What does a service charge cover, and why your lease decides

If you own or are buying a leasehold flat, the service charge is one of the biggest running costs you take on, and one of the hardest to pin down before you buy. The first question is usually the simplest to ask and the hardest to answer in general terms: what does a service charge cover?

Two flats on the same street can pay very different amounts, and the difference usually comes down to the lease rather than the building itself. This is a plain-English look at what a service charge tends to cover, and where the real answer for your own flat is written down.

What does a service charge cover?

A service charge is the money a leaseholder pays towards running and maintaining the building and its shared parts. In a typical block that covers things like cleaning the communal areas, buildings insurance, servicing a lift, lighting the hallways, maintaining any shared grounds, and repairs to the roof and structure. The freeholder or their managing agent arranges the work and collects the money, and each leaseholder pays a share of the cost.

Why there is no standard list

There is no fixed national list of what a service charge covers. Each lease sets out what the freeholder has to provide, and what the leaseholder contributes towards, so the answer changes from one building to the next. Windows are a good example: one lease makes the freeholder responsible for them, another leaves them with the flat owner. Whether a lift, an entry system or the grounds are shared and chargeable is decided the same way. The bill follows the wording of the lease.

What the law adds on top

The lease isn't the whole story. The Landlord and Tenant Act 1985 sets limits that apply on top of it: service charge costs have to be reasonable, and the work reasonably carried out. There are also points at which the freeholder normally has to consult leaseholders before spending. The freeholder normally has to consult before any works where one leaseholder's share would come to more than £250, and before signing a long-term agreement lasting more than 12 months that would cost any one leaseholder more than £100 a year. This is the process often called Section 20 consultation. The Act does not replace your lease; it sits alongside it, and the place where the two meet is often where questions come from.

Where to find it in your lease

The service charge terms usually have their own section, sometimes a separate schedule. Two lines in it explain a lot of what lands on your annual statement. The first is the apportionment, which is how your share is worked out; it might be a fixed percentage, a fraction, a split by floor area, or an equal share between flats. The second is whether the lease provides for a reserve fund, sometimes called a sinking fund, which is money collected in advance towards big future jobs such as a new roof or lift.

When a charge doesn't look right

This is where it can get technical, because the lease wording and the Act can both be in play at once. A charge that looks high, or a cost you did not expect, can turn entirely on how one clause is drafted, or on whether the reasonableness and consultation rules were followed. Because it depends on the exact wording, a service charge query may require solicitor review. A dispute about whether a charge is reasonable can be taken to the First-tier Tribunal (Property Chamber).

The plain-English point

Understanding what you pay for shouldn't need a law degree, yet service-charge clauses are often written as though it does. Reading that wording back in plain English, so you can see what your own lease actually sets out, is the kind of thing a Lease Translator report is built to do.

If you want to see how your annual charge compares with typical figures first, the free and ungated Service Charge Benchmark tool is a good place to start.