Key takeaways
- No statute caps the annual rise in a variable service charge. Section 19 of the Landlord and Tenant Act 1985 limits costs to those "reasonably incurred", and a tribunal decides what that means.
- The Property Institute's index of 108 managed estates rose 41% between 2019 and 2024, while the ONS consumer prices index rose 24.2% over the same years.
- The same index, rebuilt on 2,137 estates, shows 2026 budgets up 6.3% on 2025 after a 0.5% fall the year before, with reserve fund contributions up 26% over two years.
- The English Housing Survey median went from £1,200 in 2017 to £1,375 in 2023-24, a 14.6% rise against 26.2% inflation, on a base where 28% of leasehold dwellings are houses.
- The only hard cap is the Building Safety Act's £10,000 outside London and £15,000 inside, spread at one tenth a year, and it covers relevant building-safety defects only.
The short answer: nothing caps a service charge increase, and the real limit is a word
How much can a service charge go up in one year? If you hold a long lease on a flat in England, you've probably asked this after opening a demand well above the last one. The honest answer is that no law sets a maximum percentage. A variable service charge rises with the costs it recovers, and the statute limits the costs, not the rate of change.
Section 19 of the Landlord and Tenant Act 1985 is the whole of the protection on amount. Relevant costs count towards a service charge "only to the extent that they are reasonably incurred", and works and services must be "of a reasonable standard". Where a charge is demanded in advance, "no greater amount than is reasonable is so payable". That's it. There's no index link, no cap and no formula.
So the useful question is different. It's what a reasonable service charge increase has actually looked like, which costs drove it, and which rules constrain the parts of the bill that jump. The benchmarks below come from the two datasets that measure it, and they disagree.
The managed-estate benchmark: 41% in five years, then flat against inflation
The Property Institute, the professional body for managing agents, published its first Service Charge Index in April 2024. It covered 108 estates and 13,754 homes across England and Wales. The average bill per estate went from £331,729 in 2019 to £467,138 in 2024, which the report calls "an increase of 41% in the last five years; and a 3% increase from 2023 to 2024". Per leaseholder, the averages were £2,523 in 2019 and £3,634 in 2024, a rise of 44%.
Against prices generally, the ONS CPI index averaged 107.8 in 2019 and 133.9 in 2024, a cumulative rise of 24.2%. The index's own comparison, quoting Bank of England data, put cumulative inflation at 23%. Either way, managed estates saw a service charge increase of roughly 1.7 times general inflation over those five years.
The chart plots where the money went. Buildings insurance rose 92% per estate, utilities 73%, professional fees 69%, health and safety 40%, on-site staff 37%, repairs and maintenance 36% and reserve fund contributions 34%. Management fees rose 21%, below inflation. Every other category in that list outran the CPI.
The 2026 edition, published on 21 May 2026, is a bigger, different sample: 2,137 estates and 117,052 homes from 13 member firms, covering 2024 to 2026. Its headline reads the opposite way. Budgeted service charges for 2026 "rose by 6.3%, compared with 2025 costs", which "followed a 0.5% fall in 2025, from 2024". Across the two years the average bill rose 5.8%, against a CPI rise the report puts at 6.1% from January 2024 to January 2026. The ONS index confirms the arithmetic: 131.5 to 139.5 is 6.1%.
The average bill per leaseholder in the 2026 budgets is £2,880, with a spread from £1,525 at the tenth percentile to £8,680 at the ninetieth. Height explains most of that spread: £2,418 for buildings under 11 metres, £3,507 for 11 to 18 metres and £4,447 above 18 metres. Age explains the rest, with buildings over 50 years old averaging £5,208 against £2,508 for those under 25 years.
The household survey tells a quieter story, and the gap is the sample
The English Housing Survey asks leaseholders themselves. Its 2023-24 leasehold fact sheet, published in July 2025 and updated on 7 July 2026, reports that 65% of leaseholders paid a service charge and that among them "the average (mean) annual service charge was £1,720 (median £1,375)". Flats averaged £1,857 with a median of £1,500. Houses averaged £881 with a median of just £300.
The survey's own reading of the trend is blunt: the average "has remained relatively stable in recent years, with no significant change over the past five years." The prior year's figures support that. In 2022-23 owner occupier leaseholders paid £32 a week, "which equated to £1,650 a year (mean)", with a median of £1,222. Go back to the 2017 survey and the median was £1,200. From 2017 to 2023-24 the median rose 14.6%, while the CPI index rose 26.2% between the 2017 and 2023 annual averages.
So one dataset says service charges rose at nearly twice inflation and the other says they fell behind it. Both can be right, because they measure different buildings. Of the 2024 Property Institute sample's 108 estates, 50 were 18 metres or taller, and 22% were awaiting remediation work. Those are the buildings that took the insurance and building-safety shocks. The housing survey’s population is all 4.83 million leasehold dwellings in England, 28% of which are houses paying a median of £300 a year.
That matters for the benchmark. If your block is low-rise, resident-managed and built before the cladding era, the survey's flat medians are the better comparator. If it's a tall block with a concierge and a lift, the managed-estate index is, and its 2026 sample is 88% buildings under 11 metres, so even that understates the tall-block experience.
Reserve funds are where the biggest rises now sit, and the lease decides everything
A reserve fund, sometimes called a sinking fund, is money collected in advance for major works: roofs, lifts, external redecoration. In the 2026 index, contributions to reserve funds rose 26% over 2024 to 2026 while the total bill rose 5.8%, making them the fastest-growing line after building-safety compliance costs and the second largest at 16.4% of the 2026 budget. Buildings built before 2000 were collecting 2.5 times as much per leaseholder as newer ones.
Three rules govern that money, and the first is the lease itself. The RICS Service Charge Residential Management Code is approved by the Secretary of State under section 87 of the Leasehold Reform, Housing and Urban Development Act 1993. Its fourth edition, published on 17 March 2026, encourages planned preventative maintenance "and reserve funding where leases allow". Where the lease makes no provision, the code's advice to managers is to seek leaseholder support for an application to the tribunal to vary the leases. No lease provision, no reserve fund, however sensible one would be.
The second rule is trust. Section 42 of the Landlord and Tenant Act 1987 requires that sums paid by way of service charge, "and any investments representing those sums", be held on trust. The trust is first "to defray costs incurred in connection with the matters for which the relevant service charges were payable", and then for the contributing tenants. A reserve fund isn't the freeholder's money, and the code adds that it shouldn't be used "to subsidise day-to-day service charge expenditure" or to cover other leaseholders' arrears.
The third rule is method. The code expects every building to have a costed planned preventative maintenance plan covering at least three years, with contributions "informed by the PPM plan" and "reviewed annually as part of the budget process". A reserve fund contribution that doubles should therefore trace to a plan the leaseholder can ask for, because the code says the plan and projected contributions "should be made available to all leaseholders on request".
None of that caps the contribution. It means a large reserve fund increase has to be explained by a document, and a contribution with no plan behind it is the kind of cost a tribunal can find was not reasonably incurred under section 19.
Three procedural limits bite on a big one-off jump
Beyond reasonableness, the 1985 Act contains three mechanisms that limit specific kinds of increase rather than the total.
Section 20 consultation, under the Service Charges (Consultation Requirements) (England) Regulations 2003. Where qualifying works would cost any one leaseholder more than £250, or a long-term agreement more than £100 in an accounting period, the landlord must consult or get the requirement dispensed with by the tribunal. If it doesn't, the amount recoverable from each leaseholder is capped at those figures. The RICS code notes that consultation is still required where the works are paid from a reserve fund, so the fund doesn't bypass the process.
Section 20B, the 18-month rule. Costs incurred more than 18 months before a demand is served aren't payable, unless the leaseholder was told in writing within that 18 months that the costs had been incurred and would be charged. A catch-up demand for old costs is the one kind of rise that can fail on timing alone.
Section 21B. Every demand must carry a summary of the leaseholder's rights and obligations, and a leaseholder "may withhold payment of a service charge which has been demanded from him" if it doesn't. It's a formality, but a demand without it is unenforceable until it's cured.
Section 27A is what gives the rest teeth. Any party can apply to the First-tier Tribunal for a determination of whether a service charge is payable, and if so by whom, to whom, how much and when. The tribunal's view of "reasonable" is the only ceiling a variable charge has, and it's a case-by-case one.
The one statutory cap: building safety costs, spread at a tenth a year
There is a hard cap, but it applies to one category of cost. Schedule 8 of the Building Safety Act 2022 governs service charges for remedying "relevant defects" in a relevant building, which section 117 defines as one with at least two dwellings that is "at least 11 metres high" or "has at least 5 storeys". For a qualifying lease it sets a "permitted maximum" of £15,000 in Greater London and £10,000 elsewhere. That maximum rises to £50,000 where the lease was worth over £1,000,000 at the qualifying time and £100,000 where it was worth over £2,000,000.
The annual limit is in paragraph 7. A relevant service charge is payable only if it, plus the relevant charges that fell due in the preceding 12 months, does "not exceed one tenth of the permitted maximum". That is £1,000 a year outside London and £1,500 inside for a standard qualifying lease. Two categories are at zero: "no service charge is payable under a qualifying lease in respect of cladding remediation", and none is payable at all where the lease was worth less than £325,000 in London or £175,000 elsewhere.
It's the only maximum annual amount written down in leasehold law. It says nothing about insurance, management, staff or utilities, and it doesn't touch the compliance costs of the new regime, which the 2026 index shows up 53% over two years at 1.5% of the average budget.
Insurance was the single biggest driver, and the FCA measured it
The line that most explains the 2019 to 2024 gap is buildings insurance. The FCA's September 2022 report on insurance for multi-occupancy buildings found that mean prices "have increased by 125% from 2016 to 2021 across the sample". For mid-rise and high-rise buildings the mean annual premium went from £6,800 to £15,300. Buildings with identified flammable cladding saw a 187% rise, from £26,300 to £75,600. Buildings without cladding still saw 94%, from £6,700 to £13,000.
The regulator's April 2023 review of 16 firms, 13 brokers and three managing general agents, added the distribution layer. Average gross written premium per policy rose 56% from £7,470 in 2019 to £11,625 in 2022, and average broker commission per policy rose 46% from £1,785 to £2,595. Commission is a percentage of premium, so a doubling premium doubled the commission without anyone changing a rate. The FCA confirmed rules on 29 September 2023 requiring firms to act in leaseholders' best interests and to disclose commission to them, taking effect from the start of 2024.
The Property Institute data suggests the shock has plateaued rather than reversed. Insurance rose 92% per estate between 2019 and 2024, then was flat in 2026 budgets with a cumulative fall of 4% over 2024 to 2026, still 13% of the average bill. The 2016 to 2021 doubling has become a permanent step in the base.
What changes from 2027, and what still hasn't been decided
Part 4 of the Leasehold and Freehold Reform Act 2024 rewrites the transparency rules, but none of its service charge sections were in force at Royal Assent. Section 56 inserts a duty to provide a written statement of account within six months of the end of the accounting period, with an accountant's report, and an annual report within one month. Section 55 prescribes a standard form of demand.
On 15 July 2026 the government published its response to the 2025 consultation on those measures. It plans "to give private landlords 12 months' notice of the measures, and social landlords 24 months' notice", with leaseholders starting "to see changes during 2027" through at least five statutory instruments. Its press release of the same day describes an annual report giving "a clear insight into the health and condition of their building and plans for major works", and a right to documents "going back up to six years".
The consultation also asked about mandating reserve funds and improving the section 20 major works regime. The response defers both: it promises "a separate response in due course" on reforms outside the scope of the 2024 Act. So as of September 2026, the reserve fund rules above are the rules, and £250 and £100 are the thresholds.
What the 2027 changes do alter is the evidence available to test an increase. An annual report that has to state the condition of the building and the plans for major works is the document the RICS code already says a reserve fund contribution should trace to. Once it's a statutory requirement, a rise without one is easier to challenge.
What the benchmarks can't tell you
Every number above is an average of a sample, and the samples shift between editions. The 2024 index rested on 108 estates supplied by ten member firms. The 2026 index rests on 2,137 estates from 13, a different population, so the 41% and the 5.8% aren't two readings of one series. The 2026 figure is a budget, not an outturn, and the report says so.
The housing survey reports what leaseholders told it, describing its figure as "the average service charge reported by leaseholders across the country". The managed-estate index carries its own warning on the same point: "due to apportionment, service charge bills will vary greatly between residents, so aggregated cost averages will not be representative of actual leaseholder bills". The survey's base also changed: the 2017 and 2022-23 figures cover owner occupier leaseholders, the 2023-24 fact sheet leaseholders generally, so the 14.6% spans a change of base as well as six years.
Inflation isn't the right denominator for everything. Insurance follows the reinsurance cycle and the fire-safety risk register, not the CPI. Utilities for common parts aren't price-capped like domestic supply, which is why they rose 73% and then fell 7%. A reasonable increase in one line can be several times the CPI while the bill as a whole tracks it.
And the statutory limits are procedural. Section 19 doesn't say an 8% rise is unreasonable and a 4% one is fine. It says the tribunal looks at the cost, the standard and the process. A bill that doubles because the roof was replaced on a costed plan after consultation is a different case from a bill that rises 5% with no accounts, no plan and a demand for three-year-old costs.
For a household tracking its home the way it tracks its other assets, the service charge is a running cost. It sits alongside the unrecoverable cost of home ownership rather than on the net-worth line. The academic return series that treat a house as an investment net maintenance and ground rent out of the yield. A listed alternative shifts those costs to a fund's income statement, which is the crux of the REITs vs direct property comparison.
What would change the conclusion
The reading here is that a service charge increase has no ceiling but has a benchmark, and that the benchmark has fallen back to inflation after a five-year run at nearly twice it. Three things would overturn it.
A decision to mandate reserve funds. If the deferred response requires a fund in every block that lacks one, the 26% rise in contributions would become the pattern for buildings that have never collected, and the 2028 index would show a step up unrelated to costs.
A second insurance shock. The FCA put the 2016 to 2021 rise down to fire-safety risk and to "the broader changes to the insurers' understanding of the risks and their approach to underwriting". Another such change, in either direction, moves 13% of the average bill at once and the total with it.
A 2027 index built on the same estates as 2026. Only then would the year-on-year figure be a like-for-like series. Until it is, the honest description of the annual rise in a managed estate's service charge is a range, roughly minus 0.5% to plus 6.3% in the two years measured, and the tribunal's word "reasonable" is the only limit on where the next one lands.