Service charges are one of those things that can quickly turn into a source of frustration—for both landlords and leaseholders. While they’re an essential part of managing leasehold properties, issues often crop up when the numbers don’t quite add up or when things aren’t explained clearly. The good news? Many of these problems can be avoided with timely and transparent service charge reconciliation.
In this article, we’ll walk through what landlords need to know in 2025 about getting service charge reconciliation right, staying on the right side of the law, and—just as importantly—keeping relationships with leaseholders on good terms.
The Legal Framework You Should Know
If you’re managing leasehold properties in England or Wales, the Landlord and Tenant Act 1985 is your go-to legislation for service charges. Under Section 20B, you have 18 months to notify leaseholders about any costs you plan to recover. Miss that window, and you may lose your right to claim them—unless you’ve given advance written notice.
Leaseholders also have the legal right to request a breakdown of charges under Section 21, and they can ask to inspect the supporting documents (invoices, contracts, etc.) under Section 22. These aren’t just formalities—they’re protections that help keep things fair and open. So if you’re managing the books, keeping good records isn’t just smart; it’s required.
Best Practice
Even when you’re ticking all the legal boxes, you can still face complaints if leaseholders feel like they’re in the dark. That’s where best practice comes in.
The RICS Service Charge Residential Management Code (3rd edition) remains the main industry guidance as of May 2025. It recommends preparing service charge accounts on an accruals basis and reconciling them within six months of the financial year-end.
It also supports the use of Tech 03/11, the technical guidance for preparing residential service charge accounts. Following this gives you a framework that’s not only thorough but also widely respected—ideal for staying organised and showing leaseholders that their money is being handled properly.
Handling Disputes the Right Way
Even with the best intentions, you may still face disagreements. Leaseholders have the right to challenge charges at a First-tier Tribunal (Property Chamber). The tribunal will look at whether the charges were reasonable and whether proper consultation and documentation were provided.
To protect yourself, make sure you’ve got the paperwork to back things up—especially around larger or long-term expenses. And if you’re ever unsure, seeking professional guidance on service charge accounting can help ensure you’re covering all bases.
Conclusion
At its core, good service charge accounting is about more than financial accuracy—it’s about trust. When leaseholders see clear numbers, understandable explanations, and a willingness to be transparent, they’re far more likely to be cooperative.
So, whether you’re a landlord, a freeholder, or a managing agent, staying on top of your service charge accounting isn’t just good business—it’s your best tool for avoiding complaints, keeping tenants satisfied, and maintaining the long-term value of your property.
And in a world where expectations (and legislation) are only getting stricter, it’s the kind of diligence that sets the best landlords apart.
