directly with your managing agent, the redress scheme can investigate the complaint and, where appropriate, direct the agent to take remedial action or pay compensation.
Before pursuing formal routes, leaseholders should consider the following steps.
- Write to your managing agent setting out your concerns clearly and requesting a detailed breakdown of costs
- Exercise your right to inspect invoices and receipts under Section 22 of the Landlord and Tenant Act 1985
- Escalate through the managing agent's formal complaints procedure
- Refer the matter to the relevant property redress scheme if the complaint is not resolved
- Consider independent mediation before applying to the First-tier Tribunal
Leaseholder Rights Under the Landlord and Tenant Act 1985
The Landlord and Tenant Act 1985 service charges provisions give leaseholders a powerful set of rights when it comes to challenging service charges. Understanding these rights is essential for any leaseholder considering whether to pursue a service charge dispute.
If you are asking can I refuse to pay service charge property costs, the answer is nuanced. While outright refusal is risky and can lead to legal action, you have the right to challenge charges through the proper legal channels while continuing to pay under protest. The key rights available to leaseholders include the following.
Right to a Summary of Costs
Under Section 21, leaseholders can request a written summary of the costs making up the service charge for the previous accounting year. The landlord must comply within one month or six months of the year-end, whichever is later.
Right to Inspect Accounts
Section 22 gives leaseholders the right to inspect the accounts, receipts, and other documents supporting the summary of costs. The landlord must make these available within one month of a written request.
Right to Challenge at Tribunal
Section 27A allows any leaseholder to apply to the First-tier Tribunal for a determination of whether a service charge is payable, whether it has been reasonably incurred, and whether the works or services are of a reasonable standard.
Right to Appoint a Manager
Under Section 24 of the Landlord and Tenant Act 1987, leaseholders can apply to the tribunal to appoint a manager if the current managing agent is failing to manage the property to a reasonable standard.
For a full overview of your protections as a leaseholder, visit our freeholder and leaseholder rights page or explore what is a reasonable service charge on a flat through our service charge management guide.
How to Avoid Service Charge Disputes
The best service charge dispute guide is one that helps you avoid disputes altogether. Most conflicts between leaseholders and their managing agent stem from a lack of transparency, poor communication, or failure to follow proper procedures. A competent managing agent operating to high professional standards can eliminate the vast majority of common dispute triggers.
At Block, we take a proactive approach to preventing service charge disputes through the following commitments.
- Fully itemised budgets reviewed and approved before demands are issued to leaseholders
- Independently certified service charge accounts prepared and distributed within six months of the year-end
- Full compliance with Section 20 consultation requirements for all qualifying works
- No hidden commissions or mark-ups on insurance premiums or contractor costs
- Open access to all invoices, receipts, and supporting documentation on request
- Competitive tendering for all major contracts and regular benchmarking against market rates
Our approach to transparent block management means leaseholders can see exactly how their money is being spent. When charges are clearly justified and properly documented, the grounds for dispute simply do not arise. If you are currently experiencing a service charge dispute with your existing managing agent, switching to a provider that prioritises transparency can resolve the underlying issues and restore trust.
Frequently Asked Questions About Service Charge Disputes
What to do if your service charge is too high?
If you believe your service charge is too high, the first step is to request a summary of the relevant costs from your managing agent or freeholder. Under the Landlord and Tenant Act 1985, leaseholders have the right to inspect invoices and receipts supporting the service charge accounts. Compare the charges against similar buildings in your area and check whether the works or services were carried out to a reasonable standard. If you remain dissatisfied after reviewing the documentation, you can raise a formal complaint with your managing agent, escalate the matter to their redress scheme, or apply to the First-tier Tribunal (Property Chamber) to determine whether the charges are reasonable.
Can you refuse to pay service charge?
Leaseholders should be very cautious about withholding service charge payments. While you have the right to challenge charges you consider unreasonable, refusing to pay can result in the freeholder pursuing the debt through the county court and, in serious cases, seeking forfeiture of the lease. The recommended approach is to pay the service charge under protest while simultaneously applying to the First-tier Tribunal to determine reasonableness. This protects your position legally while ensuring your challenge is heard. If the tribunal determines that the charges were unreasonable, you may be entitled to a refund of the overpayment.
How to challenge unreasonable service charges?
To challenge unreasonable service charges, begin by writing to your managing agent or freeholder requesting a detailed breakdown of costs, including invoices and receipts. Under Section 22 of the Landlord and Tenant Act 1985, you have the right to inspect the accounts and supporting documents. If the response does not resolve your concerns, you can apply to the First-tier Tribunal (Property Chamber) under Section 27A of the Act for a determination of whether the charges are reasonable. The tribunal can assess both the standard of the works and the cost charged. You do not need a solicitor to make an application, though professional advice can be helpful for complex cases.
How to appeal a service charge?
If you wish to appeal a service charge, the formal legal route is to apply to the First-tier Tribunal (Property Chamber) for a determination under Section 27A of the Landlord and Tenant Act 1985. Before doing so, it is worth raising the matter directly with your managing agent and, if applicable, through their complaints procedure and property redress scheme. If the First-tier Tribunal has already made a determination and you disagree with the outcome, you can apply for permission to appeal to the Upper Tribunal (Lands Chamber), though permission is only granted where there is a point of law at issue.
Can leaseholders challenge service charges?
Yes, leaseholders have a clear statutory right to challenge service charges under the Landlord and Tenant Act 1985. The Act provides that service charges are only payable to the extent that they are reasonably incurred and that the works or services to which they relate are of a reasonable standard. Any leaseholder can apply to the First-tier Tribunal for a determination of reasonableness, either before or after the charges have been paid. The tribunal has the power to reduce or disallow charges it considers unreasonable, and its decisions are legally binding on both parties.
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, provides that a leaseholder is not liable to pay a service charge in respect of costs incurred more than 18 months before the demand is served, unless the leaseholder was notified in writing within the 18 month period that the costs had been incurred and that they would be required to contribute. This rule is an important protection for leaseholders against unexpected historic charges and places a clear obligation on managing agents and freeholders to issue demands and notifications promptly. If a demand is served outside the 18 month window without prior written notification, the leaseholder has a complete defence against that charge.
Transparent Service Charges That Prevent Disputes
Whether you need guidance on a current service charge dispute, want to understand your rights as a leaseholder, or are looking for a managing agent that puts transparency first, Block is here to help. Our service charge management approach is built on open accounting, fair pricing, and full compliance with service charge law UK requirements.