Managing agent fees are one of the most contested areas of the leasehold system — and one of the areas where we find overcharging most consistently when we review Section 20 bills. The challenge for leaseholders is that “managing agent fees” covers a wide range of charges, some of which are clearly legitimate, some of which are legally questionable, and some of which are straightforwardly excessive. Here’s how to tell the difference.
The Basic Legal Framework
Under the Landlord and Tenant Act 1985, service charges — including managing agent fees — must be “reasonably incurred.” This is the core test. It doesn’t matter whether the fee is contractually permitted under the lease; if it’s excessive compared to the market rate for similar services, it may not be recoverable.
RICS (the Royal Institution of Chartered Surveyors) publishes guidance on professional fees in property management. While RICS guidance is not legally binding, the First-tier Tribunal regularly refers to it when assessing whether charges are reasonable.
Management Fee: The Annual Charge
The annual management fee — charged for day-to-day management of the building — is typically expressed as a fixed fee per unit per year, or sometimes as a percentage of the service charge budget.
Reasonable benchmarks for annual management fees (2025):
- Basic block management (under 20 units): £250–£400 per unit per year
- Mid-range management (20-50 units): £200–£350 per unit per year
- Large block (50+ units): £150–£250 per unit per year
If your managing agent is charging £600–£800 per unit per year for a thirty-unit block, that’s significantly above market rate and worth challenging.
Contract Administration / Project Management Fees for Major Works
This is where we see the most significant overcharging. When major works are carried out under a Section 20 consultation, the managing agent typically charges a fee for overseeing the project. This is legitimate — project management is a real service — but the rate is frequently excessive.
RICS guidance suggests these fees should be:
- Under £50,000 contract: 8–12%
- £50,000–£200,000: 6–10%
- Over £200,000: 4–8%
We regularly see managing agents charging 15–25% on top of the contract sum. On a £60,000 project, the difference between 10% and 20% is £6,000 — extracted directly from leaseholders’ service charge funds, above any reasonable professional standard.
Legal Fees
Managing agents sometimes charge leaseholders for the legal costs of drafting Section 20 notices, dealing with tribunal proceedings, or enforcing service charge arrears — even when those enforcement costs relate to other leaseholders, not you.
Whether such fees are recoverable depends on your lease. Many leases do permit recovery of legal costs through the service charge, but only to the extent they are reasonably incurred. Legal costs for tribunal proceedings in which the freeholder lost are generally not recoverable through the service charge — though managing agents sometimes try anyway.
“Administration Charges” — The Hidden Revenue Stream
Beyond the headline management fee, many managing agents levy a range of additional “administration charges” for specific activities: providing mortgage references, dealing with lease assignments, issuing Section 20 notices, responding to solicitor enquiries.
The Commonhold and Leasehold Reform Act 2002 defines administration charges separately from service charges and provides that they must be “reasonable.” Leaseholders can apply to the First-tier Tribunal for a determination that an administration charge is unreasonable. Common administration charges we see:
- Mortgage reference / landlord reference: £50–£150 is typical; we sometimes see £250–£400
- Lease assignment (providing information on sale): £100–£300 is typical; we see up to £800
- Section 20 notice administration: should be included in the management fee; sometimes charged separately at £100–£250 per notice
How to Challenge Excessive Managing Agent Fees
The process is the same as challenging major works costs:
- Request a full breakdown of all fees charged
- Compare against market rate and RICS guidance
- Write a formal challenge letter citing specific excessive items
- If unresolved, apply to the First-tier Tribunal for a reasonableness determination
The tribunal has wide powers to reduce service charges it considers unreasonable, and managing agents are increasingly aware that inflated fees don’t survive scrutiny in proceedings.
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