Service Charge Accounts

In short

Service charge accounts show what was actually spent running the building in the year against the budget. The law does not require an audit; the lease decides whether they must be certified or audited. They are not filed at Companies House. Leaseholders can ask in writing for a summary of the costs, certified by an accountant where more than four flats pay, and can then inspect the invoices behind it.

01What they are

Service charge accounts set out what was actually spent running the building in the year, against the budget the service charge was collected on, with what was paid into and out of the reserve fund. The difference becomes a surplus to credit or a shortfall to collect, as the lease allows.

02Do they need to be audited?

Not by law. What the lease says decides it: many leases require the accounts to be certified or audited by an accountant. In practice most residential service charge accounts are examined by an independent accountant under the ICAEW guidance for residential service charge accounts, and the accountant's report says exactly what was checked. If the lease asks for an audit, ask what the accountant actually did.

03Are they filed at Companies House?

No. Service charge accounts are prepared for the leaseholders. The residents' or right to manage company files its own company accounts at Companies House, which is a different document and often shows very little because the service charge money is held on trust.

04When they are due

The lease usually sets the deadline. The RICS Service Charge Residential Management Code expects accounts to be issued within six months of the year end. Separately, costs incurred more than 18 months before they are demanded usually cannot be charged unless leaseholders were told about them in writing within that time, so late accounts can cost a building money.

05Your right to ask and to check

You can ask in writing for a summary of the costs for the last accounting year. It must be provided within one month of the request or six months of the year end, whichever is later.
Where the service charges are payable by the leaseholders of more than four flats, that summary must be certified by a qualified accountant.
Within six months of receiving the summary you can ask to inspect the invoices, receipts and other documents behind it.
A recognised tenants' association can make the same requests for all its members.

The Leasehold and Freehold Reform Act 2024 is due to bring in a standard form of annual report and accounts when its service charge provisions come into force. Until then the lease and the rules above apply.

06What we do

We close each year's accounts, have them independently examined and issue them to every leaseholder, and any leaseholder can see the invoices on request. Preparing the accounts pack is included in our fee.

07Questions

Do service charge accounts need to be audited?

Not by law. The lease decides: many require the accounts to be certified or audited by an accountant. Most are examined by an independent accountant under the ICAEW guidance for residential service charge accounts, and the accountant's report says what was checked.

Do service charge accounts need to be certified?

Where the lease says so, yes. Separately, when a leaseholder asks for a summary of the costs and the service charges are payable by the leaseholders of more than four flats, the law requires that summary to be certified by a qualified accountant.

Do service charge accounts need to be filed at Companies House?

No. They are prepared for the leaseholders. The management company files its own company accounts at Companies House, which are a different document.

How do I request service charge accounts?

Ask the landlord or managing agent in writing for a summary of the service charge costs for the last accounting year. It must be provided within one month of your request or within six months of the end of that year, whichever is later.

Can I see the invoices behind the service charge?

Yes. Within six months of receiving the summary you can ask in writing to inspect the invoices, receipts and other supporting documents, and must be given reasonable facilities to do so.

When should service charge accounts be issued?

When the lease says. The RICS Service Charge Residential Management Code expects them within six months of the year end, and costs more than 18 months old usually cannot be charged unless leaseholders were told about them in writing in time.