LTA 1985 s. 19

Service charges capped at reasonable costs: LTA 1985 s. 19

Under Section 19 of the Landlord and Tenant Act 1985, service charges are limited to costs reasonably incurred for services or works of a reasonable standard.

Official text LTA 1985 s. 19 — United Kingdom

Relevant costs shall be taken into account in determining the amount of a service charge payable for a period— only to the extent that they are reasonably incurred, and where they are incurred on the provision of services or the carrying out of works, only if the services or works are of a reasonable standard; and the amount payable shall be limited accordingly. Where a service charge is payable before the relevant costs are incurred, no greater amount than is reasonable is so payable, and after the relevant costs have been incurred any necessary adjustment shall be made by repayment, reduction or subsequent charges or otherwise. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . If a person takes any proceedings in the High Court in pursuance of any of the provisions of this Act relating to service charges and he could have taken those proceedings in the county court, he shall not be entitled to recover any costs.

Text in force at .

Source: legislation.gov.uk — The National Archives (legislation.gov.uk), reproduced under licence Open Government Licence v3.0.

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What it actually says

Section 19 is the substantive control on service charges and it has two separate tests. Relevant costs are taken into account in determining the amount payable only to the extent that they are "reasonably incurred", and where they are incurred on providing services or carrying out works, only if those services or works are "of a reasonable standard". A cost can therefore be disallowed either because the landlord should not have spent that much, or because what was actually delivered was not good enough - and the amount payable "shall be limited accordingly".

Subsection (2) deals with money demanded before the spending happens. Where a service charge is payable in advance, no greater amount than is reasonable is payable, and once the costs have been incurred any necessary adjustment must be made by repayment, reduction or subsequent charges. That is what makes a wildly inflated estimate challengeable at the time it is demanded rather than only after the year end.

Two things about how this operates. Reasonably incurred is not the same as cheapest: a landlord who takes a more expensive but justified course can still satisfy it, and a landlord who accepts the lowest quote for work of poor quality can still fail the standard test. And the section does not entitle a leaseholder simply to stop paying - it limits what is payable, and the mechanism for getting that limit determined is an application under section 27A. Subsection (5) adds a costs sting for the wrong forum: someone who brings service charge proceedings in the High Court when they could have been brought in the county court recovers no costs.

When it applies

  • A managing agent's fee that has doubled with no change in the service.
  • Major works billed at far more than comparable quotes obtained by the leaseholders.
  • Cleaning, gardening or security charged for but barely delivered.
  • An advance demand based on an estimate the leaseholders think is inflated.
  • Buildings insurance placed at a premium well above the market.

What this section does not say

  • It does not mean the landlord must always choose the cheapest option. The test is whether the cost was reasonably incurred, not whether it was the lowest available.
  • It does not entitle a leaseholder to withhold payment unilaterally. It limits what is payable; getting that determined is what section 27A is for.
  • It does not apply to charges outside the section 18 definition. If the amount is not a service charge as defined, section 19 does not reach it.
  • It does not cap the charge at any figure. There is no percentage and no maximum in this section - reasonableness is judged on the facts of the building.
  • It does not deal with consultation. Failure to consult on major works is section 20, and that limit applies whether or not the cost was reasonable.

Worked examples

Invented situations, written to show how the wording bites. They are not real cases, not judgments and not precedent, and nothing here predicts what would happen in yours.

Illustrative example

A block's annual service charge has gone from about fourteen hundred pounds a flat to nearly five thousand in a single year. The managing agent will not itemise it, and the leaseholders say the gardening and cleaning listed are barely happening.

How the wording applies

Section 19 contains two separate tests, and this dispute engages both. Costs count only to the extent they were reasonably incurred, and where they are for services or works, only if those are of a reasonable standard - so a cost can be disallowed either because too much was spent or because what arrived was not good enough. The fact that shapes the case is which of the two each item falls under, because the evidence differs: quotations and procurement for the first, photographs and attendance records for the second.

How the parties settled it

The agent supplies an itemised account and the cleaning and gardening schedules within six weeks, credits the charge for the months the schedules were not met, and the leaseholders pay the balance of the year's charge on that basis.

Illustrative example

Leaseholders are asked for a large sum on account for the coming year, based on an estimate they think is inflated. They are told they must pay now and argue afterwards.

How the wording applies

Subsection (2) deals with money demanded before it is spent: where a service charge is payable in advance, no greater amount than is reasonable is payable, and once the costs are incurred an adjustment must be made by repayment, reduction or later charges. The fact that decides whether the estimate can be resisted now rather than at the year end is that the reasonableness of an advance demand is testable at the time it is made - though the way to have it determined is section 27A, not simply withholding.

How the parties settled it

The freeholder reduces the on-account demand to the figure supported by the prior year's actual spend, and both agree that any shortfall or surplus will be trued up in the year-end account.

Illustrative example

Major works to a roof were carried out at a cost well above two quotes the leaseholders had obtained themselves. The freeholder says the contractor chosen was more expensive because it was better and offered a longer guarantee.

How the wording applies

'Reasonably incurred' is not the same as cheapest, and the section says nothing about percentages or caps - a landlord who takes a dearer but justified course can satisfy it. The fact that decides this one is what the price difference bought: if the specification, guarantee and scope genuinely differ, the comparison with the leaseholders' quotes is not like for like, and if they do not, it is.

How the parties settled it

The freeholder discloses the tender documents and the guarantee, and the leaseholders accept the higher figure for the works covered by the extended guarantee while the freeholder writes off the disputed contingency line.

The same problem elsewhere

The other legal systems in this collection answer the same everyday problem with their own provisions.

The comparison and these one-line summaries are in English.

Who pays for the roof and the lift: shared building costs in four legal systems

Read the full comparison →

Related sections

LTA 1985 s. 18 What counts as a service charge: LTA 1985 s. 18 LTA 1985 s. 20 Caps contributions without consultation: LTA 1985 s. 20 LTA 1985 s. 20B 18-Month Rule for Service Charge Demands: LTA 1985 s. 20B LTA 1985 s. 20C Stop landlord legal costs as service charge LTA 1985 s.20C LTA 1985 s. 27A Challenge paid service charges: LTA 1985 s. 27A

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We copy this text from the official publisher and re-check it against that source on every page load, but we cannot guarantee it is complete, current or free of error, and we accept no liability for any reliance on it. An amendment can take effect before a consolidation catches up. The publisher's own copy is linked below; where the two differ, it is the official one that counts.

This page reproduces the text of LTA 1985 s. 19 in force at the date shown and explains it in general terms. It is not legal advice and takes no account of the circumstances of your case, which can change the answer completely. For a live dispute, for limitation periods, and before taking any step in court, consult a qualified lawyer in England and Wales.

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