Who pays the service charge: the landlord or the tenant?

The short answer

The service charge is a cost of owning a leasehold flat, so the owner pays it. When you let the flat, nothing in the lease between you and the freeholder changes: you still owe the service charge, the ground rent and any major works bill. Your tenant pays you rent.

Why you cannot pass it on as a fee

The Tenant Fees Act 2019 lists the only payments a landlord or agent in England may ask a tenant for. They are:

• the rent;
• a deposit (at most five weeks' rent, six when the yearly rent is £50,000 or more) and a holding deposit (at most one week);
• the bills the tenancy says the tenant pays: gas, electricity, water, council tax, the TV licence, broadband and phone;
• a fee for a change the tenant asks for (at most £50, or your reasonable costs if higher), for leaving early, or for a default such as a lost key or rent more than 14 days late.

A service charge is not on the list. A clause that makes the tenant pay it on top of the rent cannot be enforced, and asking for it can lead to a fine from the council.

What you can do

• Set the rent with the cost in mind. Add up the service charge, ground rent, insurance and repairs before you advertise. The rent is the one number you can set.
• Raise the rent once a year with a section 13 notice when costs go up, like any other rent increase.
• Challenge a charge that is too high. As leaseholder you can ask the freeholder for the accounts and receipts, and apply to the First-tier Tribunal (Property Chamber) if a charge is not reasonable.
• Check the lease before you let. Many leases need the freeholder's consent to let, and some have rules (on pets, noise or flooring) your tenant must keep. Give the tenant the rules that apply to them.

Bills the tenant can pay

If the tenancy says so, the tenant can pay the gas, electricity and water, council tax, the TV licence and broadband directly. These are permitted. Heating or hot water that is part of the service charge is not a separate bill the tenant can be charged for; it stays in the rent.

This guide is general guidance for England, not legal advice.