Leasehold: Service Charges

The seller of a leasehold property is legally responsible for service charges owed up until the completion of the sale to the next leaseholder. A freeholder cannot require a leaseholder to pay charges owed by the previous leaseholder if the new leaseholder has not agreed this as part of the sale contract. The government would expect the incoming leaseholder’s solicitors to act in their client’s best interests in advising them and negotiating the terms of the sale contract.

If a landlord tries to claim that a leaseholder is liable for charges for which they are not liable, we recommend that the leaseholder seeks independent legal advice on how to proceed. Free initial advice is available from the government’s Leasehold Advisory Service. The landlord may be able to take action against the previous leaseholder regarding their failure to pay service charges due for the previous leaseholder’s period of ownership.

The government believes that all liabilities and ongoing financial responsibilities should be made clear to potential purchasers of leasehold properties, prior to purchase.

The landlord should provide relevant information, including on any ongoing or planned service charges, and specify how regularly these charges will be reassessed or increased, during purchase of the property. This is most often set out in a Leasehold Property Enquiry form 1 (LPE1) enquiry form. Prospective buyers and their legal representative are advised to check this information carefully and take it into account when negotiating the purchase price of the property.