Many leaseholders use “service charge” and “major works charge” interchangeably, and it’s easy to see why — both come from your freeholder, both go towards the building, and both can produce eye-watering demands. But they’re actually different types of charge with different legal protections, different consultation requirements, and different challenge mechanisms. Understanding the distinction could save you thousands of pounds.
What Is a Service Charge?
A service charge is an amount payable by a leaseholder under the terms of their lease for the costs of services, repairs, maintenance, improvements, insurance, and management of the building. In most leasehold flats, this covers things like:
- Building insurance
- Communal cleaning
- Garden maintenance
- Lift servicing
- Communal electricity
- Managing agent fees
- Day-to-day repairs and maintenance
Service charges are typically levied on a regular basis — monthly, quarterly, or annually — and are set in advance based on a budget. The freeholder estimates costs for the year, charges leaseholders their share (usually a fixed percentage defined in the lease), and reconciles at year end. If actual costs were lower than budgeted, leaseholders get a credit; if higher, they may face a further demand.
What Are Major Works?
Major works refer to larger-scale capital works to the building — repairs or improvements that go beyond routine maintenance. Common examples:
- Full roof replacement or major roof repair
- External redecoration (repainting the facade)
- Window replacement across the block
- Lift replacement
- Significant structural repairs
- New fire safety systems (particularly relevant post-Grenfell)
Major works are typically funded separately from the routine service charge, either through a sinking fund (where leaseholders contribute annually to a reserve) or through a one-off lump sum demand at the time the works are carried out.
The Legal Distinction That Matters: Section 20
Here’s where the distinction becomes financially important. Under Section 20 of the Landlord and Tenant Act 1985, a freeholder must follow a formal consultation process before carrying out works that will cost any individual leaseholder more than £250. If they don’t, their ability to recover more than £250 per leaseholder is restricted.
This consultation requirement specifically applies to “qualifying works” — the kind of larger, one-off projects that we call major works. Day-to-day service charge items (cleaning, insurance, routine maintenance) don’t generally trigger Section 20, because they’re ongoing contracted services rather than specific works projects.
However, a separate consultation requirement under Section 20 also applies to “qualifying long-term agreements” — contracts for services lasting more than twelve months costing more than £100 per leaseholder per year. This can include management contracts and servicing contracts, not just physical works.
The Sinking Fund Question
Many freeholders collect a “reserve fund” or “sinking fund” contribution through the annual service charge — money set aside specifically for major works when they arise. If your block has a sinking fund, major works should ideally be partly or fully funded from it, reducing or eliminating the one-off lump sum demand.
In practice, sinking funds are often under-funded, meaning leaseholders still face large one-off demands when major works are carried out. If you’re paying into a sinking fund and there’s still a significant major works demand, you should ask for a clear accounting of the fund balance and how it’s been applied.
Can You Challenge Both?
Yes. Under Section 27A of the Landlord and Tenant Act 1985, the First-tier Tribunal can determine whether any service charge — whether routine or major works — is reasonable. The process is the same; the evidence required is the same; the tribunal’s powers are the same.
In our experience, major works charges are challenged more often than routine service charges — partly because the sums are larger, and partly because the bills are more specific and therefore easier to cost-check. But inflated routine service charges (particularly excessive managing agent fees) are equally challengeable and often worth pursuing.
What This Means in Practice
When you receive any demand from your freeholder — whether it’s your annual service charge or a one-off major works contribution — the same question applies: are these costs reasonable? And you have the same legal right to challenge either type at the First-tier Tribunal if they’re not.
The key difference is the Section 20 consultation layer, which gives additional protections specifically for major works — protections that can reduce a £30,000 bill to £250 per leaseholder if not properly followed. That protection doesn’t exist for routine service charges, which is why procedural compliance matters even more in major works situations.
Think your bill might be inflated? Get an independent assessment from Section20.org.uk — 48-hour turnaround, fixed fee. Email info@rapidqs.uk, WhatsApp us at +44 7438 628277 (5-minute response guaranteed), or fill in our contact form at section20.org.uk