Service charge

What can be charged, how it's split and when it's due all come from the lease. The law then adds protections on top.

The main protections

• Reasonableness. Costs count only to the extent they are reasonably incurred, and works must be of a reasonable standard (s.19).
• Consultation before large works or long contracts: Section 20Section 20 consultationThe legal process of consulting leaseholders before carrying out works, or signing a contract of more than 12 months, that will cost any one leaseholder more than the set threshold..
• Time limit: costs must normally be demanded within the 18-month ruleThe 18-month rule (Section 20B)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..
• Paperwork: demands must carry the right information (see service-charge demandService-charge demandA written request to a leaseholder to pay a service charge, which in England must include the landlord's name and address and be accompanied by the prescribed summary of rights and obligations.).
• Trust: the money is held on trust for the leaseholders (trust moneyTrust money (section 42)Service-charge money paid by leaseholders, which the law says is held on trust to pay the costs it was collected for and, subject to that, for the leaseholders who paid it, not as the receiving company's own money.).
• Disputes: the First-tier TribunalFirst-tier Tribunal (Property Chamber)The tribunal in England that decides most leasehold disputes, including right to manage claims, whether service charges are payable or reasonable, and applications for dispensation from Section 20 consultation. can decide what is payable, even if it has already been paid (s.27A).

When you run the block

These rules apply to your RTM company or residents' management company just as they applied to the landlord. Many self-managed blocks set the charge with an annual budget, collect it in instalments on the dates the lease sets, and settle the difference with the actual costs at the year end. See Budgets and service charges.