24/09/2025
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If you live in a block of flats, you’ll know that service charges are one of the biggest costs leaseholders face. For many people, paying a large bill in one go can feel daunting, especially with rising costs everywhere. It’s no surprise that leaseholders often ask if they can pay in monthly instalments rather than one lump sum. But what happens if the lease doesn’t allow for it? Can a Residents’ Management Company (ManCo) agree anyway, and what are the risks of doing so? In this blog, we’ll look at the issue from both sides – leaseholders wanting flexibility and directors needing to follow the rules.
Most leases set out clearly when and how service charges must be paid. This could be quarterly, half-yearly, or yearly. If the lease says payments must be made in advance on fixed dates, then technically that is the only legally correct way to collect them. Anything different would be outside the lease. Departing from the lease on one issue could arguably make it difficult to uphold other clauses in the lease.
Strictly speaking, no. A Residents’ Management Company (ManCo) cannot legally permit monthly service charge payments if the lease specifies otherwise. The ManCo is bound by the lease terms just like leaseholders, so it has no power to rewrite them without a formal variation. Accepting instalments outside what the lease allows means stepping beyond its authority, and this could cause problems later.
One of the biggest risks for directors is that if arrears build up, the ManCo may struggle to recover them in court. A leaseholder could argue that the demands were not made in line with the lease, or that by permitting different arrangements the ManCo effectively undermined its own enforcement rights. Cashflow is another concern; if money comes in more slowly, the ManCo may not have enough funds available to pay for insurance, contractors, or utilities on time.
In short, while informal monthly payments can help leaseholders, directors must tread very carefully to avoid legal and financial pitfalls.
For most leaseholders, it’s simply about affordability. Paying £200 a month feels a lot more manageable than facing a £2,400 bill once a year. It helps with household budgeting and can reduce the risk of people falling into arrears in the first place. So, while the legal position is strict, the practical reality is that monthly payments make life easier for residents. Installments themselves are not the problem, it is installments that permit a leaseholder to be in arrears.
One option is for the ManCo to keep to the lease formally – demanding charges on the stated dates – but agree informally to accept monthly standing orders. This keeps the legal demand correct, while still giving leaseholders flexibility. Another option is to vary the lease formally, though that can be time-consuming and costly. Alternatively, to allow installments that collect in advance towards the next service charge due, so that when the demand hits, it is paid from that which is already collected.
The key is communication and consistency. Directors should explain the lease requirements clearly but show empathy for leaseholders’ situations. If an informal arrangement is offered, it should be transparent, written down, and available to everyone to avoid claims of unfair treatment. Directors must also keep an eye on cashflow to make sure the block doesn’t run out of money while waiting for instalments.
Allowing service charges to be paid by monthly instalments can make life easier for leaseholders, but it’s not always straightforward for a ManCo. The lease is the rulebook, and directors must tread carefully to avoid legal or financial risks. With clear communication and fair arrangements, it is possible to strike a balance between legal obligations and practical reality – helping both the building’s finances and the residents’ peace of mind.
Thank you
