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Service charge and ground rent arrears

If you own a leasehold property, you’re usually required to pay a service charge to cover the maintenance costs of the building you live in. You may also have to pay ground rent to the freeholder as part of your lease.

Information about how and when to pay your service charge and ground rent should be included in your lease. Falling behind with service charge or ground rent can lead to further action including eviction and repossession.
 

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’re not sure if you should be paying a service charge, you should check your lease or contact your landlord or management company.

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.

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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

A different process takes place if you're occupying a property as your only or principal home, and your annual ground rent is more than £250 (or £1,000 if you live in London). In these cases, you should contact us for advice.


Bear in mind that ground rent is only payable on demand. This means that even if it's included in the lease, you don't have to pay until your landlord sends you a bill.

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.

Failing to pay ground rent arrears after the court has ordered you to pay could result in the freeholder using bailiffs (enforcement agents) to evict you.

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.