Key Takeaways
- Commercial service charge disputes are governed by the lease and common law, not the First-tier Tribunal or the reasonableness rules that protect residential leaseholders.
- Most disputes come down to what the lease actually allows the landlord to recover, and whether the costs and the standard of services were reasonable.
- Under the “pay now, argue later” principle, a tenant usually has to pay the demand first and dispute it afterwards, unless the lease says otherwise.
- The RICS commercial service charge code, in its 2nd edition from 31 December 2025, sets the benchmark for good practice and favours mediation or expert determination over court.
For a commercial tenant, the service charge can be the most unpredictable line in the budget. You agree the rent with your eyes open, but the service charge arrives later, sometimes far higher than expected, covering everything from the upkeep of common areas to management fees you had not thought about. When a demand lands that looks too high, or covers things you did not expect to pay for, a dispute is often the result. For landlords and managing agents, the flip side is just as real: recovering these costs is essential, and pushback can hold up the money that keeps a building running.
The trouble is that commercial service charges sit in a very different legal world from the residential leasehold rules most people have heard about. Assuming the two work the same way is the single biggest mistake people make here.
This guide explains how commercial service charge disputes actually work, what they tend to be about, and how they get resolved. Whether you are a landlord recovering charges or a tenant questioning them, Osbourne Pinner offers a free 30-minute consultation with a commercial property solicitor.
What a commercial service charge is
A service charge is the mechanism by which a landlord recovers the cost of maintaining and running the parts of a building or estate that tenants share, such as the structure, common areas, lifts, security, cleaning and insurance, along with the cost of managing all of it. In a multi-let building each tenant pays a proportion, usually based on the floor area they occupy. What can be charged, and how it is split, is set entirely by the terms of the lease, which is why the lease is always the first place a dispute is decided.
Why commercial is different from residential
This is the point that catches people out. Residential leaseholders have strong statutory protections and can challenge service charges at the First-tier Tribunal, which can rule on whether costs were reasonably incurred. None of that applies to commercial tenants. There is no tribunal route and no automatic statutory reasonableness test. A commercial service charge dispute is a contractual matter, decided on what the lease says and the general law, not on a leaseholder protection regime. So while a commercial tenant can still argue a charge is not recoverable or not reasonable, the argument has to be rooted in the lease rather than in statute.
What these disputes are usually about
Most commercial service charge disputes fall into a handful of familiar categories. The common ones are whether a particular cost is actually recoverable under the wording of the lease, whether the amount charged is reasonable or excessive, and whether the services were carried out to an acceptable standard. Others turn on how the charge has been apportioned between tenants, the level of management fees, contributions to reserve or sinking funds for future works, and a simple lack of transparency, where the tenant cannot see what they are being billed for. Large one-off items, such as major repairs or improvements dressed up as maintenance, are a frequent flashpoint.
The “pay now, argue later” principle
Here is something tenants often get wrong. In most commercial leases you cannot simply withhold the service charge because you dispute it. The courts have generally upheld a “pay now, argue later” approach, meaning you are expected to pay the demand and then pursue your challenge, unless the lease specifically allows you to withhold. Refusing to pay can put you in breach, expose you to interest and, in a serious case, risk action to recover the arrears or even forfeiture of the lease. If you object to a charge, the safer course is usually to pay, ideally under protest, and dispute it properly rather than stopping payment.
The RICS commercial service charge code
The main benchmark for good practice is the RICS professional standard on service charges in commercial property, now in its second edition and in force from 31 December 2025. It is not law, and it cannot override the lease, but it carries real weight, sets what is considered reasonable and professional, and binds RICS members and regulated firms on its mandatory points. Among other things it expects budgets to be issued at least a month before the service charge year begins, year-end accounts within four months of the year ending, costs to reflect the actual services provided with no profit to the landlord, and clear, transparent information for tenants. Where a landlord or agent has ignored the code, that is often a strong part of a tenant’s case.
How commercial service charge disputes get resolved
The starting point is always the lease, which may set out its own dispute procedure, for example referring disagreements to an independent surveyor. Beyond that, most disputes are best resolved without going to court. The RICS code encourages alternative dispute resolution, and mediation or independent expert determination are usually quicker and cheaper than litigation. If the parties cannot agree who should decide, RICS can nominate a suitable expert. Court remains available as a last resort for issues that genuinely need a judge, but it is rarely the first or best option for a service charge disagreement.
If you are a landlord recovering charges
For landlords and managing agents, most disputes are avoidable with good practice. Clear lease drafting that spells out what is recoverable, following the RICS code, issuing budgets and accounts on time, and being transparent about costs all reduce the room for argument and make recovery far smoother when a tenant does dig in. Where a tenant simply will not pay a properly due charge, options include debt recovery and, in the right case, forfeiture of the lease. Our service charge recovery team can advise on the best route.
If you are a tenant questioning a charge
If you think a service charge is wrong, resist the urge to simply stop paying. Start by reading the lease to see exactly what you agreed to cover, then ask the landlord or agent for a full breakdown and the supporting accounts. Check the charge against both the lease and the RICS code. If it still looks wrong, pay under protest to protect your position and take advice on challenging it. A well-evidenced, lease-based challenge is far more effective than withholding payment and hoping for the best. You can read more in our overview of commercial property disputes.
Speak to a Commercial Property Solicitor About a Service Charge Dispute
Commercial service charge disputes turn on the wording of the lease and the detail of the accounts, and the tenant usually has to keep paying while the argument runs. Getting early advice, on either side, is the difference between a quick resolution and an expensive standoff.
At Osbourne Pinner, our commercial property solicitors can review the lease, advise on whether a charge is recoverable and reasonable, and help you recover or challenge a service charge through negotiation, ADR or the courts.
Please note that this article is for informational purposes only and does not constitute legal advice. We always recommend speaking to a qualified solicitor for advice tailored to your specific circumstances.
We offer a free 30-minute consultation to discuss your situation. You can speak with us via video call or visit our offices in Harrow, Canary Wharf, Piccadilly Circus or Manchester. To arrange your consultation, call 0203 983 5080, email [email protected] or complete the form below.
