Is a Freeholder Entitled to Increase Service Charges Substantially?

In the realm of leasehold properties, the relationship between freeholders and leaseholders is central to a property’s management and operation. One point of contention often arises around service charges, particularly when a freeholder decides to make substantial increases. This blog aims to clarify whether a freeholder is entitled to increase service charges significantly and the factors that influence this decision.

Understanding Service Charges

Service charges are fees paid by leaseholders for the maintenance and management of the communal areas of a property. These charges can cover various services such as cleaning, maintenance, gardening, insurance, and more. The standard practice is that leaseholders receive a breakdown of these charges annually, detailing the expected costs for the coming year.

Freeholder Rights and Responsibilities

A freeholder, as the owner of the land and the building, has certain rights and responsibilities regarding service charges. They are required to maintain and manage the building effectively and to ensure the safety and comfort of the residents. However, with these rights come obligations to act reasonably and transparently in how they increase service charges.

Legal Framework Governing Service Charges

In England and Wales, service charges are governed by several key pieces of legislation, including the Landlord and Tenant Act 1985 and the Leasehold Reform, Housing and Urban Development Act 1993. These laws set out the framework within which freeholders can operate, including stipulations about how service charges should be calculated and increased.

1. Reasonableness: The law mandates that any increase in service charges must be reasonable. What constitutes reasonableness can depend on various factors, including market conditions and the level of service being provided. Freeholders cannot impose arbitrary increases without justification.

2. Commonhold and Leasehold Reform: Changes in legislation such as the Commonhold and Leasehold Reform Act have sought to provide more protection for leaseholders. These reforms aim to ensure that leaseholders have a clearer understanding of their rights and the means to challenge unreasonable service charges.

3. Consultation Requirements: For certain types of work or major changes to service charges, particularly those that exceed a specific threshold, freeholders must consult with leaseholders beforehand. This process helps to ensure that leaseholders have a voice in decisions that directly affect their financial obligations.

Grounds for Increasing Service Charges

Freeholders may justify an increase in service charges based on several legitimate grounds:

1. Increased Costs: If the costs associated with maintaining the property rise—such as increases in utility prices, council tax, or hiring contractors—the freeholder may be entitled to raise service charges to cover these expenses.

2. Enhanced Services: If the freeholder decides to offer additional services or improve existing amenities, leaseholders may see a corresponding increase in service charges. This could include better security, upgraded facilities, or improved maintenance standards.

3. Compliance with Legislation: Sometimes, changes in regulations require additional spending that can lead to an increase in service charges. Compliance with health and safety standards, for instance, may necessitate unexpected expenditures.

4. Repairs and Maintenance: Major repairs, especially ones that were not anticipated or budgeted for, can lead to significant increases in service charges. Leaseholders should be informed about such needs and allowances within the budget.

Can Leaseholders Challenge Increased Service Charges?

If leaseholders believe that increased service charges are unreasonable, they have several routes for recourse:

1. Open Communication: Initially, leaseholders should engage in dialogue with the freeholder. Expressing concerns and seeking clarity can sometimes resolve misunderstandings about the charges.

2. Review Lease Terms: Leaseholders ought to thoroughly review their lease agreement, as this document outlines the rights and obligations of both parties regarding service charges. Terms of the lease can set limits on how much and how frequently service charges can increase.

3. First-tier Tribunal (Property Chamber): If discussions fail, leaseholders can make an application to the First-tier Tribunal. This independent body has the authority to review service charge disputes and can determine whether an increase is fair and lawful.

4. Consulting Professional Advisors: Seeking legal advice can also be beneficial. Professionals specialising in property law can offer insights into lease agreements, service charge calculations, and the feasibility of a challenge.

Conclusion

Freeholders do have the right to increase service charges, but this right is tempered by legal obligations to ensure that any increase is reasonable and justifiable. As a leaseholder, understanding your rights, responsibilities and the legal context surrounding service charges is crucial.

Being proactive, staying informed about the maintenance of your property and engaging constructively with your freeholder can lead to a more harmonious living situation and help manage costs effectively. Ultimately, fostering clear communication and an understanding of shared responsibilities can greatly enhance residents’ experiences in leasehold properties.

If you have concerns about service charges or feel that an increase is unjustified, it is vital to act promptly to ensure your interests are protected and to seek the relevant advice or assistance as needed.

If you are looking for a first rate conveyancing service why not give one of Alexander JLO’s specialist property lawyers a call on 020 7537 7000, click on the get a quote button or email quote@london-law.co.uk for a free, no-obligation quotation? Come and see what we can do for you.

This blog was prepared by Alexander JLO’s property partner Matt Johnson on 19th February 2026 and is correct at the date of publication. Matt has many years of experience of dealing with property work and specialises in new build and shared ownership properties.  His profile on the independent Review Solicitor website and be found here