Five Lines to Question: A Leaseholder’s Audit of the Service Charge Demand

A service charge demand is an invoice, not a verdict. That distinction matters more than ever in 2026, as leaseholders in new-build blocks absorb higher building safety, insurance and maintenance costs. The transparency direction introduced through the Building Safety Act 2022 and related measures has improved access to information, but it has not removed the need for leaseholders to read the demand line by line.

The demand is not the same as the debt

Liability depends on the lease, on the reasonableness of the costs and on whether the landlord or managing agent has followed the correct process. A demand may be payable even where a challenge is underway, so withholding payment without advice can expose a leaseholder to forfeiture and costs. The safer course is usually to pay under protest, keep evidence and pursue the specific query through the proper channels. This is not obstruction. It is the discipline that makes transparency meaningful.

Five clauses to challenge

1. The management fee

Management fees are often presented as a single figure, but the underlying contract may permit additional charges for project management, inspections, administration or contractor oversight. Check whether the fee is fixed, inflation-linked or capped, and whether the same work appears twice. Ask for a breakdown of the fee, the scope of services and any commission or connected-party arrangement. A recurring ‘administration’ charge with no stated output is a legitimate question, not a petty one.

2. The reserve fund

A healthy reserve fund prevents sudden special levies; a thin one shifts risk onto leaseholders. Ask for the current reserve balance, the asset management plan and the condition survey behind future works. Challenge reserve spending that duplicates routine maintenance, and check whether building safety costs are being counted twice—once in the reserve and again in the annual demand. If major works are planned, the reserve strategy should be evidenced, not asserted.

3. Building safety costs

Remediation, fire risk assessments, waking watch and insurance are among the fastest-growing cost heads in many blocks. Not every building safety cost is automatically recoverable through the service charge. The lease, the statutory protections and the allocation between landlord and leaseholders all matter. Ask for a clear breakdown of the cost, the legal basis for recovery, any grant funding and whether the landlord is meeting its own obligations. A line labelled ‘building safety’ should never be accepted without supporting documentation.

4. Major works and consultation

Qualifying major works are subject to consultation requirements, and so are long-term qualifying agreements. Ask for the consultation notice, the estimates obtained, the contractor selection process and an explanation of any final cost that exceeds the estimate. A red flag is the splitting of works into smaller packages to avoid consultation, or a retrospective demand for works already completed. If the process was defective, the recoverable amount may be limited; legal advice should be taken promptly.

5. Apportionment, insurance and professional fees

Check the lease percentages and the floor areas used to calculate them. Balconies, terraces, commercial units and mixed-use areas can distort apportionment if they are treated inconsistently. Insurance deserves separate scrutiny: commission, excess levels, revaluation and the scope of cover all affect the bill. Legal and professional fees should be tested for recoverability, particularly where they arise from the landlord’s own breach or from a dispute the leaseholder did not cause.

A framework for challenging without jeopardising the lease

First, gather the lease, the current demand, the budget, the previous year’s accounts, any consultation notices and the insurance summary. Second, write to the managing agent requesting a summary of costs and the opportunity to inspect supporting documents under the statutory provisions in the Landlord and Tenant Act 1985. Third, submit a focused query letter: identify the line item, cite the lease clause, ask a specific question and set a reasonable deadline. Broad allegations are easy to dismiss; precise evidence requests are harder to ignore.

Fourth, coordinate with other leaseholders where the issue is communal. A collective challenge is often more efficient and can demonstrate that the concern is systemic rather than personal. Fifth, use the available redress routes. Managing agents should belong to a redress scheme, and the First-tier Tribunal (Property Chamber) can determine whether service charges are reasonable. Time limits apply, so take advice early rather than waiting for the next demand.

Finally, negotiate. A successful challenge may result in a correction, a credit, a phased payment arrangement or a revised reserve plan. It rarely produces a wholly free service charge, and it should not be pursued as though it might.

The investor’s angle

For buyers of new-build flats, the service charge is a due diligence item, not a footnote. Ask for three years of accounts, the reserve plan, building safety information, cladding status and any litigation or dispute history. A low headline service charge can be a warning sign if reserves are visibly inadequate. For existing owners, the same discipline applies annually: compare the budget with the actual accounts, track recurring overspends and keep a file of correspondence.

Transparency rules only work when leaseholders use them. A well-evidenced challenge is not a refusal to pay; it is part of responsible ownership and, for investors, part of protecting the asset’s long-term net income.