Service Charge

A service charge is a regular payment made by leaseholders to the freeholder or managing agent to cover the cost of maintaining and running the building. It pays for things that benefit all residents — the roof over your head, the hallway lights, the building insurance, and the communal garden.

What the service charge covers

A typical service charge includes:

• Building insurance — the freeholder insures the structure; leaseholders contribute via the service charge
• Communal repairs and maintenance — hallways, stairwells, lifts, entry systems, lighting
• External maintenance — roof repairs, external decoration, window cleaning, guttering
• Grounds maintenance — gardens, car parks, bin stores
• Management fees — the cost of the managing agent who administers the building
• Reserve/sinking fund — a fund built up over time for major future works (roof replacement, external redecoration)

How service charges relate to renovation

Your service charge is usually separate from your own renovation costs, but they can interact in several ways:

• Major works levies — if the building needs significant repair (a new roof, structural work, external repainting), the freeholder can levy a major works charge on top of regular service charges. This can run into thousands of pounds per flat and may arrive unexpectedly.
• Your renovation affecting common areas — if your renovation requires access through communal areas, use of the building’s lift for material deliveries, or temporary protection of shared spaces, the managing agent may charge you for this.
• Building improvements — if the freeholder undertakes improvements (not just repairs), these costs may be passed to leaseholders through the service charge. You have legal rights to challenge unreasonable charges.

Your rights as a leaseholder

Under the Landlord and Tenant Act 1985, you have the right to:

• See the accounts — request a summary of costs and inspect receipts
• Be consulted — for works costing more than a certain threshold per flat, the freeholder must consult leaseholders before proceeding (Section 20 consultation)
• Challenge unreasonable charges — you can apply to the First-tier Tribunal if you believe charges are unreasonable

When budgeting for a flat renovation, factor in both your own project costs and any upcoming major works that the service charge accounts might reveal. Ask the managing agent for the last two years of service charge accounts and any planned major works before committing to a renovation budget.