Do service charge accounts need to be audited? What the Act requires, what the lease requires, and the difference

"Do service charge accounts need to be audited?" is asked by leaseholders who suspect the figures and by agents who are being asked to pay for an audit they are not sure the law requires. The answer has three layers, and they are usually run together.

Layer one: the statute

Section 21 of the Landlord and Tenant Act 1985 gives a leaseholder, or the secretary of a recognised tenants' association, the right to request a written summary of the costs incurred in the last accounting year. The landlord must supply it within one month of the request or six months of the end of the accounting period, whichever is later. Where the charges are payable by the tenants of more than four dwellings, the summary must be certified by a qualified accountant as a fair summary, complying with the section, and sufficiently supported by accounts, receipts and other documents produced to the accountant.

Three things follow. The statute requires a certificate, not an audit; the words are different and so is the work. The certificate is required only on a requested summary; a block where nobody asks has no statutory duty to have anything certified. And the threshold is more than four dwellings, so a converted house of four flats is outside it even when asked.

Section 22 then lets the leaseholder, within six months of receiving the summary, inspect the accounts, receipts and other documents behind it, with facilities afforded within one month and open for two months. The service charge year calendar puts both on the diary.

Layer two: the lease

Most leases say something about the accounts, and the wording governs. Common forms are "certified by the landlord's accountant", "certified by a chartered accountant", "audited by a qualified accountant", or simply "a statement of account". Where the lease says audited, an audit is what the leaseholder is entitled to, and the cost of it is a service charge cost if the lease allows management and accountancy costs, which almost all do. Where the lease says certified, an audit is more than the lease requires and a leaseholder could argue the extra cost is unreasonable under section 19.

Read the lease, not the previous agent's practice. Blocks change hands with "we always had an audit" attached and nobody has looked at the clause for a decade.

Layer three: what an audit is

An audit is an opinion under auditing standards that the accounts give a true and fair view, with the testing and independence that implies. A certificate under section 21 is a narrower statement: the summary is fair and the documents support it. An agreed-upon-procedures engagement, in which the accountant performs listed checks and reports the findings without an opinion, is narrower still. The accountancy bodies and RICS have published joint technical guidance on residential service charge accounts for many years; we have not re-read the current edition for this guide, and an agent choosing between the three forms should ask the accountant which the lease wording calls for.

The costs differ in the same order. For a block of 24 flats, an audit is the most expensive, a certificate less, agreed procedures least. All three are service charge costs in most leases, and all three are what the leaseholders are paying for, which is the reason the choice should be the lease's and not the agent's preference.

What the code expects

The RICS Service Charge Residential Management Code, 4th edition, in force from 7 April 2026, treats timely year-end accounts and independent examination as marks of proper management. It does not override the lease. An agent who provides a certified summary within six months of the year end on every block of five flats or more, and an audit where the lease says so, is inside both the statute and the code.

The questions that actually come in

"I want the accounts audited." Ask whether the lease requires it. If it does, it is already happening or should be. If it does not, the leaseholder's statutory rights are the section 21 summary, certified where there are more than four flats, and section 22 inspection of the documents behind it. Offer both, in writing, with the dates.

"Why have you charged for an audit?" Because the lease says audited, and here is the clause. If the lease says certified, the question is fair and the answer may be that the firm should change the engagement.

"Can the accountant be your own?" Section 21 requires a qualified accountant who is not an officer or employee of the landlord, its agent or a company associated with them, so an in-house accountant cannot certify. The agent's external accountant can, provided the independence rule in section 28 is met.

When the annual report arrives

The Leasehold and Freehold Reform Act 2024 provides for an annual report to leaseholders alongside standardised demands. On 1 October 2026 those provisions are not in force; our guide on which parts of the 2024 Act have commenced tracks them. When they are, the report will sit next to the certified accounts rather than replacing them.

This is general information for England, not legal advice.