Service Charge Disputes in Mixed-Use Developments – Who Pays for What?

Why mixed-use buildings are different

A service charge is your contribution to the landlord’s costs of maintaining, repairing, insuring and managing the building.

The lease decides how costs are shared.

Two different rulebooks

Residential leaseholders have strong statutory protection under the Landlord and Tenant Act 1985. Commercial tenants have no equivalent statutory code. Their position depends almost entirely on the wording of the lease. The courts have sometimes been willing to read in a requirement that costs be fair and reasonable, but this is far less certain than the residential protections.

Common flashpoints

Most disputes come back to apportionment: whether each occupier is paying a fair share for what they actually use. Typical arguments include:

• flat owners contributing to commercial refuse collection or signage
• retailers paying for residential concierge services or communal gardens
• landlords adding new or discretionary services that one group neither asked for nor uses.

The lease wording is critical. Where it allows the landlord to decide a “fair proportion”, a residential leaseholder can ask the tribunal whether the landlord’s split is reasonable. Where the lease fixes a percentage, the parties are generally bound by it. One limited exception is where the contributions across the flats add up to more or less than the whole cost. In that case, a flat owner may be able to apply to vary the lease under section 35 of the Landlord and Tenant Act 1987.

Insurance can also cause friction. Some commercial uses push up the premium for the whole building, and whether that increase can be passed to the business responsible depends on the lease.

Resolving a dispute

Start with the documents: the lease, the budget, the year-end accounts and the invoices behind them. Put your questions to the landlord or managing agent in writing. Many disputes stem from poor information rather than genuine overcharging.

Be cautious about withholding payment altogether.

Residential leaseholders in England can apply to the First-tier Tribunal (Property Chamber) under section 27A for a ruling on whether charges are payable and reasonable. The tribunal can also be asked to stop the landlord adding its legal costs to the service charge (section 20C). Commercial disputes are resolved through negotiation, mediation, any expert determination process in the lease, or the courts.

Where management is the real problem, the Right to Manage may be an option. Since 3 March 2025, a building can qualify where up to 50% of its internal floor area is non-residential, up from 25%. This brings many more mixed-use buildings within reach. Subject to the other statutory qualifying conditions, qualifying flat owners can then take over management of the building through a company they control.

Service charge dispute often arise due to a lack of information being provided by the freeholders , or a lack of understanding on the part of the leaseholders of the obligation of the freeholder. Our team can help both freeholder and Leaseholders hopefully reached an amicable resolution of these disputes.

Holly Minney

Head of Dispute Resolution

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