Service Charges And Ground Rent

Alice Morgan
Alice Morgan
Updated 8 July 2022  | 3 mins read

When you’re budgeting for a new home, service charges and ground rent may be something you’ll have to factor in.

Leaseholders typically pay these fees to their landlords, or a management agency, to cover the costs of maintenance to the property, and the land the property is built on.

They can be costly, but you can dispute them if you believe them to be unreasonable. It is important to understand all relevant costs before signing a mortgage deal.

Key points

  • Service charges can be paid monthly, quarterly, or annually to your landlord or management agency
  • Ground rent will be paid annually and the price is set by the landlord
  • You’ll only need to pay ground rent if your landlord demands it in writing

What are service charges and ground rent?

If you’re a leaseholder, you might pay service charges to your landlord or a management agency who looks after the property for the landlord.

Service charges typically cover things like the maintenance and upkeep of the property, in particular the communal areas.

Ground rent is a separate charge which you’ll pay to your landlord to cover the cost of the land your home is built on.

You only need to pay ground rent if your landlord sends you a written demand for it.

The cost of your ground rent and service charge will be detailed in your lease so it’s worth taking a close look over everything before you move in to the property.

How much are service charges?

Service charges differ for each property, and you’ll usually get an annual breakdown of the payments you’ll need to make monthly, quarterly, or yearly. If you don’t have this, request it from your landlord or management agency.

Research from 2021 by Keller Williams revealed that service charges can reach up to £1900 per year in London, and £650 in the north east of the UK.

Wherever you are, working out this cost can help you to budget your outgoings.

What do service charges cover?

Service charges cover a number of things, such as insurance, repairs, and staff wages.

Your cost breakdown will show you where your money is being spent.

Buildings insurance

If you live in an apartment, your buildings insurance will usually lie with your landlord, or management agency.

It covers the structure of the building you’re living in, and the premium will be included in your service charges. Everyone in the building contributes to the insurance cost.

You’ll still need to buy contents insurance to cover your belongings in your home.


As service charges are taken a year in advance, the service charge covers repairs that will happen across the course of the following year.

These will typically be for communal areas, such as lifts, corridors, and staircases, rather than your personal property.


You’ll pay for your energy bills separately, but your service charge will cover the heating of communal areas to keep the building warm.

Wages of staff

The management agency or landlord will pay cleaners, contractors, and porters to maintain the building, and keep communal areas clean and safe.

Who pays service charges?

Leaseholders pay service charges, whether you’ve bought the property or you’re renting.

Sometimes, a landlord can agree to split the cost with tenants or apartment owners.

Everything will be laid out in your agreement when you buy or rent the property so you’ll understand just how much you’re paying for your service charges.

What is ground rent?

Ground rent is a payment made by the leaseholder to the landlord, for the land that the property is built on.

It can only be increased if you agree for the cost to be put up, or the terms in your lease state that it can be.

Bear in mind that your landlord can ask for unpaid ground rent for the previous six years, so it’s important to keep up with your payments, rather than pay out one big lump sum if you fall behind.

How much is ground rent?

There isn’t a set way of determining ground rent, but you’ll tend to find that older buildings with a long lease can be a lot cheaper - sometimes as little as £1 a year - than more modern buildings which can see you paying around £500 a year.

Remember that you only need to pay it if your landlord demands it in writing.

Challenging the charges

You’re well within your rights to challenge your service charges if you feel it’s unreasonable and you don’t think you should be paying it.

You can apply to the First-Tier Tribunal to dispute it.

However, if you’ve already paid the charge, the dispute is already going through court, or you pay a fixed sum, you won’t be able to sort the issue through the tribunal.

Failing to pay the charges

Failing to pay the charges could see you paying out more money, as the landlord can take legal action against you.

If you don’t agree with the charges, see if you can dispute it rather than failing to pay.

What do I need to understand about service charges?

The main thing you need to understand when it comes to service charges is whether you’re on a fixed or variable service agreement.

If it’s fixed, the payment you make won’t change throughout the year but any additional costs could be added on the following year instead.

However, a variable rate could change throughout the year.

A detailed breakdown from your landlord or management agency will help you understand what you’re paying for.

Once you’ve signed the lease, you’ll need to pay your service charges, otherwise you could face legal action, and even lose your home.

What do I need to understand about ground rent?

Ground rent is an annual one-off fee that you’ll only pay if your landlord demands it.

The landlord can determine what you pay but the government is starting to crack down on landlords taking advantage of this.

Is council tax a service charge?

No, it’s a separate charge you’ll pay directly to the council. Council tax is determined on the location and size of your house, and it’s something you’ll need to consider along with your service charges and ground rent, if you’re moving into a leasehold property.