Service charge and ground rent arrears

What is a service charge?

A service charge is a bill that covers the costs of any repairs or maintenance to the structure of your building, including drainage, insurance and management charges. You usually pay a service charge monthly or quarterly depending on the agreement with your freeholder.

If you own the property, details about your service charge should be included in your lease. If you rent your property it’s likely that the service charge will be included in your rent but you can check this in your tenancy.

The amount you pay for service charges can vary from year to year, depending on the actual cost of the services to your landlord. You should always treat your service charge as a priority debt as not paying it can have serious consequences.

Disputes with service charges can arise as the freeholder should only charge you a reasonable management fee and not make a profit. Because these charges can change each year, it can become difficult to budget for any changes to your service charge.

If you have a dispute with the amount you’re paying you should contact the Leasehold Advisory Service for more information.

I can’t afford my service charge, what should I do?

If you can’t pay your service charge, or you’ve fallen into arrears, you should contact the landlord or management company of your property to discuss your options for repaying the arrears.
If you don’t take steps to deal with the arrears the freeholder could take court action and you could lose your home.

Need help with service charge or ground rent arrears?

What is ground rent?

Ground rent is a payment you make to the freeholder of your property. It’s usually a condition of your lease and may only be around £100 to £200 a year. Information on paying ground rent should be included in your lease..

What happens if I don’t pay my ground rent?

If you don’t pay your ground rent, the freeholder can apply to the court for repossession of the property. This type of action is known as ‘forfeiture’.

The freeholder can only start taking court action if:

• You’re three or more years in arrears with your ground rent
• You owe £350 or more worth of ground rent, service charges and administration charges

You’re normally given four weeks to repay the arrears. If you’re able to pay what you owe, any legal action stops and your lease will continue as normal.

If your freeholder hasn’t asked you to pay any ground rent for a few years, they can’t ask you to pay more than six years’ worth of backdated payments. They’ll also need to follow the correct process to ask you to pay for it.

If you have service charge or ground rent arrears or you’re finding it difficult to pay your bills, we’d recommend getting debt expert advice as soon as possible.