Introduction

If you own a flat on a leasehold basis, you’ll know that service charges are part of life. They pay for the running of the building – from insurance and cleaning to repairs and long-term maintenance. But here’s the thing: everything about service charges comes back to one key document – your lease. It sets out what can be charged, when payments are due, and how accounts must be presented. In this blog, we’ll look at how to understand service charges through your lease, and share some tips on how to read it without feeling lost in legal jargon.

Leases are supplemented by caselaw (which interprets the lease) according to the circumstances of the case, and by statutes such as the Landlord & Tenant Act 1985 or the Commonhold and Leasehold Reform Act 2002.

What does the lease actually say about service charges?

Your lease is the contract between you (the leaseholder) and the freeholder, landlord or management company. It spells out exactly what costs can be included in the service charge. This could cover repairs, cleaning, gardening, insurance, and sometimes contributions to reserve funds. If it’s not in the lease, it can’t legally be charged as service charges, for ManCo’s other costs may be recoverable and chargeable as company contributions.

When are service charges usually due under the lease?

Most leases say service charges must be paid in advance, often quarterly, half-yearly, or annually. The lease will specify the dates and whether payments must be demanded in a certain way. If the demands aren’t made correctly, leaseholders may be entitled to withhold payment until they are fixed, or perhaps not at all. Read more in our blog titled “Service Charges and Paying by Instalments: Should a ManCo Allow Monthly Payments?”

Year-End Accounts and Checking Reasonableness

At the end of each service charge year, the landlord or management company must prepare a set of service charge accounts. These compare the estimated costs in the service charge budget with the actual costs incurred. Service charges are not for profit, so if too much was collected, the surplus is usually credited or placed into reserves. If too little was collected, leaseholders may be asked to pay a balancing charge to cover the shortfall.

Leaseholders have the right to see a summary of these accounts each year and may request to inspect invoices, receipts, and supporting documentation. The law requires charges to be reasonable—meaning the costs must have been genuinely incurred, be of a reasonable amount, and relate to works or services of a reasonable standard. If leaseholders doubt this, they have the option of challenging charges at the First-tier Tribunal.

Why does the lease matter so much for service charges?

The lease is the primary document or reference point for service charges, in short the lease is the rulebook. It’s not enough for something to feel fair – if the lease doesn’t allow it, it can’t be charged. This is why directors of Residents’ Management Companies and RTM companies must follow the lease to the letter. Otherwise, they risk charges being ruled invalid.

How can you read a lease without getting lost?

Start by focusing on the sections about service charges, repairs, and accounts. Look for headings like ‘Service Charge’, ‘Expenses’, or ‘Repair and Maintenance’. Don’t worry if the language feels old-fashioned – the key is to pick out the practical rules: what, when, and how. If you’re stuck, ask a solicitor or managing agent to explain the clauses in plain English.

Service charges can feel complicated, but the lease is always the starting point. It tells you what can be charged, when you must pay, and how the accounts should balance out at year-end. By learning to read the lease and asking questions when things aren’t clear, leaseholders can feel more confident about their rights – and directors can manage their blocks more smoothly and fairly.