Glossary
The 18-month rule (Section 20B)
Also called: Section 20B, s.20B, 18 month rule service charge, section 20B notice
The rule that a leaseholder doesn't have to pay service-charge costs that were incurred more than 18 months before they were demanded, unless they were warned in writing within that time that the costs had been incurred and would be charged.
It's one of the few service-charge mistakes that can't be put right later. Money that falls outside the rule is lost for good.
How it works
- The clock starts when a cost is incurred (usually when you receive the invoice or pay it).
- If the cost isn't demanded within 18 months, the leaseholder doesn't have to pay it.
- Unless, within those 18 months, the leaseholder was told in writing that the cost had been incurred and that they would be asked to pay towards it later (a "section 20B(2) notice").
Where it bites
- Year-end balancing charges, when the accounts are finished late and some costs are from early in the year.
- Costs from before a change of management that nobody demanded.
- Big invoices paid from a float or reserve and only recharged later.
How to stay safe
Finish the year-end accounts promptly and demand any balancing charge quickly. If accounts will be late, send a written section 20B(2) notice listing the costs incurred so far. Keep a dated copy of the notice and proof of how it was served. See The 18-month rule.
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