Why Are Service Charges Increasing in 2026?

If your service charge has gone up this year, the first question is usually quite simple: Why? Sometimes the answer is obvious. Perhaps the lift needs replacing, the building has been re-roofed or the cost of insurance has increased. But in other cases, the increase can appear without any single obvious explanation. Your service charge demand arrives and the figure is suddenly hundreds or even thousands of pounds higher than the previous year. That can be frustrating, particularly when you have not seen any major improvement to the building.

So, why are service charges increasing in 2026? There is no single answer. Service charges are made up of the costs of running, maintaining, repairing, insuring and managing a particular building. If those underlying costs rise, the amount leaseholders contribute can rise too. The important question is therefore not simply whether your service charge has increased. It is what has caused the increase, whether those costs are allowed under the lease and whether they are reasonable.

Why are service charges increasing?

Service charges can increase because the cost of running a residential building has increased. This can happen even when the managing agent’s own fee has stayed exactly the same.

For example, a block may face higher costs for building insurance, electricity, cleaning, lift maintenance, repairs, gardening, fire safety work or specialist contractors. There can also be years when a building requires significantly more work than usual.

A block that spent £40,000 on maintenance one year might need £80,000 the next if a roof, lift, external wall, drainage system or other major component requires attention. This is why comparing only the final service charge figure from one year to the next does not always tell you what has changed. 

1. Building insurance can push service charges higher

Insurance is one of the most significant costs for many residential blocks.

The freeholder will usually arrange insurance for the building, with the cost recovered through the service charge where the lease permits this. GOV.UK confirms that building insurance will usually form part of the service charge and that leaseholders have rights to ask for information about the policy and challenge unreasonable costs. Insurance premiums can change because of the insurer’s assessment of the building and the wider insurance market.

The condition, age and construction of a property can also matter. A block with previous claims, complex construction, fire safety concerns or expensive reinstatement costs may face a very different insurance premium from a newer, simpler building. This means two neighbouring blocks can have completely different insurance costs.

2. Repairs and maintenance are becoming more expensive

A building does not become cheaper to maintain simply because it gets older. In fact, older blocks can require more frequent repairs as components reach the end of their useful life. Common examples include:

Building cost	Why it can increase
Lift maintenance	Older equipment may require more repairs or specialist parts
Roof repairs	Weather damage and ageing materials
Door entry systems	Replacement parts and upgraded technology
Electrical systems	Testing, repairs and replacement
Plumbing	Leaks, corrosion and ageing pipework
Communal lighting	Repairs, replacement and electricity costs
Cleaning	Labour and contractor costs
Gardening	Labour, equipment and material costs
Fire safety	Inspection, maintenance and remedial works
External repairs	Age, weather damage and deterioration

The London Assembly has highlighted rising insurance, utilities and building safety-related costs among factors contributing to higher service charges. This is particularly relevant in blocks where several expensive building systems need attention at the same time.

3. Contractors are charging more

A large proportion of a block’s expenditure goes towards external contractors.

The managing agent may arrange the work, but the money is ultimately being spent on services such as cleaning, electrical maintenance, gardening, lift servicing, fire safety, plumbing and repairs. If contractor prices increase, the service charge can increase too.

That does not necessarily mean the managing agent is simply adding a larger profit margin. A contractor may be facing higher labour, equipment, insurance, materials, fuel or compliance costs. However, good block management should still involve monitoring those costs and seeking appropriate value rather than automatically accepting the first quotation.

This is one reason YHPM’s approach to block management performance focuses on expenditure, maintenance and the overall performance of the building rather than simply the headline management fee.

4. Energy and communal utilities can affect the bill

Some blocks have significant communal energy costs. This can include:

• communal lighting
• heating systems
• hot water systems
• ventilation
• pumps
• lifts
• car park lighting
• other shared electrical equipment.

Where a building operates communal heating or other shared systems, changes in energy costs can feed into the service charge.

The impact varies significantly between buildings. A small block with minimal communal electricity usage may see very little change, while a large development with lifts, lighting, heating systems, ventilation and other equipment can have much greater exposure to energy costs.

5. Fire safety and building compliance can add costs

Another reason service charges can rise is the increasing importance of building safety and compliance. Residential blocks have a range of obligations relating to safety, inspections, maintenance and record keeping.

Depending on the building, this can involve work relating to:

• fire doors
• emergency lighting
• fire alarms
• smoke control systems
• electrical safety
• lift safety
• asbestos
• water systems
• access control
• other building safety measures.

Some of these costs are relatively small and recurring.

Others can become substantial if an inspection identifies a problem that requires remedial work. This is one area where trying to keep service charges artificially low can create problems later. Ignoring necessary maintenance may make one year’s budget look cheaper, but it does not make the underlying problem disappear.

6. Major works can cause a sudden jump

Not every increase is caused by inflation. Sometimes the building simply needs something expensive.

• A roof may need replacing.
• The external walls may need repairs.
• A lift may have reached the end of its useful life.
• The windows may require replacement.
• A major electrical upgrade may be necessary.

These projects can dramatically change the amount being collected from leaseholders. Where qualifying major works exceed the relevant statutory threshold, the landlord will normally need to follow the Section 20 consultation process. GOV.UK currently states that consultation is generally required where planned works would cost more than £250 for an individual leaseholder.

That does not mean every major works bill is automatically unreasonable. It means leaseholders should be given the appropriate information and consultation where the legal requirements apply.

7. Reserve funds can make service charges look higher

Some blocks collect money towards future major expenditure through a reserve or sinking fund. At first glance, this can make the annual service charge look unnecessarily high.

But there is an important distinction between paying more because money is being wasted and paying more because the building is preparing for a predictable future expense. A roof replacement, lift renewal or major external repair can cost a significant amount. If a block has a properly planned reserve fund, leaseholders may contribute gradually rather than being presented with the entire cost when the work becomes urgent. Whether a reserve fund can be collected and how it can be used will depend on the lease.

8. The age and condition of your block matters

This is an often-overlooked reason for different service charge levels. There is no universal “normal” service charge for a flat. A modern development with a concierge, gym, underground car park and multiple lifts may have very different running costs from a small Victorian conversion with six flats and no communal facilities.

Equally, a small block can have a high service charge if it suddenly needs expensive repairs. The age, size, design, facilities and condition of the building all influence expenditure. This is why comparing your service charge with a friend’s flat in another building can be misleading.

9. Management costs can increase too

Managing a block involves administrative and professional work. Depending on the building, this can include:

• preparing budgets
• collecting service charges
• arranging contractors
• dealing with repairs
• organising inspections
• maintaining records
• handling leaseholder queries
• managing major works
• monitoring compliance
• dealing with emergencies.

The managing agent’s fee is only one part of the overall service charge, but it is still worth checking when reviewing an increase.

A higher management fee should be considered alongside the level of service being provided. A low management fee does not automatically mean a low overall service charge. In fact, poor management can sometimes increase total costs if maintenance is delayed, contractors are not properly monitored or problems are allowed to become emergencies.

YHPM explains more about what a block management company actually does and how professional management fits into the wider running costs of a building.

10. Poor planning can make increases worse This is perhaps the most important issue for leaseholders and RMC directors.

Not every increase is simply the result of unavoidable inflation. The way a building is managed can influence how much it ultimately costs. For example, poor planning can result in:

• emergency repairs instead of planned maintenance
• repeated contractor call-outs
• poor-quality work that needs correcting
• missed maintenance
• inadequate reserve planning
• contracts being renewed without proper review
• unclear expenditure
• unnecessary administrative costs.

Good management is not about making every service as cheap as possible. It is about making sure the building spends money where it needs to, when it needs to, and at an appropriate cost. YHPM’s existing guidance on service charge saving tips looks specifically at ways leaseholders and building managers can identify potential savings without simply cutting essential maintenance.

Does inflation automatically mean my service charge can increase?

No. This distinction is important. Inflation and rising costs can explain why a contractor, insurance provider or supplier has increased its price.

But the legal position is not simply:

“Costs went up, therefore any service charge increase is reasonable.”

LEASE’s current guidance confirms that there is no fixed percentage limit on how much a variable service charge can increase. However, the charge must still be reasonable, permitted by the lease and, where it relates to work or services, carried out to a reasonable standard. So if your service charge has increased by 20%, 30% or more, the percentage alone does not establish whether the charge is reasonable. You need to understand what caused the increase.

Can I challenge a rising service charge?

Potentially. A rising service charge is not automatically an unlawful or unreasonable service charge. You need to establish whether the amount is payable under the lease and whether the relevant costs are reasonable. If you believe there is a genuine problem, the first step should normally be to understand the figures and raise your concerns with the landlord or managing agent.

You may be able to request supporting documents, including invoices and receipts. If the dispute cannot be resolved, leaseholders can potentially ask the First-tier Tribunal (Property Chamber) to determine whether a service charge is payable and reasonable.

However, simply saying “my service charge has gone up too much” is unlikely to be enough on its own. Evidence matters.

Why are service charges increasing in London?

London leaseholders can face many of the same cost pressures as leaseholders elsewhere, but individual buildings can have particularly high operating costs. Insurance, contractor pricing, labour, repairs, maintenance and compliance can all contribute. The London Assembly has also highlighted service charge affordability as a significant issue for leaseholders and identified increased insurance, utilities and building safety-related costs among factors behind rising charges. However, there is no single “London service charge”. A small block in one part of London can have completely different costs from a large development elsewhere.

If you are reviewing your building’s current arrangements, YHPM provides block management in London with a focus on financial management, maintenance and the day-to-day operation of residential blocks.

What should leaseholders do when their service charge increases?

Don’t immediately assume the increase is wrong. But don’t ignore it either.

Start by asking three questions:

What has increased?

Look at the individual budget categories.

Why has it increased?

Ask for an explanation where the change is significant.

Is the cost reasonable and permitted by the lease?

Check the lease and supporting information.

This approach is much more useful than comparing your total bill with someone else’s. It also helps distinguish between a genuine increase in the cost of maintaining the building and an increase that may need further investigation.

What can RMC directors do to control rising service charges?

RMC directors have an important role because service charge expenditure should not simply be treated as an unavoidable annual bill. They can review budgets, monitor contracts, question unusual increases, plan major works early and make sure contractors are delivering the services being paid for. Long-term maintenance planning is particularly important. If a block knows that its roof, lift or external decoration will require significant work in several years, planning early can give residents more time to prepare financially and can reduce the likelihood of emergency expenditure.

The objective should not be to produce the lowest possible service charge this year. It should be to achieve good value over the lifetime of the building.

What is changing about service charges in 2026 and 2027?

There is also a wider reform picture. The Leasehold and Freehold Reform Act 2024 contains measures intended to improve service charge transparency and leaseholder access to information, but many of those changes have not yet been implemented. The direction of travel is towards clearer service charge information, more standardised reporting and greater transparency around costs.

For leaseholders, this makes it increasingly important to understand the figures behind the headline amount. For freeholders, RMCs and managing agents, it is a good reason to make service charge reporting clearer now rather than waiting for every new requirement to take effect.

The bottom line: why are service charges increasing?

So, why are service charges increasing? Usually, it is not because of one single factor. The increase may be caused by a combination of:

• higher building insurance
• more expensive contractors
• repairs and maintenance
• energy and communal utilities
• building safety and compliance
• major works
• reserve fund contributions
• higher management and administration costs
• the age and condition of the building
• poor maintenance planning.

The key is to look beyond the final number. A higher service charge does not automatically mean a managing agent is overcharging. Equally, a large increase should not simply be accepted without understanding where the additional money is going.

For leaseholders, the best starting point is the budget, the lease and the supporting information behind the charge. For RMC directors and freeholders, effective financial management means looking ahead, controlling unnecessary expenditure and maintaining the building properly rather than simply reacting when something goes wrong.

If your block’s service charges are rising year after year and you are not getting clear explanations, it may be worth reviewing how the building is managed.

Contact Your Home Property Management to discuss professional block management across London, Kent and Essex.

Need Better Control Over Your Block’s Costs?

Rising service charges are not always avoidable, but poor financial management can make them worse. A well-managed block should have clear budgets, properly monitored contractors, planned maintenance, transparent reporting and a sensible approach to long-term expenditure. If your residents are questioning repeated increases or your current managing agent is not providing clear answers, it may be time to review the way your block is being managed.

Speak to Your Home Property Management about professional block management across London, Kent and Essex.

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