24/09/2025
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If you’re a leaseholder, paying the service charge by standing order might sound like a good idea. Set it up once, let it tick along each month, and forget about it. Easy, right? Not quite.
For management companies (ManCos) and Right to Manage (RTM) directors, standing orders often cause more problems than they solve. That’s because the leaseholder controls the standing order, not the ManCo. And since service charges change each year, standing orders wont, unless the leaseholder remembers to write to their bank and instruct them to change the standing order amount. Quite simply, standing orders rarely keep up. In this blog, we’ll explore why standing orders don’t really work for service charges, the risks they create, and what alternatives work better for everyone.
A standing order is set up and controlled by the leaseholder. The amount is fixed, and only the leaseholder can change it. A direct debit, on the other hand, lets the payee (like the ManCo or managing agent) collect the right amount each time, as long as notice is given. This makes direct debits far more flexible when charges change. The challenge for small blocks of flats and private housing estates is that if you are self-managing then it is unlikely that the bank will give you the ability to be a direct debit originator.
Service charges change every year because the service charge budget changes. Insurance premiums go up or down, different repairs are anticipated in different years, cleaning and gardening contractors put costs up due to outside factors such as inflation, national insurance increases and the like, and, unexpected repairs might crop up. That means the service charge demand is almost never the same year after year. If a standing order isn’t updated, the leaseholder will quickly fall into arrears without even realising it.
The biggest issue with standing orders is arrears. Leaseholders often forget to update their standing order when the service charge changes, leaving the ManCo short of funds to pay bills. When directors chase the shortfall, it can create tension and even disputes with neighbours, who may resent the situation and blame the directors once final notices or legal proceedings are issued.
The problem becomes even more complicated if arrears recovery ends up in court. Leaseholders may argue that they have been paying regularly, but if the standing order amount hasn’t been updated, those payments will be wrong. This makes the arrears claim look messy and can lead judges to err on the side of the leaseholder, since a ManCo, RTM company, or freeholder is considered a professional body expected to follow good governance. For directors, being new to the role is no defence. Ultimately, standing orders muddy the waters, whereas payments made in response to official demands issued under the lease provide a far cleaner and more enforceable record.
Standing orders might work in theory for blocks where the service charge is very stable and rarely changes. But in most real-world situations, costs fluctuate too much. Even a small change – say £10 a month – adds up quickly if it’s missed. So while standing orders feel convenient, they usually store up trouble.
The simplest way is for the ManCo or managing agent to issue proper demands in line with the lease. Leaseholders can then pay by bank transfer or, even better, set up a direct debit. That way, the right amount is always collected, arrears are minimised, and disputes are avoided. Clear communication and reminders also go a long way to keeping payments on track.
Standing orders might seem like the easy option, but for service charges they’re more hassle than help. Because the leaseholder controls them and the amounts rarely change on time, they almost always lead to arrears and disputes. For ManCos and RTM directors, the safer route is to stick to proper demands and encourage direct debit or clear one-off payments. That way, the building’s bills get paid, the accounts stay clean, and neighbours stay on friendlier terms.
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