In short
A service charge is what leaseholders pay, under their lease, towards running, insuring and repairing the building. By law it must be reasonable, reasonably incurred, demanded in the correct form and held on trust. We prepare the budget, issue compliant demands, chase arrears through a documented process, and hold funds in a client account protected by the UKALA Client Money Protection scheme (membership 24113).
The service charge year
Every lease sets its own rules: the accounting year, whether charges are paid in advance, how many instalments, each flat's percentage and whether a reserve fund is allowed. Before we issue a single demand, we read the leases and build a summary of those rules for the directors. A typical year looks like this:
- BudgetPrepared two to three months before the year starts, based on contracts in place, the planned maintenance plan and last year's actual spend. Shared with directors for approval.
- DemandsIssued on the dates the lease sets, with the statutory summary of rights and obligations.
- Collection and spendPayments reconciled at least monthly, invoices checked against orders before payment, and an income and expenditure tracker shared with directors.
- Year-end accountsPrepared after the year closes, reviewed or audited by an independent accountant where the lease or law requires it, and sent to leaseholders with any balancing charge or credit.
Setting a budget that holds
A budget that is too low is not a saving. It means a mid-year shortfall, an unplanned extra demand and a loss of trust. We build budgets line by line, from real contracts and quotes, and we show the directors where every figure comes from. Our guide on what a service charge budget should include goes into the detail.
Reserve funds
Where the lease allows it, a reserve (or sinking) fund spreads the cost of large, predictable items like roofs, lifts and external decorations across several years. It is the single most effective way to avoid large one-off Section 20 demands. We size the reserve from a 10-year planned maintenance plan rather than a round number. See how much a block should hold in reserve.
Demands and legal requirements
A service charge demand is only enforceable if it is issued properly. The main rules in England are:
- Summary of rights and obligations: every demand must be accompanied by the prescribed summary. Without it, the leaseholder can lawfully withhold payment until it is served.
- Landlord's name and address: demands must include the landlord's name and an address in England and Wales (sections 47 and 48 of the Landlord and Tenant Act 1987).
- The 18-month rule: costs must normally be demanded within 18 months of being incurred, or leaseholders must be notified in writing within that period that they will be charged later (section 20B of the 1985 Act).
- Reasonableness: costs must be reasonably incurred and works carried out to a reasonable standard (section 19). Leaseholders can ask the First-tier Tribunal to decide.
- Information rights: leaseholders can request a summary of costs and inspect the supporting invoices and receipts.
Year-end accounts
We aim to issue year-end accounts within six months of the year end. The accounts show the budget against actual spend, the reserve fund balance, and each flat's balancing figure. Where an accountant's certificate or report is required by the lease, we use an independent accountant working to the recognised professional guidance for residential service charge accounts.
Arrears: firm, fair and documented
When one leaseholder does not pay, everyone else ends up funding their share. We deal with arrears early and consistently, and we record every step so that, if it reaches the tribunal or court, the paper trail is complete.
- Around 14 days after due dateFriendly reminderMost arrears are oversights. A clear reminder with the statement of account solves the majority.
- Around 28 daysFormal reminder and a conversationWe call, not just write. Where someone is in genuine difficulty, we can propose a payment plan for the directors to approve.
- Around 42 daysLetter before actionA formal letter that complies with the pre-action rules for debt claims, sent only with the directors' approval.
- Directors' decisionLegal recoveryA claim through the county court or an application to the First-tier Tribunal, usually through specialist solicitors. Any costs recoverable under the lease are claimed from the defaulting leaseholder, not the building.
Forfeiture of a lease is heavily restricted for service charge debts and is almost never the right tool. We will explain the realistic options at each stage rather than threaten remedies that cannot be used.
How client money is protected
Service charge and reserve funds are held on trust for the leaseholders. At EKIN they are held in a client bank account with a UK high-street bank, completely separate from EKIN's own money, reconciled monthly and reported in the year-end accounts. EKIN Property Management Ltd is a member of UKALA and covered by the UKALA Total Loss Client Money Protection scheme (membership 24113), which is designed to protect client funds held in the client account if an agent misappropriates them, subject to the scheme's terms, limits and exclusions. More on our regulation and client money page.
What changes in 2027
In July 2026 the government confirmed how it will bring in the service charge transparency measures in the Leasehold and Freehold Reform Act 2024: standard demand forms, a prescribed format for accounts, annual reports for leaseholders and clearer rules on administration and insurance charges. Regulations are expected later in 2026, with leaseholders seeing the changes during 2027. Our reporting format is already close to what is proposed, which should make the change straightforward. See leasehold reform in 2026.
Frequently asked questions
Can we see where the service charge money is at any time?
Yes. Named directors get permission-controlled access to an agreed set of the building's current records, including the income and expenditure position and arrears summary. See director reporting and access.
Do you charge leaseholders for chasing arrears?
Only where the lease allows administration charges and only at a reasonable level. Any such charge is set out in advance and charged to the leaseholder in arrears, not to the building.
What happens to the money if EKIN stops trading?
Service charge funds are held on trust in a client account, separate from EKIN's own money. On top of that, EKIN is a member of UKALA's Total Loss Client Money Protection scheme, subject to the scheme's terms, limits and exclusions.
Can service charges be challenged?
Yes. A leaseholder can apply to the First-tier Tribunal (Property Chamber) to decide whether a charge is payable and reasonable. Clear budgets and records are the best way to avoid disputes getting that far.
Last reviewed 2026-09-23 against the sources listed. This page is general information about England and is not legal advice; the lease for your building always comes first.
Sources: Landlord and Tenant Act 1985, ss.18–30; Lease advice: leasehold reforms to charges.