Service Charge Dispute Resolution Guide
A comprehensive guide to resolving a service charge dispute, covering your rights when challenging service charges, how to gather evidence, and how to take your case to the service charge dispute tribunal. Whether you are dealing with unreasonable service charges flats or need guidance on challenging reasonableness of service charges, this service charge dispute guide explains the process step by step.
Understanding Service Charge Disputes
A service charge dispute arises when a leaseholder disagrees with the amount, reasonableness, or payability of the service charge demanded by their freeholder or managing agent. Service charges fund the maintenance, insurance, and management of a building and its communal areas. When leaseholders believe that the charges levied against them do not reflect reasonable costs or that the works and services provided do not justify the expenditure, a dispute may follow.
Disputes can range from informal disagreements resolved through correspondence to formal proceedings before the First-tier Tribunal (Property Chamber). The statutory framework governing service charges is designed to protect leaseholders from unfair service charges while also ensuring that buildings are properly maintained. Understanding when and how to challenge charges is critical, because leaseholders who simply withhold payment without following the correct process risk county court proceedings and damage to their credit record.
This guide sets out everything you need to know about resolving a service charge dispute, from identifying valid grounds for a challenge to presenting your case at the Tribunal. For a detailed explanation of the legislation that underpins your rights, see our service charge law guide.
Common Reasons for Disputes
Challenging service charges usually stems from one or more identifiable issues with the way costs have been incurred or demanded. Understanding the most common grounds for a service charge dispute will help you assess whether you have a valid case.
Costs Not Reasonably Incurred
The most frequent ground for disputing a service charge is that the costs were not reasonably incurred. This might arise where the managing agent has engaged an expensive contractor without obtaining competitive quotes, where the scope of works exceeds what is necessary, or where the charges include items that do not benefit the leaseholders. Under Section 19 of the Landlord and Tenant Act 1985, costs passed on through the service charge must be reasonably incurred, and the Tribunal has the power to disallow charges that fail this test.
Poor Standard of Works or Services
Even where costs have been reasonably incurred, leaseholders can challenge the standard to which works or services have been carried out. If communal cleaning is inadequate, repairs have been poorly executed, or landscaping has been neglected despite being charged for, leaseholders may have grounds to argue that the charges are unreasonable service charges flats residents should not bear. The Tribunal can reduce the payable amount to reflect the standard actually delivered.
Failure to Consult on Major Works
Section 20 of the Landlord and Tenant Act 1985 requires landlords to consult leaseholders before carrying out qualifying works where the cost to any one leaseholder exceeds a prescribed limit. If the consultation process has not been followed correctly, the amount recoverable from each leaseholder may be capped. This is a common basis for a service charge dispute, particularly where large sums are involved for roof repairs, external redecoration, or lift replacement.
Charges Not Permitted by the Lease
The service charge can only include costs that are permitted by the terms of the lease. If the lease does not provide for a particular category of expenditure, the managing agent or freeholder cannot recover it through the service charge. Reviewing the lease is therefore an essential first step in any dispute. Our service charge audit guide explains how to carry out a detailed examination of your charges against the lease terms.
Your Legal Rights Under the Landlord and Tenant Act
The Landlord and Tenant Act 1985 provides the statutory framework that protects leaseholders from unfair service charges and gives you the tools to challenge charges you believe are unreasonable. Knowing your rights is essential before embarking on the dispute resolution process.
Right to a Summary of Costs (Section 21)
You have the right to request a written summary of the costs that make up the service charge. The landlord must provide this within one month of the request or within six months of the end of the accounting period, whichever is later. If the summary is not provided, you may withhold payment until it is.
Right to Inspect Accounts (Section 22)
After receiving a summary of costs, you have the right to inspect the invoices, receipts, and other documents that support the figures. This right must be exercised within six months of receiving the summary. Inspecting the underlying documentation is one of the most important steps in building a case for challenging reasonableness of service charges.
Right to Challenge at the Tribunal (Section 27A)
Any leaseholder may apply to the First-tier Tribunal (Property Chamber) for a determination of whether a service charge is reasonable and payable. There is no time limit on making an application, and you can challenge charges before or after payment. The Tribunal will consider whether the costs were reasonably incurred, whether the standard of work was reasonable, and whether the charges are permitted by the lease. This is the primary route for resolving a service charge dispute that cannot be settled informally.
The 18-Month Demand Rule (Section 20B)
A landlord cannot recover service charge costs unless a demand for payment is made within 18 months of the costs being incurred. If no demand or written notification is given within this period, the costs cannot be passed on. This is a valuable defence for leaseholders who are presented with historic charges. For further detail on this and other time limits, see our service charge arrears guide.
Step-by-Step Dispute Resolution Process
Resolving a service charge dispute follows a structured process. Taking the right steps in the right order strengthens your position and may resolve the matter without the need for Tribunal proceedings.
- Review your lease to confirm which costs are recoverable through the service charge and the correct apportionment
- Request a summary of costs under Section 21 and inspect the supporting documentation under Section 22
- Write a formal letter to your managing agent or freeholder setting out the specific charges you are disputing and the reasons why
- Allow a reasonable period (typically 28 days) for a written response addressing each of your concerns
- If the dispute is not resolved, consider mediation or alternative dispute resolution before applying to the Tribunal
- If informal resolution fails, make an application to the First-tier Tribunal (Property Chamber) under Section 27A
- Prepare your evidence, including the lease, service charge demands, cost summaries, invoices, photographs, and comparable quotes
- Attend the Tribunal hearing, present your case, and await the written determination
It is important to continue paying your service charge while the dispute is ongoing. Withholding payment without a Tribunal determination in your favour exposes you to the risk of service charge arrears proceedings, county court judgments, and potential forfeiture of your lease.
Taking Your Case to the First-tier Tribunal
The First-tier Tribunal (Property Chamber) is the specialist body that determines service charge dispute cases in England. It was established to provide an accessible, relatively low-cost forum for resolving leasehold disputes without the formality and expense of the county court. Understanding how the service charge dispute tribunal works is essential for anyone considering a formal challenge.
Making an Application
To apply to the Tribunal, you need to complete an application form setting out the charges you are disputing, the grounds for your dispute, and the outcome you are seeking. The application fee is modest, and there is no requirement to instruct service charge dispute solicitors or legal representatives, although professional advice can be helpful in complex cases. Applications can be made by individual leaseholders or by groups of leaseholders acting together.
The Hearing Process
Tribunal hearings are generally less formal than court proceedings. The Tribunal panel typically comprises a legally qualified chair, a surveyor, and a lay member. Both parties present their evidence and arguments, and the panel may ask questions. Hearings can be conducted in person, by video, or on paper (without an oral hearing) depending on the complexity of the case. The Tribunal will issue a written decision setting out its findings and determining which charges are reasonable and payable.
Section 20C Cost Protection
One of the most important provisions for leaseholders is Section 20C of the Landlord and Tenant Act 1985, which allows you to apply for an order preventing the landlord from recovering their Tribunal costs through the service charge. Without this order, a landlord could pass on their legal costs to all leaseholders in the building. It is standard practice to include a Section 20C application alongside the main dispute application.
Evidence Gathering and Preparation
The strength of your case when challenging service charges depends heavily on the quality and organisation of your evidence. The Tribunal makes its determination based on the documentary evidence and arguments presented by both parties, so thorough preparation is essential.
Key Documents to Gather
Your evidence bundle should include your lease (particularly the service charge provisions), all service charge demands and summaries of costs, the invoices and receipts obtained through your Section 22 inspection, any correspondence between you and the managing agent or freeholder, and the Section 20 consultation notices if major works are involved. Our service charge audit guide provides a detailed methodology for reviewing these documents systematically.
Comparable Evidence
Where you are arguing that costs were not reasonably incurred, comparable evidence is particularly persuasive. Obtaining alternative quotes for the same work or service, benchmarking management fees against industry norms, or presenting evidence of what similar buildings pay for equivalent services can demonstrate that the charges in dispute are above a reasonable level. This type of evidence is central to challenging reasonableness of service charges at the Tribunal.
Photographic and Inspection Evidence
If your dispute relates to the standard of works or services, photographic evidence is valuable. Photographs of poor-quality repairs, unclean communal areas, or incomplete works can substantiate your argument that the service provided does not justify the cost. Date-stamped photographs taken over a period of time are particularly effective. Where possible, obtain an independent surveyor's report on the quality of works carried out.
Costs and Outcomes
Understanding the potential costs and outcomes of a service charge dispute helps you make an informed decision about whether to proceed with a formal challenge. The Tribunal system is designed to be accessible, but there are still costs and risks to consider.
Tribunal Fees
The application fee for the First-tier Tribunal is relatively low compared to county court proceedings. There may also be a hearing fee if an oral hearing is required. These fees are significantly less than the costs of instructing service charge dispute solicitors to pursue the matter through the courts, which is one reason the Tribunal is the preferred route for resolving service charge disputes.
The No-Costs Rule
Unlike the county court, the Tribunal generally operates a no-costs rule, meaning that even if you lose, you will not normally be ordered to pay the other side's legal costs. This makes the process far less risky for leaseholders. The exception is where a party has acted unreasonably in conducting the proceedings, in which case the Tribunal may make a costs order under Rule 13.
Possible Outcomes
The Tribunal can determine that the charges are reasonable and payable in full, that they are payable at a reduced amount, or that they are not payable at all. It can also make a determination about future charges and grant a Section 20C order preventing the landlord from passing on Tribunal costs through the service charge. The determination is binding and can be enforced through the county court if necessary. Leaseholders who are successful may also be able to recover charges already paid if the Tribunal finds they were unreasonable.
Preventing Future Disputes
While knowing how to resolve a service charge dispute is important, preventing disputes from arising in the first place is better for everyone. Good management practices, transparency, and communication are the foundation of a well-run building where leaseholders have confidence in the charges they are asked to pay.
- Appoint a managing agent with a strong track record of transparent accounting and clear communication with leaseholders
- Ensure that the annual service charge budget is circulated to all leaseholders with a clear breakdown of anticipated costs
- Obtain competitive quotes for all significant works and share these with leaseholders as part of the consultation process
- Provide timely summaries of costs and make supporting documentation readily available for inspection
- Maintain an adequate reserve fund so that leaseholders are not faced with large unexpected demands
- Address leaseholder concerns promptly and in writing, resolving issues informally wherever possible
- Conduct regular service charge audits to identify and correct errors before they become disputes
At Block, we prioritise transparency and leaseholder engagement in everything we do. Our approach to service charge management is designed to minimise disputes by ensuring that charges are fair, well-documented, and clearly communicated. Where disputes do arise, we work with all parties to find a resolution that is proportionate and in the best interests of the building.
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, you should begin by requesting a full breakdown of costs from your managing agent or freeholder. Under Sections 21 and 22 of the Landlord and Tenant Act 1985, you have the right to request a summary of costs and to inspect the invoices and receipts that support those costs. Compare the charges against the terms of your lease and against what similar buildings in your area are paying. If, after reviewing the information, you still believe the charges are unreasonable, you should write to your managing agent or freeholder setting out your concerns in detail. If the matter cannot be resolved informally, you have the right to apply to the First-tier Tribunal (Property Chamber) under Section 27A for a determination on whether the charges are reasonable and payable.
How to challenge unreasonable service charges?
To challenge unreasonable service charges, you can apply to the First-tier Tribunal (Property Chamber) under Section 27A of the Landlord and Tenant Act 1985 for a determination of whether the charges are reasonable and payable. Before making an application, you should request a summary of the costs and inspect the supporting invoices and receipts, which is your right under Sections 21 and 22 of the Act. You should also write to your managing agent or landlord setting out your concerns and giving them the opportunity to respond. If the matter cannot be resolved informally, the Tribunal will examine whether the costs were reasonably incurred, whether the standard of work or services is reasonable, and whether the charges comply with the terms of the lease. The Tribunal process is designed to be accessible and does not usually require legal representation.
Can I refuse to pay my service charge?
You should not refuse to pay your service charge without first taking proper legal steps. Service charges are a contractual obligation under your lease, and non-payment can lead to county court proceedings, a county court judgment against you, and in the most serious cases, forfeiture of your lease. However, if you believe the charges are unreasonable or have not been properly demanded, you have the right to challenge them through the First-tier Tribunal (Property Chamber). The Tribunal can determine whether the charges are reasonable and payable. Until you have a Tribunal decision in your favour, the safest course is to pay the disputed amount and challenge it formally rather than withholding payment unilaterally.
Is there an ombudsman for service charges?
There is no dedicated ombudsman for residential service charges in England and Wales. The primary route for resolving service charge disputes is through the First-tier Tribunal (Property Chamber), which has jurisdiction under Section 27A of the Landlord and Tenant Act 1985 to determine whether service charges are reasonable and payable. If your managing agent is a member of a professional body such as RICS or ARMA, you may be able to make a complaint through their complaints procedure and, if unresolved, escalate it to the relevant ombudsman or redress scheme such as The Property Ombudsman or the Property Redress Scheme. However, these redress schemes deal with standards of service rather than the reasonableness of specific charges. For disputes about whether particular costs are payable or reasonable, the First-tier Tribunal is the correct forum.
Can leaseholders challenge service charges?
Yes, leaseholders have a statutory right to challenge service charges. Under Section 27A of the Landlord and Tenant Act 1985, any leaseholder may apply to the First-tier Tribunal (Property Chamber) for a determination of whether a service charge is reasonable and payable. The Tribunal can consider whether the costs were reasonably incurred, whether the standard of work was reasonable, and whether the charges comply with the terms of the lease. Leaseholders can challenge charges before they have been paid or after payment has been made, and there is no time limit on applying to the Tribunal for a determination. This right applies to individual leaseholders and to groups of leaseholders acting together, making it a powerful tool for holding managing agents and freeholders to account.
What is the law on service charges in the UK?
The law on residential service charges in England and Wales is primarily governed by the Landlord and Tenant Act 1985, as amended by the Commonhold and Leasehold Reform Act 2002. Section 18 defines a service charge as an amount payable by a leaseholder as part of or in addition to rent, which varies according to the costs incurred by the landlord. Section 19 provides that service charge costs must be reasonably incurred and that any works or services must be carried out to a reasonable standard. Section 20 requires landlords to consult leaseholders before carrying out qualifying works exceeding a prescribed amount. Section 20B prevents landlords from recovering costs unless demanded within 18 months of being incurred. Section 27A gives the First-tier Tribunal jurisdiction to determine whether charges are reasonable and payable. These provisions are designed to ensure transparency, fairness, and accountability in the management of leasehold properties.
Need Help Resolving a Service Charge Dispute?
Whether you are a leaseholder facing unreasonable service charges flats residents should not have to bear, a director looking for guidance on challenging service charges, or you need advice on taking a case to the First-tier Tribunal, Block is here to help. Our experienced team can assist with service charge disputes and ensure your building is managed fairly and transparently.