Problems found after you bought · Service charges and major works
When I bought this property, I didn’t know A service charge or major works bill could hold up a sale or a remortgage. Now I’m stuck.
Would you have bought the property if you had known?
If you had known what the service charge could become before you committed, and understood the problems it could cause when you later came to sell or remortgage, would it have changed your decision?
- Would you have paid the same price?
- Would you have wanted it investigated first?
- Would you have walked away?
If knowing about the problem might have changed what you did, the next question is obvious.
Did you receive the right advice when you bought?
You may not know the answer yet. But if nobody explained the problem, or you are now questioning what you were told at the time, that is worth looking at.
You don’t need to know whether anyone was at fault. Tell us what happened and when you bought. We’ll talk it through with you.
Why service charges and major works can hold up a sale or remortgage
Many variable leasehold service charges are collected on account using an estimate for the relevant accounting period. The lease determines when payments are due, how the owner’s share is calculated and whether final accounts or a certificate produce a balancing adjustment. If the actual expenditure exceeds the estimate, a further sum may become due. If it is lower, the surplus may be credited, carried forward or otherwise dealt with as the lease provides.
A balancing demand can therefore arrive for a period for which payments have already been made. Where a sale completes before the final position is known, the parties sometimes agree a retention from the seller’s proceeds. The lease governs liability to the landlord or management body; the sale contract governs how responsibility is adjusted between the seller and buyer.
Major works can create a separate problem. Where the statutory consultation requirements apply to qualifying works or a qualifying long-term agreement, the landlord will normally have to follow the process commonly called Section 20 consultation. Failure to comply can limit what is recoverable from leaseholders unless the tribunal grants dispensation. Consultation notices, estimates and demands can arrive during a sale, and the sums involved may be substantial. Requirements differ between lenders.
How the problem usually surfaces
A balancing charge after the year end
The accounts show the estimate was too low, and a further sum is demanded for a period you had already paid for.
Major works or a Section 20 notice
Consultation notices or estimates have been served, or works are known to be coming, and nobody can say what your share will be.
The seller will not agree a retention
You ask for money to be held pending the final accounts, but the seller refuses. Any later balancing demand must then be dealt with under the lease and sale contract, with no retained fund available.
The percentage does not add up
The lease sets a fixed share, but the percentages across the building do not total the whole, or yours cannot be reconciled with what is demanded.
Service charge arrears and a demand that may not be valid
Sums are said to be outstanding, but the demands may not have carried the information the law requires.
Little or nothing in the reserve or sinking fund
The accounts show that little has been set aside. Substantial work may therefore result in a large one-off demand or require some other funding arrangement.
What if major works or a Section 20 notice have arrived?
Establish whether consultation notices or estimates have been served, what stage the process has reached, and whether the work is to be funded from the reserve or sinking fund, from a one-off demand or over time. Ask your conveyancer what has been notified in writing rather than relying on what is being said informally, because a buyer’s enquiries and a lender’s requirements turn on the documents.
What you can do about it now
Get the numbers in front of you: the last two or three years of accounts, the current estimate, the reserve or sinking fund position, and anything served about proposed works.
If the accounts for the current period are not final, the buyer may ask for a service charge retention from your sale proceeds. The amount, duration, permitted deductions and arrangements for releasing the balance should be recorded in the contract. The lease determines who is liable to the landlord, while the contract determines how responsibility is adjusted between seller and buyer. It should not be left to an informal understanding.
Check the contribution mechanism. The lease or deed may specify a fixed percentage, a formula or another basis for calculating your share. Ask your conveyancer what it provides and whether the sums demanded can be reconciled with it. If no workable basis can be identified, that may also raise a defective lease issue.
Treat arrears or a disputed demand urgently. Do not assume that a defect in the demand permanently removes the underlying liability or that payment can safely be withheld. Obtain advice about the demand, any available challenge and how the position should be resolved for the sale or remortgage.
If you are selling, your conveyancer can ask the buyer’s solicitor what remains unresolved and whether it arises from the buyer’s lender’s requirements. If you are remortgaging, your conveyancer can check your proposed lender’s requirements directly.
What happened when you bought?
The lease or deed as it stood when you bought may have set out the basis on which service charges were payable and how your contribution was calculated. Any management information obtained at the time may have included recent accounts, the current estimate, the reserve-fund position and information about proposed works. It could not have predicted later expenditure that was not then known or reasonably foreseeable. The questions are what information was obtained, what it disclosed, whether any known or notified works were investigated, whether a retention was agreed and what you were told about the estimated nature of the charge.
Several records from the time may matter, and some may survive. The lease or deed may record the apportionment or the basis on which the contribution was to be calculated. The management pack or LPE1 obtained then may show the accounts, the estimate and the reserve fund. The contract may contain a retention clause or rider, and the completion statement may show the apportionment paid. The lender’s historical written instructions may also be difficult to recover, because they are revised regularly and superseded versions disappear from public view.
Was this property really mortgageable when you bought?
Getting a mortgage when you bought does not necessarily tell you how readily mortgageable the property was across the wider market. There are two historical questions worth asking.
What did your own lender’s written requirements say about service charges when you bought? And what express requirements did other lenders have recorded at the same time?
Lenders’ written requirements were not necessarily uniform, and their wording changed over time. That means both which lender you used and when you bought can matter.
Lenders set out in writing what they expect a conveyancer to do about particular features of a property. Those instructions are revised regularly, and superseded versions drop out of public view, which can make a question as simple as what was my conveyancer told about service charges in the year I bought? surprisingly difficult to answer from the sources available today. Lexsure has retained historical lender-specific conveyancing requirements since April 2007, so where the records permit they can help reconstruct what your lender’s requirements said at the time and how that compared with the wider lending market.
Across that period, 19 lenders in our covered archive population have had express requirements about service charges on record, addressed across 4 separate places in their instructions. The earliest express appearance we can identify in the material we hold dates from 2008; the most recent recorded change of wording is 2026.
Two points of precision, because they matter. “Earliest identified” means the earliest express appearance in the material we hold, not the date any requirement began. And where our material for a particular lender and period is incomplete, that lender is left out of these figures rather than counted as having said nothing. We do not treat an incomplete record as showing that the lender had no requirement.
So, when did you buy?
Changing the year here doesn’t send us an enquiry or tell us who you are.
An example of the kind of wording in force 2007 to 2011
One lender’s requirements, not named, by way of illustration. Requirements were not uniform and this is not the wording that applied to your purchase — that depends on your lender and your completion date.
No lender handbook Part-2 (specific) requirements were published prior to . But professionals were still under a duty of care on this topic. It is still worth speaking to us even if the purchase predates .
If we find no express requirement for your lender
Where our material for your lender and period is complete, the answer may simply be that no express wording about service charges appears in it. Where our material is incomplete, we treat that as a gap in what we hold, not as evidence that your lender said nothing.
Either way, the lender’s instructions are only one part of the record from the time.
The wider picture
Historical lender requirements can help us understand how mortgageable the property was when you bought. The conveyancing file and the advice given to you also matter.
Lexsure holds historical Report on Title material: the reports conveyancers sent to homebuyers, going back years. That material shows the kinds of service charge issues that were being addressed when firms reported to buyers, and it is a second and separate record from what lenders required.
The charge and how it was apportioned
Were you told what the service charge was, what share of the whole you paid, and how that share was fixed?
The year-end mechanic
Was it explained that the charge was an estimate and that a balancing sum could follow, and was a retention agreed for the year in progress?
Works in prospect
Were you told about any proposed or notified works, what they might cost you, and whether any reserve fund existed to meet them?
Your rights to information and challenge
Were you told about any applicable rights to obtain service-charge information and challenge a variable service charge, including whether the expenditure and amount were reasonable?
Whether the effect on selling was explained
Were you told the charge, the accounts and any works would be raised again on a future sale, and could matter to a buyer’s lender?
These are examples of issues addressed in historical conveyancing material, not a checklist of what every purchaser should have been told. What mattered in an individual purchase depended on the circumstances and on what was known at the time.
So even if your mortgage completed, or there is nothing unusual in your lender’s historical requirements, it can still be worth talking to us about what happened.
Could this problem have been seen coming?
The relevant starting point is what was known, or could reasonably have been identified, when you bought.
What did the lease say about the charge? What did the accounts show? What was in the conveyancing file? What were mortgage lenders requiring at the time? What kinds of service charge issues were conveyancing firms addressing with homebuyers? And what were you actually told?
Taken together, that can help build a picture of whether the problem you are facing today was already something that should have been considered when you bought.
Did you receive the right advice?
What the historical evidence can tell us
Where the relevant lender and period are covered, we may be able to establish what that lender’s conveyancing requirements said when you bought, and how that compared with the wider record at the time.
- That does not by itself establish that anyone was negligent, or that you have a claim. Those questions need the original file and legal advice.
- The absence of express wording does not establish that the lender accepted the issue.
- What your conveyancer had to tell your lender and what they had to tell you are different questions, and the second depends on the retainer and the circumstances.
Time limits apply, and in some cases the date on which you first knew enough about the problem matters as well as the date you bought, which is why we ask about both. Our full methodology, including how we treat gaps in the record, is set out in the archive and its limits. Where a solicitor later needs formal historical evidence, Lexsure can provide source-evidenced historical lender information.
Sources and review
This page is about the service charge itself and the cost of works. Where the question is who manages the building and your position in relation to the company, see management company problems; where the lease lacks workable machinery for recovering the charge, see defective lease; where the charge on a freehold estate is a rentcharge, see estate rentcharge. Guidance here about the present problem is general information. It is not legal advice about your property.
Leaseholders paying a variable service charge have statutory rights to information, to consultation before qualifying works and to challenge a charge as unreasonable. Those rights, the consultation thresholds and the time limits on recovering a cost are set by statute and change; this page states no figures or periods and the current position must be verified at each review. It states no lender requirement as a general rule, because requirements differ between lenders and change.
Historical lender information is drawn from Lexsure’s archive of lender-specific conveyancing requirements, maintained since April 2007. Figures on this page state the population they are drawn from.