Can a landlord recover legal costs through the service charge? The lease test, section 20C and what the 2024 Act will change

Yes, but only where the lease allows it, and a leaseholder can still ask the court or tribunal to keep the costs out of the service charge under section 20C of the Landlord and Tenant Act 1985. That is the law on 1 October 2026. Section 62 of the Leasehold and Freehold Reform Act 2024 would reverse the starting point, so that the landlord has to apply for permission. It is not in force.

Test one: what the lease says

The First-tier Tribunal can order one side to pay the other's costs only in limited circumstances. Its rules allow it where a party has acted unreasonably in bringing, defending or conducting the case. A landlord who wins there gets its legal bill back through the lease or not at all.

The case to read is Kensquare Ltd v Boakye, decided by the Court of Appeal on 22 November 2021. The lease let the service charge include the cost of professional advisers and agents reasonably required "in connection with the management of the Building". The court held that those words did not extend to litigation costs: lawyers were not named and nothing was said about legal proceedings. It cited an older Court of Appeal decision, Sella House v Mears, where a judge said he would need to see a clause in clear and unambiguous terms before making paying leaseholders fund claims against their neighbours.

The same lease made the leaseholder pay costs incurred for the purpose of preparing and serving a section 146 notice. The court held that this clause did cover the landlord's costs of the earlier tribunal case, because the landlord had to bring that case before it could serve the notice. That is a charge on the one leaseholder, an administration charge, and not a service charge shared by the block.

The court also repeated that each lease turns on its own wording. Find the clause and write it into the file before proceedings start.

Test two: a section 20C order

Even with a clear clause, a leaseholder may apply for an order that all or any of the landlord's costs of the proceedings are not to be counted when working out the service charge. The application can cover court, tribunal and arbitration proceedings. The court or tribunal makes whatever order it considers just and equitable.

Three points matter to the agent.

• The order protects the applicant and any other person named in the application. Leaseholders who are not named are not protected by it.
• It can be made during the case or after it has ended.
• The tribunal fee for a section 20C application is £114, with £227 if a hearing is listed, under the schedule in force from 13 July 2026.

Administration charges have a twin. Under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002, a leaseholder in England can apply for an order reducing or extinguishing an administration charge for litigation costs. The fee is the same.

Test three: reasonableness

Section 19 of the 1985 Act counts a cost only to the extent that it was reasonably incurred. A £6,000 bill for chasing £2,400 will be looked at on that basis even where the first two tests are passed.

One bill, four outcomes

A block has 24 flats on equal shares. The landlord spends £6,000 on solicitors in a tribunal case about Flat 9's arrears and wins. The splits below are our reading of section 20C, checked twice.

For a residents' management company with no income but the service charge, the last two rows mean asking the members for money. Tell the board before the solicitor is instructed.

What the 2024 Act will change

Section 62 of the 2024 Act removes section 20C and puts section 20CA in its place. Under it a landlord's litigation costs are not service charge costs unless the court or tribunal, on the landlord's application, orders otherwise. A lease term to the contrary has no effect. A matching paragraph 5B does the same for administration charges, and section 63 gives leaseholders a right to apply for their own costs from the landlord. On 1 October 2026 legislation.gov.uk shows all of this as prospective.

The government's response of 15 July 2026 says how it will be used:

• Court or tribunal approval will be needed for every recovery through the service charge, defended or not.
• For administration charges there will be an exemption below a threshold. No figure is given.
• Residents' management companies, right to manage companies and tribunal-appointed managers will be able to use service charge funds first, then apply once the case has ended and repay the account if approval is refused.

The response says the statutory instruments will be laid later this year and that leaseholders will start to see changes during 2027. It gives no commencement date for the litigation costs rules. Our guide to what is in force under the 2024 Act tracks the commencement orders.

What to do before the next claim

1. Read the lease for a costs clause and note which kind it is.
2. Tell the client in writing what can be recovered, from whom, and that a section 20C application may follow.
3. Price the court fees with our guide to what a county court claim costs.
4. Send the three arrears letters first. The section 20C test is what is just and equitable, and the letters are the record of how the client behaved.
5. Show legal costs as their own line in the accounts. A leaseholder who uses the right to inspect the invoices will ask for them.
6. If an order is made, take the costs off the accounts of everyone it names.

This is general information for England, not legal advice.