What Happens If You Don't Pay Your Service Charge?

Disputes over service charges are common, and you may feel it is reasonable to withhold payment if you believe your landlord is charging too much or acting unreasonably. However, refusing to pay can put you in breach of your lease, even if you have a valid legal argument.

In this guide, we explain the risks of withholding payment, the steps your landlord can take, and why paying “under protest” is usually the safest approach.

Should You Pay a Disputed Service Charge?

If you disagree with a service charge, the safest approach is usually to pay the amount under protest and then challenge it afterwards. This helps you avoid breaching your lease while still preserving your right to dispute the charge.

Withholding payment, even where you believe the charge is unreasonable, can quickly escalate and lead to serious consequences. Paying under protest makes it clear you are not accepting liability, while preventing the landlord from taking immediate enforcement action.

What is Paying Under Protest?

Paying “under protest” means you pay the service charge demanded, while making it clear to your landlord that you dispute it.

This is important because you cannot challenge a charge at a tribunal if you have already “agreed” or “admitted responsibility” for paying it.

Paying under protest helps preserve your right to challenge the charge later. However, repeated payments over a long period without clear objection may be taken into account by a tribunal when considering whether you have effectively accepted liability. For this reason, it is important to word any correspondence carefully so your position is clearly set out from the outset.

Additional Charges for Non-Payment

If you do not pay your service charge on time, your lease may allow the landlord to recover additional costs, known as administration charges. These may include:

• Late or non-payment fees
• Charges from debt collection agencies instructed by the landlord or managing agent
• The landlord’s legal costs incurred in recovering arrears

These charges must be reasonable and permitted under your lease. The landlord must also include a statutory summary of your rights and obligations with any demand for an administration charge. If this summary is not provided, the charge is not payable until it is.

Administration charges differ from service charges because they apply to individual leaseholders rather than to the building as a whole. You can also challenge administration charges at the tribunal if you believe they are unreasonable.

What Action Can a Landlord Take If You Don’t Pay?

If service charges remain unpaid, your landlord may take further action. This can include:

• Applying for a County Court Judgment (CCJ) requiring you to pay the debt
• Asking your mortgage lender to pay the arrears and add the amount to your mortgage
• Starting forfeiture proceedings to repossess your property

Forfeiture of Your Lease

Forfeiture is the most serious consequence of non-payment. It involves the landlord seeking to repossess your property for breaching the lease.

To commence forfeiture proceedings, the landlord must serve a Section 146 Notice under the Law of Property Act 1925. Before doing so, certain conditions must be met:

• You have admitted in writing that the service charge is owed, or
• There has been a final determination (by a court, tribunal, arbitrator, or default judgement) confirming that the debt is owed and reasonable, and
• The total amount owed (including service charges, administration charges, and ground rent) exceeds £350 or includes an amount outstanding for more than three years.

Only once these conditions are met can a Section 146 notice be validly served.

Why Early Advice Matters

Missing a service charge payment, even unintentionally, can lead to serious and costly consequences. You may face legal fees, court proceedings, administration charges, and, in the most serious cases, the loss of your home.

If you are considering withholding payment, have received an unexpected demand, are already in arrears, or are unsure about your rights, it is important to seek advice as early as possible.

Contact Our Team

Our Property Litigation team can review your lease, assess the landlord’s demand, advise you on your options, and help you challenge any charges that are unfair or not properly payable.

You can contact a member of our team for advice and support on 023 8063 9311 or email enquiries@warnergoodman.co.uk.