, Property
A demand arrives at every flat in a block of twenty-two. Roof works, £4,800 each, payable in forty-two days. There has been no meeting, no notice, no estimates circulated and no explanation of why this contractor. The managing agent's letter says the works are urgent and the sum is due under the terms of your lease.
Some of the leaseholders will pay. Some will not pay and will hope nothing happens. A smaller number will read the Landlord and Tenant Act 1985, and they are the ones who will end up paying less.
Reasonable is a legal test, not an opinion
Section 19 of the Landlord and Tenant Act 1985 limits what a landlord can recover through a variable service charge to costs that are reasonably incurred, and to works of a reasonable standard. That is a statutory limit and it cannot be contracted out of by anything in your lease.
It has real edges. Instructing a contractor without obtaining comparable quotes, spending on works that go beyond what the lease actually permits the landlord to charge for, or paying a management fee well above the market for a block of that size are all arguable. So is charging insurance commission that was never disclosed.
Section 20B is the one that catches sloppy managing agents. If costs were incurred more than eighteen months before the demand, and no notice was given within that eighteen months telling leaseholders that the costs had been incurred and would be charged, they are not recoverable at all. Agents who have been slow to bill lose the right to bill.
You also have information rights. Section 21 and the related provisions entitle you to a written summary of the costs, and section 22 gives you the right to inspect the accounts, receipts and supporting documents behind it. A request in writing from the requisite number of leaseholders, properly made, is often the entire dispute, because the documents either exist or they do not. Every demand must also be accompanied by a summary of rights and obligations in the prescribed form, and a demand without it is not properly served.
Section 20 is where most demands fall over
Section 20 of the same Act requires consultation before qualifying works and before entering into qualifying long-term agreements. The thresholds have not moved for many years: consultation is required where the works would cost any single leaseholder more than £250, or where a long-term agreement of more than twelve months would cost any leaseholder more than £100 a year.
The process is prescribed and it has stages. A notice of intention describing the works and inviting observations, with thirty days to respond and the right to nominate a contractor. Then a notice setting out at least two estimates, including one from any nominee, with a further thirty days for observations. Then notification of the award with reasons if the lowest tender was not chosen.
If the landlord does not consult properly, the amount recoverable from each leaseholder is capped at £250 for the works, however much they cost. On a £4,800 demand across twenty-two flats, that is the whole argument. A landlord who has failed to consult can apply to the tribunal for dispensation, and tribunals do grant it, particularly for genuinely urgent works, but often on terms and sometimes with a reduction. Urgency does not remove the duty. It changes where the argument happens.
So when a demand of that size lands, the first question is not whether the roof needed doing. It is whether two notices were served and when.
The tribunal is cheaper than you expect
Disputes about residential service charges go to the First-tier Tribunal, Property Chamber, in England, and to the Leasehold Valuation Tribunal in Wales. Under section 27A of the 1985 Act you can apply for a determination of whether a service charge is payable, by whom, to whom, how much and when, and you can do it before you pay or after.
It is designed to be used without lawyers. Fees are modest, hearings are inquisitorial rather than adversarial, and the general rule is that each side bears its own costs, so you are not exposed to the landlord's legal bill the way you would be in court. Where the landlord's lease allows them to recover their legal costs through the service charge, you can apply under section 20C for an order preventing that.
Two related rights are worth knowing about. Under section 24 of the Landlord and Tenant Act 1987, leaseholders can apply to the tribunal to appoint a manager where the landlord is in breach of obligations or where management is otherwise unsatisfactory, which is a fault-based remedy. And a recognised tenants' association, formally acknowledged, has stronger consultation and information rights than individual leaseholders acting alone. Forming one costs nothing but organisation.
Right to manage does not require the landlord to be at fault
The Commonhold and Leasehold Reform Act 2002 created a no-fault right to take over management of the building. You do not have to prove the agent is bad. You only have to qualify and follow the procedure.
The building must be a self-contained building or part, at least two-thirds of the flats must be held on long leases, and at least half the qualifying leaseholders must be members of the RTM company. There has long been a restriction where a large proportion of the building is in non-residential use; the Leasehold and Freehold Reform Act 2024 raised that limit from 25% to 50% of internal floor area, and that provision commenced in March 2025, bringing many mixed-use blocks with shops at street level within reach for the first time. The same Act removed leaseholders' liability for the landlord's process costs on an RTM claim, which had previously been a real deterrent.
The mechanics are a company limited by guarantee with prescribed articles, a notice inviting participation to every qualifying leaseholder who is not already a member, then a claim notice on the landlord, who has a period to serve a counter-notice. If the landlord disputes it, the tribunal decides, and disputes are usually about qualification or procedure rather than merit. Get the notices wrong and you start again, which is the main reason claims fail.
What you get is management: appointing the agent, setting the budget, running the repairs, holding the money. What you do not get is ownership of the freehold, so ground rent still goes to the landlord and buying the freehold remains a separate exercise. What you also get is the work, because somebody now has to be a company director and read the quotes.
The sinking fund nobody built
A reserve or sinking fund collects money each year towards the major works everybody knows are coming: the roof, the lift, the external redecoration on a five-year cycle. Where a lease permits one, the money is held on trust under section 42 of the Landlord and Tenant Act 1987, in a designated account, and it belongs to the leaseholders collectively rather than to the landlord.
Plenty of blocks do not have one, either because the lease does not allow it or because nobody wanted to be the person proposing a higher annual charge. The result is the £4,800 demand with forty-two days to pay, in a block where several owners do not have £4,800, and where the ones who cannot pay become the ones who are pursued.
If you take over management, commission a condition survey and build a ten-year plan from it, then fund it. It is the least popular decision available to a new RTM company and it is the one that prevents the next crisis.
Where this shows up in the game
Property and lettings arrive in Business Baron with the Property & Construction Track, an add-on to the full game. Costs in the game land in the month they fall due rather than when it suits you, which is exactly how major works feel to the owner of a flat. Owning a unit in a building somebody else manages is a different asset from owning the building, and it deserves a different price.