Quick Answers
What did the 2024 Act change about service charges?
It strengthened leaseholder rights to transparency, tightened the rules on how the service charge trust account must be managed, improved enforcement mechanisms for information requests, and introduced clearer standards for how accounts must be structured and when they must be produced. It built on the existing 1985 Act framework rather than replacing it.
Do leaseholders have a right to see invoices behind the accounts?
Yes. Section 22 of the Landlord and Tenant Act 1985 gives leaseholders the right to inspect accounts, receipts, and supporting documents within 21 days of a written request. The 2024 Act reinforced this. A managing agent who refuses to provide invoices when requested is in breach of the statutory inspection right and the leaseholder can apply to the Tribunal.
Must service charges be held in a trust account?
Yes, under section 42 of the Landlord and Tenant Act 1985. All service charges collected from leaseholders must be held in a designated trust account, separate from the landlord's own funds. Interest earned belongs to the fund. Mixing service charge funds with landlord money is a statutory breach. The 2024 Act tightened trust account obligations.
The underlying framework: service charge accounting is primarily governed by the Landlord and Tenant Act 1985, supplemented by the Commonhold and Leasehold Reform Act 2002. The 2024 Act builds on both. The core obligations — annual accounts, trust account, leaseholder inspection rights — have existed since 1985. What the 2024 Act added is stronger enforcement, clearer format requirements, and expanded leaseholder rights where landlords fail to meet the standard.
The practical gap most RTM companies have: accounts that are produced late, do not separate the general and reserve fund clearly, are not accompanied by a summary in the format the Act now requires, and where information requests from leaseholders meet resistance rather than a clear documented response. None of this is technically difficult to fix. It requires a managing agent who knows the current standard and a process that is built around it.
Key Takeaways
The 2024 Act strengthened the existing framework rather than replacing it
The Landlord and Tenant Act 1985 has required annual service charge summaries, trust accounts, and leaseholder inspection rights since 1985. The 2024 Act did not sweep this away and start again. It tightened each obligation, strengthened enforcement, and in some cases extended the scope of what must be provided and when. Managing agents who understood the 1985 Act framework correctly and applied it conscientiously are close to compliance with the 2024 changes. Those who treated the 1985 Act requirements as optional paperwork have the most to do.
Annual accounts must be produced within six months of the year end
Section 21 of the Landlord and Tenant Act 1985 requires an annual summary of service charges to be provided to leaseholders within six months of the end of the accounting year. The 2024 Act strengthened this by clarifying what the summary must contain and improving enforcement where landlords fail to comply. Producing accounts eleven months after year end, or not at all, is not an administrative oversight — it is a statutory breach that gives leaseholders grounds for a Tribunal application.
The general and reserve fund must be separately reported
Good practice under the existing framework has always required the general maintenance account and the reserve fund (sinking fund) to be clearly separated in the accounts. The 2024 Act made this separation a formal requirement rather than a best practice recommendation. Leaseholders must be able to see clearly how much is held in the reserve fund, what the balance was at the start and end of the year, what has been paid in and drawn out, and the interest earned. Accounts that combine these funds or fail to identify reserve fund movements clearly do not meet the current standard.
Leaseholders can now require a formal report on the trust account
The 2024 Act extended the information that leaseholders can request beyond the annual summary. Leaseholders now have a clearer right to receive confirmation of the name and address of the bank or building society holding the service charge trust account, the account number, and the current balance. This allows leaseholders to verify independently that the trust account exists, that it is properly constituted, and that the balance reported in the accounts corresponds to the actual funds held. A landlord or managing agent who cannot provide this information, or who holds service charge funds in a personal or business account rather than a designated trust account, is in material breach.
Insurance commission transparency was specifically addressed
The 2024 Act introduced requirements for landlords and managing agents to disclose commissions and other financial benefits they receive from insurance and other service charge expenditure. This addresses one of the most persistent transparency concerns in residential leasehold: managing agents who earn significant commission income from block insurance placements while presenting the gross premium in the service charge accounts. The disclosure requirement means leaseholders can now see the net cost of insurance to the building and the commission paid to the agent, allowing them to assess whether the arrangement is fair.
Non-compliance gives leaseholders Tribunal remedies including penalty orders
The 2024 Act strengthened the Tribunal's powers to enforce service charge transparency obligations. Where a landlord or managing agent fails to produce accounts, refuses to respond to a section 22 inspection request, or fails to disclose required information, the Tribunal can make orders requiring compliance and, in some cases, penalty orders. A pattern of non-compliance — particularly where RTM directors are aware of the obligations and are failing to meet them — is also relevant evidence in an application to appoint a manager under section 24 of the 1987 Act.
What the 2024 Act Changed: Before and After
- Annual summary required under s.21 but format not precisely specified
- Trust account required under s.42 but verification by leaseholders difficult
- Section 22 inspection right existed but enforcement was slow and uncertain
- Reserve and general fund separation was best practice, not mandatory
- Insurance commission disclosure was not required in a standard format
- Accounts timing requirements existed but enforcement mechanisms were weak
- Leaseholder information requests could be delayed or partially answered without clear consequence
- Annual summary format clarified, accounts must separate general and reserve fund clearly
- Trust account details (bank, account number, balance) must be provided to leaseholders on request
- Section 22 inspection right reinforced with stronger Tribunal enforcement powers
- Reserve fund reporting now explicitly required to show opening balance, contributions, expenditure, closing balance, and interest
- Commission and financial benefit disclosure required in a specified format within accounts
- Six-month production deadline reinforced with Tribunal penalty order powers
- Non-response to information requests within 21 days is itself an enforceable breach
How Service Charge Accounts Should Be Structured
A compliant set of service charge accounts for a residential block in 2026 must contain clearly separated sections for each component of the service charge. The minimum structure required is:
General Service Charge Account
Records all routine income and expenditure during the accounting year: service charge collected from leaseholders, expenditure on maintenance, repairs, insurance, management fees, and other recurring costs.
Must show: opening balance, total income collected, total expenditure by category (not just a single total), closing balance. Major expenditure items should be individually identified, not grouped into a single line.
The closing balance represents any surplus or deficit carried forward into the next year.
Reserve Fund Account
Records the long-term savings held for future major works: reserve contributions collected, interest earned, expenditure drawn from the reserve during the year, and the closing balance carried forward.
Must show: opening balance, contributions during the year, any expenditure drawn down, interest earned on the account, closing balance. The closing balance should correspond to the balance of the designated reserve trust account.
The 2024 Act made this separation mandatory — it cannot be merged with the general account or presented as a single combined figure.
Insurance Disclosure
A specific disclosure within or appended to the accounts showing: the gross insurance premium paid, any commission or financial benefit received by the managing agent or landlord from the insurance placement, and the net cost of insurance to the building.
The 2024 Act made this disclosure mandatory. Leaseholders who receive accounts showing only a gross insurance premium, with no disclosure of commission, are not receiving compliant accounts under the current standard.
Year-End Summary and Certification
A summary statement covering the total service charge for the year per flat, the reserve fund balance per flat's proportionate share, and any surplus or deficit position. Should be accompanied by a statement confirming that the accounts are a true and fair record of income and expenditure.
Where the accounts are certified by an accountant, the certification should state the basis of the accountant's review and any material limitations or qualifications.
The Trust Account Obligation
Section 42 of the Landlord and Tenant Act 1985 has always required service charges to be held on trust. The 2024 Act built on this by making the trust account more transparent to leaseholders and by tightening the rules on how the account must be constituted.
The key requirements are:
- The account must be designated as a trust account, either in the landlord's name as trustee or in a format that makes clear the money is held for leaseholders and not available to the landlord's creditors.
- General and reserve funds must be held in separate accounts or in accounts that are clearly segregated within the managing agent's client account system. Combining the two in a single undifferentiated pool is not compliant with the requirement for separate reserve fund accounting.
- Interest earned on the accounts belongs to the fund, not to the managing agent or the landlord. Commission earned on the account balance is a financial benefit that must be disclosed under the 2024 Act's commission disclosure provisions.
- On request from leaseholders, the landlord must confirm the name and address of the institution holding the account and the account number. This allows leaseholders to verify the account exists and, if necessary, apply to the Tribunal to inspect bank statements confirming the balance matches the accounts.
Some managing agents hold all their client funds in a single pooled client account with sub-ledger accounting. This can satisfy the trust requirement if the sub-ledger system clearly designates each building's funds and prevents the commingling of funds from different buildings. However, a pooled account does not automatically satisfy the requirement that general and reserve funds are held separately — the sub-ledger must also track these as distinct balances within the building's allocation. If the agent cannot readily demonstrate which part of the pooled account represents the reserve fund for a specific building, the segregation requirement may not be met in practice even if it is technically met in structure.
Leaseholder Rights to Information Under the 2024 Act
| Right | What It Covers and the Timescale for Compliance |
|---|---|
| Annual accounts (s.21) | The landlord must provide a written summary of costs incurred during the accounting year (or since the last summary) within six months of the year end. On written request from a leaseholder, this must be produced within one month if the six-month period has already passed. The summary must be in the format now required under the 2024 Act, including separate reserve fund reporting and insurance commission disclosure. |
| Inspection of accounts and receipts (s.22) | Within 21 days of a written request from a leaseholder, the landlord must make available for inspection all accounts, receipts, and other documents relevant to the service charge. The leaseholder can take copies. The inspection right covers underlying invoices and contractor receipts, not just the summary accounts. A managing agent who provides only the summary and withholds the invoice documentation is not complying with the inspection right. |
| Trust account information | On written request, the landlord must provide the name and address of the financial institution holding the service charge trust account and the account number. This right was strengthened by the 2024 Act. Failure to provide this information within 21 days of a written request is itself an enforceable breach, with Tribunal enforcement available to leaseholders who do not receive a response. |
| Insurance commission disclosure | The managing agent or landlord must disclose any commission or financial benefit received from insurance or other service charge expenditure. This disclosure must be included in or appended to the annual accounts. A leaseholder who does not receive this disclosure as part of their annual accounts can request it separately and can apply to the Tribunal for an order requiring production if the request is not answered. |
| Advance payment reasonableness | Where the service charge includes advance payments (payments on account for the coming year), leaseholders can apply to the Tribunal to determine whether the amount of the advance payment is reasonable. This right is unchanged by the 2024 Act but sits alongside the strengthened information rights — leaseholders who have access to proper historic accounts are better placed to assess whether the advance payment demand is justified. |
Challenging Accounts at the First-Tier Tribunal
The First-tier Tribunal (Property Chamber) has jurisdiction to determine whether service charges are reasonably incurred, whether they reflect works or services of a reasonable standard, and whether managing agents have complied with the statutory information obligations.
A leaseholder who believes their service charge accounts are non-compliant has several routes:
- Write to the managing agent requesting the information that is missing — annual accounts if not produced within six months, invoice documentation under s.22, trust account details, or insurance commission disclosure. Keep copies of all correspondence.
- Allow the statutory timescale to expire without a compliant response. Once the 21-day inspection window or the six-month accounts window has passed without compliance, a Tribunal application can be made without further notice.
- Apply to the First-tier Tribunal for an order requiring the landlord to provide the missing information, a determination that specific service charge costs were not reasonably incurred, or — in cases of persistent non-compliance — a penalty order against the landlord.
- Consider a section 24 application for appointment of a manager where the managing agent's failure to produce accounts or respond to information requests is part of a broader pattern of management inadequacy.
In practice, the majority of service charge disputes that involve missing accounts or refused information requests are resolved when the leaseholder sends a clear written request citing the specific statutory provision and the Tribunal route available if the request is not answered. Managing agents who know that a Tribunal application is imminent tend to produce the documentation they should have provided months earlier. The Tribunal route is real and should be invoked where necessary, but many leaseholders achieve compliance through a well-drafted letter before they need to issue proceedings.
What Good Service Charge Accounts Look Like in 2026
For RTM directors reviewing their managing agent's accounts or assessing whether their current accounts process meets the 2024 Act standard, here is the checklist.
Compliant accounts produced in 2026 should:
- Be produced and circulated to leaseholders within six months of the accounting year end — not nine months, not on demand, not never
- Separately present the general service charge account and the reserve fund account, with opening balance, movements, and closing balance for each
- Identify all expenditure items by category with sufficient detail that a leaseholder can understand what was spent and for what purpose — not just "maintenance: £12,500"
- Include a specific insurance disclosure showing the gross premium, any commission received by the agent, and the net cost to the building
- Be accompanied by a covering letter or summary sheet showing each flat's share of the total costs, the reserve fund balance attributed to their flat, and any surplus or deficit position
- Reference the trust account(s) in which the funds are held, including the name of the institution and confirmation that the closing balance corresponds to the actual account balance
- Be certified by the managing agent or, for larger blocks, by an independent accountant, with a statement of the basis of the review
- Be accompanied by documentation confirming leaseholders' rights to inspect the underlying invoices and accounts under s.22, and the process for making a request
For the broader framework of what leaseholders pay for through the service charge, see Service Charges Explained: What Leaseholders Are Actually Paying For. For how RTM companies should manage their governance alongside their service charge obligations, see AGM Guide for RTM Companies.
Frequently Asked Questions
The 2024 Act strengthened existing service charge transparency obligations under the Landlord and Tenant Act 1985. Key changes include: clearer format requirements for annual accounts including mandatory reserve fund separation; strengthened enforcement for information requests; new requirements to disclose insurance and other commissions; improved leaseholder rights to verify trust account details; and Tribunal penalty order powers for non-compliance. It built on the existing framework rather than replacing it.
Yes. Section 22 of the Landlord and Tenant Act 1985 gives leaseholders the right to inspect accounts, receipts, and supporting documents within 21 days of a written request. This covers underlying invoices and contractor receipts, not just the summary accounts. The 2024 Act reinforced this right and the Tribunal can order compliance where requests are refused. Do not accept "the summary is all that is available" from a managing agent who has refused an inspection request.
Yes. Section 42 of the Landlord and Tenant Act 1985 requires service charges to be held in a designated trust account separate from the landlord's own funds. Interest belongs to the fund. The 2024 Act strengthened this by requiring the landlord to confirm account details to leaseholders on request, enabling them to verify the account exists and the balance matches the accounts. General and reserve funds must be held in separately identified accounts or clearly segregated sub-ledger allocations.
Accounts must be produced within six months of the accounting year end or within one month of a leaseholder's written request. Where they are not, leaseholders can apply to the First-tier Tribunal for an order requiring production. The 2024 Act strengthened enforcement powers, including penalty orders in cases of persistent non-compliance. A pattern of late or absent accounts is also relevant evidence in an application to appoint a substitute manager under section 24 of the 1987 Act.
Yes. The First-tier Tribunal can determine whether service charges are reasonably incurred, whether works were of a reasonable standard, and whether advance payment demands are reasonable. Applications can be made before or after payment. Most disputes resolve through correspondence and production of adequate documentation before formal Tribunal proceedings are necessary, but the Tribunal route is real and should be used where the landlord or agent fails to engage.
Managing a block where the service charge accounts are not meeting the 2024 standard?
Neon produces compliant service charge accounts as a standard part of block management for RTM companies across East London and Essex — separately reported general and reserve accounts, insurance commission disclosure, annual summaries within six months of year end, and a clear process for handling leaseholder inspection requests. If your current agent's accounts are not meeting the 2024 Act standard, that is a management change conversation worth having.
Talk to Neon about managing your block →