Service Charge
A service charge is a payment collected from leaseholders or sub-tenants to cover the shared costs of managing and maintaining a building or estate. From a landlord’s point of view this can be either:
Income they collect and pass on (for example where they are the head landlord/freeholder), or
A cost they themselves must pay to a superior landlord or managing agent when they own a leasehold flat and then let it out.
Service charges typically cover cleaning and lighting of common areas, gardening, repairs to structure and common parts, buildings insurance, management fees and contributions to a reserve/sinking fund. Under the Landlord and Tenant Act 1985, charges must be reasonably incurred, for works carried out to a reasonable standard, and demanded with prescribed information. Leaseholders can challenge them in the Property Tribunal.
For a buy-to-let landlord, service charges are normally a business expense and cannot usually be added on as a separate “tenant fee” in an assured tenancy, they should be priced into the rent. The Renters’ Rights Act, alongside wider leasehold reform, are tightening rules on transparency, reasonableness and consultation around variable charges, making it harder for poor-quality landlords to hide routine running costs within opaque add-ons to occupiers.
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