Service charge year-end checklist: accounts, balancing charge and next year's budget

The service charge year end is the same job on every block every year: close the books, get the accounts out, demand or credit the balance, answer the requests that follow and set the next budget. The 1985 Act sets no single date for accounts, so the job is run against the lease, the RICS code and one hard limit of 18 months. This list is for the property manager or client accountant at a managing agent in England. Start it a month before the year end and keep one copy for each block.

Free tool

Service charge year-end checklist

Tick each step as it is done. The ticks are kept in this browser only, so you can come back to the list; nothing is sent anywhere.

Before the year end

Read the lease for the year end, the demand dates and what it says about accounts Check whether the lease says certified, audited or only a statement of account Diary six months from the year end as the date the accounts go out List every cost not yet demanded with its date, and find the oldest

Closing the books

Assemble the year's file: accounts, invoices, receipts and the contracts behind recurring costs Block of more than four flats: use a qualified accountant who is independent of landlord and agent Agree with the accountant which engagement the lease calls for: audit, certificate or agreed procedures Accounts will be late: send a section 20B(2) letter to every leaseholder Change of agent during the year: reconcile each flat to the last demand the old agent issued List the arrears at the year end and check each unpaid demand was valid before it is chased

The accounts and the balancing charge

Send the accounts to every contributor, not only to the directors or the landlord Work out each flat's balancing charge from its lease percentage, one schedule at a time Attach the summary of rights and obligations to the balancing demand Name the landlord, with its address, on the demand, and give an address for notices Check no cost in the balancing demand is more than 18 months old without a notification

Requests that follow the accounts

Section 21 request: send the cost summary within one month, or six months from the year end if later More than four dwellings: have the requested summary certified by the accountant Section 22 request: open the file within one month and keep it open for two months Sort a mixed request into section 21, section 22 and subject access, and date each one

Next year's budget and first demand

Set the budget and the reserve contribution, then apply each flat's share Send the budget with a one-line reason for each heading that moved by more than a few percent Print each flat's percentage on the demand Test planned works and contracts in the budget against £250 and £100 on the largest share Keep the 1985 Act demand template: do not switch to the 2024 Act's standard form yet Chase unpaid balancing charges with three letters over about five weeks before any solicitor

Copy what is left Print the list Clear the ticks

A working list, not a certificate and not advice: the rule behind each step, with its source, is set out below.

Works in your browser. Nothing you type leaves this device.

Before the year end

Read the lease for the year end, the demand dates and what it says about accounts. On-account demands fall on the dates the lease sets, and the lease usually says when accounts are to be prepared and the balancing charge demanded, often as soon as practicable after the year end. The 1985 Act sets no single date for accounts. Source: The lease; Landlord and Tenant Act 1985. The working is in When are service charge accounts due? A calendar from the year end, with the 18-month clock.

Check whether the lease says certified, audited or only a statement of account. Where the lease says audited, an audit is what the leaseholder is entitled to. Where it 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 clause, not the last agent's practice. Source: The lease; Landlord and Tenant Act 1985, section 19. The working is in Do service charge accounts need to be audited? What the Act requires, what the lease requires, and the difference.

Diary six months from the year end as the date the accounts go out. Section 5.13 of the RICS code, 4th edition, says accounts should be prepared and made available to all contributors within six months of the end of the financial period, or sooner if the lease requires. Source: RICS Service Charge Residential Management Code, 4th edition, section 5.13. The working is in When are service charge accounts due? A calendar from the year end, with the 18-month clock.

List every cost not yet demanded with its date, and find the oldest. A cost incurred more than 18 months before the demand is lost unless notified in writing within the 18 months. For a year running 1 April to 31 March, a cost incurred on 1 April must be demanded or notified by 30 September the following year. Source: Landlord and Tenant Act 1985, section 20B. The working is in When are service charge accounts due? A calendar from the year end, with the 18-month clock.

Closing the books

Assemble the year's file: accounts, invoices, receipts and the contracts behind recurring costs. A leaseholder may ask to inspect the documents behind the cost summary within six months of obtaining it. A file assembled at the year end is ready for the accountant now and for an inspection later. Source: Landlord and Tenant Act 1985, section 22. The working is in Leaseholder asks to see the invoices.

Block of more than four flats: use a qualified accountant who is independent of landlord and agent. A requested summary must be certified by a qualified accountant who is not an officer or employee of the landlord, its agent or an associated company. An in-house accountant cannot certify; the agent's external accountant can. Source: Landlord and Tenant Act 1985, sections 21 and 28. The working is in Do service charge accounts need to be audited? What the Act requires, what the lease requires, and the difference.

Agree with the accountant which engagement the lease calls for: audit, certificate or agreed procedures. An audit is an opinion under auditing standards. A section 21 certificate says the summary is fair and supported by the documents. Agreed procedures report findings with no opinion. The cost falls in that order, and in most leases the leaseholders pay it. Source: Landlord and Tenant Act 1985, section 21; the lease. The working is in Do service charge accounts need to be audited? What the Act requires, what the lease requires, and the difference.

Accounts will be late: send a section 20B(2) letter to every leaseholder. The letter says costs have been incurred and a contribution will be required. It does not need a figure. It protects costs that would otherwise be more than 18 months old when the demand is served. Source: Landlord and Tenant Act 1985, section 20B(2). The working is in Service charge demand checker.

Change of agent during the year: reconcile each flat to the last demand the old agent issued. The RICS code asks the outgoing agent for a full and final reconciliation within three months of termination. Where a change of agent makes the accounts later than six months, the code says all parties should be told why. Source: RICS Service Charge Residential Management Code, 4th edition, sections 5.13 and 7.4 to 7.6. The working is in Taking over a block from another managing agent.

List the arrears at the year end and check each unpaid demand was valid before it is chased. A leaseholder sent a demand without the summary of rights may withhold it, and the lease's interest and late-payment terms do not run while they do. Chasing a defective demand produces an argument, not a payment. Source: Landlord and Tenant Act 1985, section 21B. The working is in Service charge arrears letter template for managing agents.

The accounts and the balancing charge

Send the accounts to every contributor, not only to the directors or the landlord. The code says copies should be made available to all contributors. Accounts sent with a balancing demand within six months also answer a section 21 request if one arrives, and clear the 18-month limit for every cost in the year. Source: RICS Service Charge Residential Management Code, 4th edition, section 5.13. The working is in When are service charge accounts due? A calendar from the year end, with the 18-month clock.

Work out each flat's balancing charge from its lease percentage, one schedule at a time. The lease sets the share, and many leases split costs into parts such as the building, the estate, the lift and the car park. Run the sum once for each schedule with its own total and add the results. Source: The lease. The working is in Service charge apportionment calculator.

Attach the summary of rights and obligations to the balancing demand. Under section 21B a demand must be accompanied by the prescribed summary, in the prescribed form and type size. Without it the leaseholder may withhold the charge, and lease terms on late payment and interest do not apply meanwhile. Source: Landlord and Tenant Act 1985, section 21B; Summary of Rights and Obligations Regulations 2007. The working is in Service charge demand checker.

Name the landlord, with its address, on the demand, and give an address for notices. The landlord is the freeholder or the RMC, not the agent. Until the landlord's name and address are given, and an address in England and Wales for service of notices, the charge is treated as not due. Source: Landlord and Tenant Act 1987, sections 47 and 48. The working is in Service charge demand checker.

Check no cost in the balancing demand is more than 18 months old without a notification. This is the one failure that loses the money outright. A late demand with no earlier written notification cannot be cured by serving it again, so tell the client the figure in writing. Source: Landlord and Tenant Act 1985, section 20B. The working is in Service charge demand checker.

Requests that follow the accounts

Section 21 request: send the cost summary within one month, or six months from the year end if later. A leaseholder, or the secretary of a recognised tenants' association, may ask in writing for a summary of the costs in the last accounting year. The landlord must comply within one month of the request or six months of the year end, whichever is later. Source: Landlord and Tenant Act 1985, section 21. The working is in When are service charge accounts due? A calendar from the year end, with the 18-month clock.

More than four dwellings: have the requested summary certified by the accountant. Where the charges are payable by tenants of more than four dwellings, the summary must be certified by a qualified accountant as a fair summary, sufficiently supported by accounts, receipts and other documents. The Act asks for a certificate, not an audit. Source: Landlord and Tenant Act 1985, section 21. The working is in Do service charge accounts need to be audited? What the Act requires, what the lease requires, and the difference.

Section 22 request: open the file within one month and keep it open for two months. The leaseholder has six months from obtaining the summary to ask. Inspection is free and copies may be charged for at a reasonable rate. Failing without reasonable excuse is a summary offence with a fine of up to £2,500. Source: Landlord and Tenant Act 1985, sections 22 and 25. The working is in Leaseholder asks to see the invoices.

Sort a mixed request into section 21, section 22 and subject access, and date each one. A single email often contains all three rights, and each has its own clock. A subject access request for the leaseholder's own personal data is due within one month of receipt. Section 22 reaches the one year the summary covers. Source: Landlord and Tenant Act 1985, sections 21 and 22; UK GDPR, Articles 12 and 15. The working is in Leaseholder asks to see the invoices.

Next year's budget and first demand

Set the budget and the reserve contribution, then apply each flat's share. On a £48,000 budget with a £6,000 reserve contribution, a flat with a 4.5% share pays £2,430 a year, which is £1,215 on each half-yearly demand. The percentage comes from the lease, not from last year's spreadsheet. Source: The lease; our arithmetic. The working is in Service charge apportionment calculator.

Send the budget with a one-line reason for each heading that moved by more than a few percent. A budget that goes from £44,000 to £48,000 is up 9.1%, and the first email after the demands go out will ask why. A sentence saying which headings moved answers it before it is asked. Source: Our arithmetic on the example budget. The working is in Service charge apportionment calculator.

Print each flat's percentage on the demand. Stating the percentage lets the leaseholder check the sum without asking. A flat on 4.5% in a block of 24 pays £180 a year more than one twenty-fourth of a £54,000 total, and leaseholders do that sum themselves. Source: The lease; our arithmetic. The working is in Service charge apportionment calculator.

Test planned works and contracts in the budget against £250 and £100 on the largest share. At a largest share of 4.5%, works costing more than £5,555.56 need Section 20 consultation first, and so does a contract of more than 12 months costing more than £2,222.22 a year. Use the largest share in the block, not the average. Source: Landlord and Tenant Act 1985, section 20; Service Charges (Consultation Requirements) (England) Regulations 2003. The working is in Service charge apportionment calculator.

Keep the 1985 Act demand template: do not switch to the 2024 Act's standard form yet. Part 4 of the Leasehold and Freehold Reform Act 2024, with its standard demand form and annual report, had not commenced on 1 October 2026. Some agents who redesigned demands early dropped the section 21B summary or the section 47 and 48 information. Source: Leasehold and Freehold Reform Act 2024, Part 4 (uncommenced on 1 October 2026). The working is in Leasehold and Freehold Reform Act 2024.

Chase unpaid balancing charges with three letters over about five weeks before any solicitor. A reminder at seven days, a formal reminder at fourteen and a final letter at fourteen. Forfeiture cannot be threatened for a service charge that is neither admitted nor determined, and is unavailable for £350 or less unless some of it is over three years old. Source: Housing Act 1996, section 81; Commonhold and Leasehold Reform Act 2002, section 167; SI 2004/3086. The working is in Service charge arrears letter template for managing agents.

How to use the list

File the ticked list with the block's year-end accounts, with the dates the accounts, the balancing demand and the budget went out. A step that does not apply, such as the accountant's certificate in a block of four flats, should be ticked with a note saying why. Next year, start from this year's list: the lease clauses in the first group will not have changed. If a section 21 or 22 request arrives later, the list shows where the file is and when the accounts were issued.

A ticked list is a record that the steps were done, not proof that each was done properly. The list covers the points our guides and the official pages named above set out; it is not every duty a firm has. This page is general information, not legal advice.

Overlyft sets up AI assistants for block and property managers: they prepare drafts for a person to approve. They do not tick off any of these steps for you, and you can do every one without them.