Leasehold and Service Charge Disputes

Under the Landlord and Tenant Act 1985, service charges can only be recovered from leaseholders if they are reasonably incurred and the services or works are of a reasonable standard. The amount charged must be reasonable. These are legal requirements, not voluntary standards.

Common service charge disputes include:

• Major works bills that seem excessive or were not properly consulted on
• Management fees that appear disproportionate to the services provided
• Charges for works that were not done or were done poorly
• Insurance costs that appear significantly above market rates
• Charges for items not covered by the lease

Before challenging a service charge, exercise your statutory right to request a written summary of costs and to inspect supporting documents (receipts, invoices, and accounts) within six months of receiving the annual accounts. Your landlord must comply within 21 days of a request for inspection. Failure to comply is a criminal offence.

You can withhold a disputed service charge while a challenge is pending — but only the genuinely disputed portion. Withholding undisputed charges can result in forfeiture proceedings, so take advice before withholding any payment.

The First-tier Tribunal (Property Chamber) — Residential Property — handles applications from leaseholders to determine whether service charges are reasonable. The Tribunal can:

• Determine whether service charges are payable and, if so, in what amount
• Determine whether insurance costs are reasonable
• Vary lease terms (in limited circumstances)
• Appoint a manager to take over the management of a building

The application form (LVT1 for service charges) can be submitted online or by post. The fee ranges from £100 to £200 depending on the case, with fee remissions available for low-income applicants. Hearings are held locally and are relatively informal compared to courts — legal representation is not required, though it can be helpful for complex cases.

There is no limitation period for service charge challenges (you can challenge charges from past years), but practically, older charges may be harder to challenge due to lack of evidence. The Tribunal's decision is legally binding on both parties.

Note: Before using the Tribunal for major works over £250 per leaseholder (or £1,000 in total), the landlord should have followed a Section 20 consultation process. Failure to consult limits the amount recoverable to £250 per leaseholder regardless of the actual cost of the works — unless the Tribunal grants dispensation.

The Leasehold and Freehold Reform Act 2024 received Royal Assent in May 2024 and introduces the most significant changes to leasehold law in a generation. Key provisions include:

• Longer standard lease extensions: Leaseholders of houses and flats will be able to extend their lease by 990 years (rather than the current 90 years for flats and 50 years for houses) on payment of a premium.
• Abolition of marriage value: The 'marriage value' premium payable for leases under 80 years has been abolished, significantly reducing the cost of lease extension for many leaseholders.
• Two-year ownership rule removed: The requirement to have owned a leasehold property for two years before qualifying for lease extension or collective enfranchisement has been removed.
• Capped ground rents: The Act prohibits ground rents in lease extensions above a peppercorn (effectively zero).
• Costs provisions: The default rule that leaseholders pay the landlord's legal costs in lease extension and enfranchisement proceedings is changed — costs will generally be paid by each party.
• Right to Manage improvements: The Right to Manage (RTM) process is simplified and the 25% commercial premises restriction is relaxed.

Many provisions require secondary legislation to bring them into force — check the current implementation status at GOV.UK or with a leasehold specialist.

Leaseholders have two important collective rights to take control of their building:

Right to Manage (RTM): Under the Commonhold and Leasehold Reform Act 2002 (as amended by the Leasehold and Freehold Reform Act 2024), qualifying leaseholders can take over management of their building by setting up an RTM Company — without having to prove any fault or mismanagement by the current freeholder. To qualify:

• The building must be self-contained and contain at least two flats
• At least two-thirds of flats must be held by qualifying tenants (long leaseholders)
• At least 50% of qualifying leaseholders must participate

The RTM process involves forming an RTM Company (a company limited by guarantee), serving a Notice of Claim on the freeholder, and waiting for the claim period to expire. The freeholder can challenge the claim only on limited grounds.

Collective enfranchisement: Under the Leasehold Reform, Housing and Urban Development Act 1993, qualifying leaseholders can collectively purchase the freehold of their building. The process involves forming a nominee purchaser, serving an Initial Notice, obtaining a valuation, and negotiating or applying to the Tribunal for the price. The leaseholders pay a premium determined by a statutory formula. Once the freehold is purchased, the residents own the building collectively, typically through a freehold company.

Both RTM and collective enfranchisement are complex legal processes — seek advice from a solicitor specialising in leasehold law before starting either.