Finance glossary
Service Charge
In simple terms
A service charge is what leaseholders pay towards the upkeep of a building’s shared parts — things like the roof, hallways, lifts, gardens and buildings insurance.
On this page
What does service charge mean?
A service charge is the money leaseholders (usually of flats) pay to the freeholder or managing agent to cover the cost of maintaining and running the parts of the building they share — such as the structure, communal hallways, lifts, gardens, cleaning and buildings insurance.
It is set out in the lease and is separate from any ground rent. It normally also includes a contribution to a “sinking fund” or reserve for future big repairs.
How a service charge works
The charge is usually estimated at the start of the year and then reconciled against actual spend. Costs are shared between leaseholders according to the lease, often as an equal share or by the size of each flat.
For larger “major works” — like a new roof or lift — leaseholders can face significant one-off bills. Landlords must follow a formal consultation process (“Section 20”) before charging for major works or long-term contracts above set thresholds.
How could this affect me?
Service charges are an ongoing cost of owning a leasehold flat, and they can rise. Before buying, ask for the last few years’ accounts to see how much the charge is, how it has changed, and whether major works are planned.
You have rights to challenge charges you believe are unreasonable, but disputes can be time-consuming — so understanding what you are signing up to matters.
Things to watch out for
- Major works can mean large one-off bills on top of the regular charge.
- Charges can rise year on year — check the recent history before you buy.
- A low reserve (“sinking”) fund can mean bigger bills later when major works are needed.
Know your rights
- Service charges must be “reasonable”, and you can challenge unreasonable charges at the First-tier Tribunal (Property Chamber) under the Landlord and Tenant Act 1985.
- Landlords must consult leaseholders (“Section 20” consultation) before carrying out qualifying major works or long-term agreements above set thresholds.
- You have the right to see a summary of how the service charge is spent.
General information, not personal advice
Consumer Credit is an independent information service. We do not provide regulated financial advice or sell financial products. For advice on your own situation, speak to an appropriately authorised firm or a free service such as MoneyHelper. About Consumer Credit.
Sources
We checked this page against these official and authoritative sources.
- GOV.UK, Leasehold property — service charges and other expenses (opens in a new tab). Accessed 22 Aug 2026.
- legislation.gov.uk, Landlord and Tenant Act 1985 — service charges (opens in a new tab). Accessed 22 Aug 2026.