Service Charges: What Does Your Lease Actually Say?

Mar 9, 2026

Service charges are one of the most common areas of dispute within leasehold property — and often, the issue comes down to one key document: the lease.

No two leases are identical. The lease will clearly set out how and when service charges must be demanded, and it is essential that this process is followed precisely.

How Are Service Charges Demanded?

Your lease will usually specify:

  • Whether service charges are payable annually, half-yearly, quarterly, or at another interval

  • Whether payments are made in advance (on account) or in arrears

  • Whether a budget must be issued

  • Whether a balancing charge can be raised after year-end

Some leases are very prescriptive. Others allow more flexibility. In rare cases, a lease may even provide for multi-year cycles.

The key point is this: the lease governs the demand structure — not custom, convenience or preference.

Can You Raise Interim Demands?

This depends entirely on the wording of the lease.

Many leases allow the landlord or management company to demand payments “on account” based on an estimated budget. This allows for interim demands to be raised, with a balancing charge issued once actual expenditure is known.

However, if the lease specifies that service charges are demanded annually and does not provide for interim payments, raising additional mid-year demands may not be enforceable.

Before issuing any interim demand, it is essential to check:

  • Does the lease expressly permit advance or on-account payments?

  • Does it allow supplementary or balancing charges?

  • Is there wording allowing for unforeseen expenditure?

If the lease does not allow it, the ability to recover those sums could be compromised.

What Happens If You Don’t Demand Correctly?

This is where mistakes can become costly.

If service charges are not demanded strictly in accordance with the lease and statutory requirements:

  • The demand may be invalid

  • Leaseholders may legally withhold payment

  • The debt may not be recoverable through the courts

  • Interest or administration charges may not apply

  • Recovery action may fail

In addition, service charge demands must comply with statutory requirements under the Landlord and Tenant Act 1985 and 1987, including:

  • Correct name and address for service

  • Summary of rights and obligations

  • Compliance with Section 47 and Section 48 notices

Failure to include required information can render a demand invalid until corrected.

Why Accuracy Matters

Directors of RMCs and freeholders have a duty to act in accordance with the lease. Even well-intentioned attempts to “adjust” collection methods for convenience can create enforcement issues later.

Service charges are only recoverable if:

  1. They are permitted by the lease

  2. They are reasonably incurred

  3. They are demanded correctly

If any of those elements fail, recovery can become problematic.

Getting It Right from the Start

Professional block management ensures that:

  • Budgets are prepared in line with lease provisions

  • Demands are issued in the correct format and timeframe

  • Statutory notices are included

  • Interim or balancing charges are raised only where permitted

  • Records are maintained for transparency and audit

Service charge administration is not simply an accounting exercise — it is a legal process governed by the lease.

If you are unsure whether your building’s service charges are being demanded correctly, or if you are a director seeking clarity on your responsibilities, our Block Management team at Oakfield would be happy to advise. Find our contact details here.