Service Charges and the 18-Month Rule: When Are Costs Incurred?

Originally published 12 May 2013. Updated 13 October 2026.

A service-charge bill arriving years after work was done is not automatically too late to recover. The crucial question under Section 20B of the Landlord and Tenant Act 1985 is when the relevant costs were incurred, together with whether a demand or qualifying written notification was served in time.

That distinction matters when buying or selling a leasehold flat. Accounts may remain unfinished, a balancing charge may arrive after completion, or the parties may disagree about what a retention was intended to cover.

This article revisits OM Property Management Ltd v Burr [2013] EWCA Civ 479 and explains why the date of the work, the landlord’s expenditure and the leaseholder’s demand need separate examination.

What is the 18-month rule for service charges?

Section 20B generally prevents recovery of the part of a variable service charge reflecting costs incurred more than 18 months before the demand was served.

There is an important exception. The restriction does not apply where, within that period, the leaseholder was notified in writing that the costs had been incurred and that they would subsequently be required to contribute through the service charge.

Whether a particular notification satisfies that requirement depends on its content and service. A document’s heading alone does not establish compliance.

The Leasehold Advisory Service’s guidance on recoverable service charges explains the rule and notification exception.

What did OM Property Management v Burr decide?

The dispute concerned gas supplied to a communal swimming pool. For years, the management company had paid one supplier before another supplier claimed payment for the gas it had actually supplied.

Mr Burr challenged the resulting charge. The argument was whether costs had been incurred when the gas was supplied or at a later point.

The Court of Appeal held that the mere provision of services or supplies did not mean that costs had been incurred for these purposes. It did not need to decide between presentation of an invoice or other demand and payment.

The practical lesson: do not calculate the 18 months simply from the date the work was carried out or the service supplied. Establish the relevant expenditure and supporting dates.

The official Court of Appeal judgment explains the reasoning.

Which invoice are you looking at?

There may be several documents with different functions:

• A contractor’s invoice to the landlord or management company.
• Evidence of payment to the contractor.
• Annual service-charge accounts.
• A written notification concerning costs already incurred.
• A service-charge demand addressed to the leaseholder.
• A later reminder or statement of arrears.

The date on a reminder does not necessarily identify when the underlying costs were incurred or when the original demand was served.

Ask for the underlying records and a clear explanation of the chronology before deciding whether the charge is recoverable.

A seller received a notice while relying on the sale proceeds

In a September 2026 HousingUK discussion, a seller reported receiving a document described as a Section 20B notice while selling a flat in a block of 12.

The account described an estimated £28,000 service-charge deficit, potentially around £2,333 per flat. The accounts remained in draft and individual balancing invoices had not yet been issued.

The seller’s concern was practical: they needed the sale proceeds for their onward purchase and wanted to know whether a retention might be requested or liability could continue after completion.

This was an unverified personal account. It does not establish that the notice was valid or who was legally responsible for payment.

A former owner was asked for money after selling

In a December 2024 HousingUK discussion, a former owner reported that the buyer had requested approximately £3,500 following revised service-charge statements for earlier financial years.

The seller said the service-charge account had been settled on completion, but the management company had subsequently sought to recover an overspend.

Again, this was a personal account rather than a legal finding. It illustrates why unfinished accounts and later adjustments need attention during conveyancing.

Both examples raise separate questions: is the landlord’s charge payable, and what arrangements did buyer and seller agree between themselves?

Does the buyer or seller pay a later balancing charge?

There is no safe rule that the person who owned the flat when the work was done must always pay, or that every bill issued after completion automatically belongs to the buyer.

First examine liability under the lease and applicable law. Then examine the sale contract, including any apportionment, indemnity, allowance or retention provisions.

A contractual arrangement between buyer and seller does not necessarily change the landlord’s rights under the lease. It may instead provide a separate route for one party to recover money from the other.

Distinguish an existing unpaid debt from a charge that becomes payable later. The dates and wording matter.

A retention needs clear boundaries

Where final accounts are outstanding, the parties may negotiate a retention from the seller’s proceeds. Its usefulness depends on the agreement.

• Which accounting periods or works does it cover?
• How much is held?
• What evidence permits a deduction?
• When must a claim be made?
• When is the remaining money released?
• What happens if the eventual bill exceeds the retained amount?

The end of a contractual retention period and the Section 20B time limit are different matters. Expiry of one does not automatically determine the other.

Lexsure’s Report on Title wording concerning an allowance or retention for excess service charge provides a resource for explaining options, subject to adaptation to the actual agreement.

Section 20 consultation and Section 20B are different

Section 20 concerns consultation for qualifying works and certain long-term agreements. Section 20B concerns the timing of demands or notifications relating to costs incurred.

A consultation document should not automatically be treated as a qualifying Section 20B notification. Its contents and timing require examination against the relevant statutory requirements.

Similarly, compliance with the 18-month rule does not settle every other question about recoverability, reasonableness or compliance with the lease.

What should conveyancers investigate before exchange?

The purchase review should identify which service-charge years remain open, whether expenditure exceeds the estimates already collected and whether further demands or notifications are expected.

Relevant documents include the lease, accounts, budgets, statements, notices, management replies and correspondence about outstanding expenditure.

Where information remains incomplete, explain the uncertainty and any proposed contractual protection. Payment of the estimated annual charge does not necessarily establish that the account is final.

Our article on major works disclosed in the management pack considers the related question of expenditure already anticipated when a buyer commits.

What if the unexpected bill arrived after you bought?

Obtain the underlying demand, expenditure records and relevant notices. Separately, retrieve your original management pack, Report on Title, enquiries and replies, sale contract and retention agreement.

Those documents may help establish whether unfinished accounts or a prospective liability were identified and explained before exchange.

A later bill does not automatically establish negligence. The assessment depends on what was reasonably available at the time, the advice given, the contractual arrangements and any resulting loss.

For the wider impact on buyers and sellers, see our article on rising service charges affecting a flat sale.

This article concerns variable residential service charges in England and Wales and provides general information. Liability depends on the lease, statutory requirements, notices and transaction documents. Obtain advice before withholding payment or releasing retained money. When I Bought is a Lexsure service, not a law firm. Time limits may apply to complaints or claims.

Earlier this month Court of Appeal handed down its judgment in OM Property Management Limited v Burr ([2013] EWCA Civ 479) on an appeal from a decision of the Upper Tribunal (Lands Chamber) dated 26th January 2012.

At the heart of the appeal was the consideration as at what point in time service charge costs are incurred under Section 20B of the Landlord and Tenant Act 1985.

Section 20B of the said Act provides that service charges are not recoverable if the landlord does not demand payment, or notify the leaseholder that a payment will be due, within 18 months of the service charge costs being incurred.

Proceedings were issued against Mr Burr in the county court and transferred to the Leasehold Valuation Tribunal (LVT). The LVT took the view that the costs were “incurred “when the gas was supplied and as the demand for payment was made more than 18 months after this date the charge was not recoverable from Mr Burr. OM appealed to the Upper Tribunal (Lands Chamber).