Our flats' service charge is rising to £2,500 per year - should we buy the freehold to take control?

Shortly after, my fellow leaseholders and I discovered that the leaseholders had been overpaying the service charges every year since the management company took over in 2023. 

The money wasn't returned and just sat in the account. Despite the constant overpayments, the service charge went up every single year. 

The management company has now refunded the money, but has not explained why this happened or why no one was notified.

On top of that, they recently admitted that when the freeholder switched management companies, they agreed to pay a minimum management fee of £3,600 for our block of four flats, plus lots of extra fees bringing the total to nearly £10,000. It means we are paying about £2,500 a year each.  

They claim they had no obligation to tell us about this agreement.

I spoke to the freeholder and asked about taking over management ourselves under the Right to Manage. Then, we received notice that the freeholder plans to sell. I'm wondering if we could club together and buy the freehold. 

The flats have a yoga studio on the ground floor, and one owner is currently in the process of selling. What are our options?

Dilemma: A This is Money reader moved into a leasehold flat in February 2026 and already faces problems

Jane Denton, of This is Money, replies: Having only moved into your leasehold flat in February, you are already facing many of the pitfalls of leasehold. 

When someone buys the freehold of a property they own the building and the land it is built on. 

Leasehold property means you own the right to occupy the property for a set length of time, but not the land it is built on.​ Once the lease ends, the property, typically a flat, returns to the landowner, known as the freeholder.

Leaseholders are typically responsible for paying an annual ground rent and monthly service charges that go towards repairs and maintenance of shared areas. 

In 2025, flat leaseholders in England and Wales paid an average service charge of £2,405 or £200 a month, up 4.6 per cent from the previous year according to Hamptons. 

And the average service charge has risen by more than 30 per cent in the past five years and 55.6 per cent in the past decade, outstripping inflation, Hamptons added. 

By serving everyone in your block with a Section 5B notice, your landlord has told you he plans to sell his interest in the property at auction. But as leaseholders, you have the right to first refusal. 

If you match the winning auction bid, you can acquire his share of the freehold.

If you and the other leaseholders want to do this, ensure you get legal advice beforehand as there are potential compliance and legal pitfalls to watch out for. 

If your attempt to buy the freehold doesn't work out, you are mulling pursuing right to manage. 

This gives leaseholders the opportunity to take control of the management of their building, without needing to buy the freehold outright or seek the landlord’s agreement. 

I asked two experts how you should proceed with the service charge increase, Section 5B notice and right to manage plans.  

James Naylor, a partner at Naylor Solicitors, said: Start with your lease. It should explain how service charges are calculated and what happens when payments exceed actual expenditure. 

A surplus may be credited against future charges rather than refunded immediately, so money sitting on the account is not necessarily improper. 

However, repeated surpluses while annual demands continue to rise certainly justify asking how the budgets were calculated.

James Naylor is a partner at Naylor Solicitors 

Because you only acquired the flat in February, also ask your conveyancing solicitor how any historic service charge credits were dealt with when you purchased.

The management charges deserve close scrutiny. The fact that the freeholder agreed a minimum £3,600 fee does not automatically mean it can simply pass that cost to leaseholders. 

The lease must allow the cost to be recovered, and service charges must be reasonably incurred under Section 19 of the Landlord and Tenant Act 1985.

Therefore, ask for the service charge accounts since 2023, an explanation of the annual surpluses, a breakdown of the nearly £10,000 and how costs are divided between the flats and yoga studio. 

If the information is not provided voluntarily, you can request a summary of the relevant costs and inspect supporting documents under sections 21 and 22 of the Landlord and Tenant Act 1985.

If it appears that the charges are unreasonable or not payable under the lease, they can be challenged in the first-tier tribunal.

Ask to see the management agreement too. Broadly speaking, if it ties the freeholder in for more than 12 months and costs any leaseholder more than £100 a year, the freeholder may have had to consult you under Section 20. 

If it failed to do so, recovery of the costs under that agreement may be capped at £100 per leaseholder per year, unless the first-tier tribunal grants dispensation.

The Section 5B notice is more urgent. It means the landlord proposes to sell its interest at public auction. 

If the necessary majority of qualifying leaseholders accepts the offer, they can nominate a purchaser and reserve the right to buy at the price reached at auction.

They can still decide not to proceed, allowing the sale to the winning bidder, although withdrawing may leave them liable for costs.

However, the Section 5B notice does not stop you pursuing right to manage. 

The two processes are separate. Section 5B gives qualifying leaseholders the opportunity to buy the freehold at the auction price, while right to manage can give qualifying leaseholders control of the building's management without buying the freehold.

If you still want right to manage, I would continue with that process while urgently taking advice on the Section 5B notice. 

With one owner selling, speak to the other leaseholders now so you do not miss any statutory deadlines.

Jill Carey, a property litigation partner at Freeths, said: Tenants have the ability to challenge service charge costs by making an application to the first tier tribunal. If all the tenants are challenging the sums, working together can be very effective.

An approach should therefore be made to the landlord to query the charges, even if they have been paid, provided that they have not been admitted or agreed. 

If that does not result in a resolution, then an application could be made to the tribunal. 

The same would apply to future charges. However, this is more difficult for the tenant who is selling, as they will have to disclose the dispute.

The Section 5 notices relate to the right of first refusal that some tenants with long residential leases have under the Landlord and Tenant Act 1987 when their landlord is selling its interest, or part of its interest. 

Where the building and the leaseholders qualify, Section 5 notices must be served by the landlord before any transfer takes place.

This applies to premises if:

- They consist of the whole or part of a building and contain two or more flats held by qualifying tenants

- The number of flats held by qualifying tenants exceeds 50 per cent of the total number of flats, so in this case at least three out of four

- They are used entirely for residential purposes, or if mixed use, 50 per cent or more of the internal floor area of the premises, excluding common parts, is residential

Whilst buying the freehold would give the tenants more control over the building and the service charge, it would come with the responsibilities of running the building, and the price would include the yoga studio, although as the new landlord you could collect this rent.

Section 5 is complicated, and you should take specialist advice to check the notice that has been served and how to proceed if enough qualifying tenants are interested.

In the first instance, you should discuss with your fellow tenants to see whether there is sufficient interest and then seek legal and valuation advice. 

The time limits are short, with only two months to accept the offer, and so you need to move quickly.

If no acceptance notice is served or the tenants do not nominate a purchaser in time, the landlord may sell its interest within 12 months of the deadline.

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