---
title: "Section 20B: The 18-Month Rule on Late Service Charge Demands"
url: https://manage.management/blog/section-20b-the-18-month-rule-on-late-service-charge-demands
description: "How the section 20B 18-month rule on late service charge demands works, key cases and the future demand notice replacing the 20B notice from April 2027."
author: "Franklin Baeza"
published: 2026-11-08T06:33:28.000Z
updated: 2026-11-08T07:37:39Z
categories: ["Service Charges","Governance & Compliance"]
publisher: Manage.Management
language: en-GB
---

# Section 20B: The 18-Month Rule on Late Service Charge Demands

How the section 20B 18-month rule on late service charge demands works, key cases and the future demand notice replacing the 20B notice from April 2027.

Under section 20B of the Landlord and Tenant Act 1985, a leaseholder does not have to pay any part of a service charge that reflects costs incurred more than 18 months before the demand was served, unless they were told in writing within those 18 months that the costs had been incurred and would be charged later. From 1 April 2027, that written warning becomes a prescribed "future demand notice" under section 54 of the Leasehold and Freehold Reform Act 2024. For RMC and RTM directors, the practical rule is simple: bill every cost, or send a compliant notice, within 18 months of the invoice.

This guide explains how the 18-month rule works today, what the courts have said, what changes in 2027 and how a resident-led block can stay inside the time limit. It is written by Manage.Management, the UK block management platform for RTM and RMC directors, leaseholders and managing agents.

## Key takeaways

- Section 20B stops a landlord or management company recovering costs incurred more than 18 months before a valid service charge demand.
- The rule does not bite if leaseholders were notified in writing, within 18 months, that the costs had been incurred and would be charged later.
- Costs are usually "incurred" when the invoice is presented or paid, not when the work was done (OM Property Management Ltd v Burr, 2013).
- If payments on account already cover the actual spending and no balancing charge is needed, section 20B does not apply (Gilje v Charlegrove, 2003).
- From 1 April 2027, the notice must be a prescribed future demand notice, and regulations may cap recovery at the figures given in it.

## What does section 20B actually say?

Section 20B has two parts: a time limit and an exception. If costs were incurred more than 18 months before a service charge demand was served, the leaseholder is not liable for that part of the charge, unless the exception applies.

The time limit in [section 20B(1)](https://www.legislation.gov.uk/ukpga/1985/70/section/20B) applies to the costs, not to the whole demand. A year-end balancing charge that mixes recent and old invoices is only unrecoverable for the old items. The exception in section 20B(2) applies if, within 18 months of the costs being incurred, the leaseholder was "notified in writing that those costs had been incurred and that he would subsequently be required under the terms of his lease to contribute to them by the payment of a service charge."

The rule protects leaseholders from surprise bills for work done years ago, often after a flat has changed hands. It applies to variable service charges in residential leases of dwellings, which covers almost every block of flats in England and Wales.

## When is a cost "incurred" for the 18-month rule?

A cost is usually incurred when the supplier presents an invoice or when it is paid, whichever the facts show, not when the work was carried out. That gives directors a clear starting point for the 18-month clock.

The leading case is [OM Property Management Ltd v Burr [2013] EWCA Civ 479](https://caselaw.nationalarchives.gov.uk/ewca/civ/2013/479). A gas supplier did not bill the management company for communal gas for several years. The Court of Appeal held that the cost was not incurred until the bill was presented, so the later service charge demand was in time. The practical lesson for directors is to log every invoice date, because that is normally when the clock starts.

## Does section 20B apply to payments on account?

Not if the advance payments already cover what was spent. Where leaseholders paid on account, actual spending did not exceed those payments and no further demand is needed, section 20B has nothing to bite on.

That was decided in Gilje v Charlegrove Securities Ltd [2003] EWHC 1284 (Ch), as explained in [London Borough of Brent v Shulem B Association Ltd [2011] EWHC 1663 (Ch)](https://caselaw.nationalarchives.gov.uk/ewhc/ch/2011/1663). The risk arises with the balancing charge. If the year-end accounts show an overspend and the balancing demand goes out more than 18 months after some of the invoices, those older costs may be lost.

Payments on account must themselves be validly demanded. In Skelton v DBS Homes (Kings Hill) Ltd [2017] EWCA Civ 1139, the Court of Appeal held that demands only became payable once the required estimates were provided, and because that happened more than 18 months after the costs were incurred, the charges fell foul of section 20B. A demand that is defective, for example one missing the summary of rights required by section 21B, may need to be re-served, and a corrected demand served too late can lose the costs.

## What must a section 20B notice say today?

Until 1 April 2027, there is no prescribed form, but the notice must be in writing, state the costs actually incurred and say the leaseholder will be required to contribute through the service charge. Estimated figures are not enough.

In the Brent v Shulem B case, the High Court held that a valid notice must state a figure for the costs the landlord has actually incurred, and that a letter giving only estimates and warning that costs might be higher did not count. The notice does not need to say what share each leaseholder will pay. A notice is still valid if the costs later demanded turn out to be lower.

| Requirement | Current section 20B(2) notice (to 31 March 2027) | Future demand notice (from 1 April 2027) |
| --- | --- | --- |
| Legal basis | Section 20B(2), Landlord and Tenant Act 1985 | Section 20B as amended by section 54, Leasehold and Freehold Reform Act 2024 |
| Form | No prescribed form; any written notice | Specified form set by regulations |
| Content | Costs incurred, with a figure, and that the leaseholder will contribute | Specified information, which regulations may set as estimated costs, expected contribution and expected demand date |
| Effect of later demand | Costs recoverable if notice was valid | Regulations may limit recovery to the estimate or contribution, and bar it after the expected demand date |
| Applies to | Variable service charges | Variable service charges, now defined in section 18(1) as amended |

## What changes on 1 April 2027?

From 1 April 2027, the informal section 20B(2) letter is replaced by a prescribed future demand notice. The [Leasehold and Freehold Reform Act 2024 (Commencement No. 4 and Saving Provision) (England) Regulations 2026](https://www.legislation.gov.uk/uksi/2026/1128/contents/made) bring [section 54](https://www.legislation.gov.uk/ukpga/2024/22/section/54) fully into force on that date in England.

Section 54 lets the government specify the form of the notice, the information it must contain and how it must be given. The regulations may require an estimated costs amount, an expected contribution from each leaseholder and an expected demand date. Where the demand is then served more than 18 months after the costs were incurred, the regulations may limit liability to the estimate or the expected contribution, and remove liability entirely if the demand comes after the expected demand date.

The commencement rules took effect for regulation-making on 6 November 2026, but the regulations setting out the final form had not been published when we checked on 8 November 2026. A draft future demand notice was included as Annex C to the government's consultation. For the full sequence of 2027 changes, including prescribed demand forms from 1 November 2027, see our guide to the [leasehold reform timetable](https://manage.management/blog/leasehold-reform-timetable-confirmed-service-charge-insurance-and-legal-cost-changes-from-2027).

## How can RMC and RTM directors avoid losing costs under section 20B?

Run a monthly check of unbilled invoices and either demand them or serve a notice well before 18 months. Volunteer boards are most at risk when year-end accounts run late.

1. **Log invoice dates.** Record the date each invoice is received and paid, as this normally starts the 18-month clock.
2. **Set a 12-month alert.** Flag any cost not yet demanded 12 months after the invoice date, leaving six months to act.
3. **Finish year-end accounts promptly.** Aim to issue the balancing charge within six months of the year end, as recommended by the [RICS Service Charge Residential Management Code](https://manage.management/blog/the-new-rules-of-building-management-what-the-rics-service-charge-code-means-for-leaseholders).
4. **Serve a notice when billing will be late.** Write to every leaseholder giving the actual costs incurred and stating that they will be charged through the service charge.
5. **Keep proof of service.** Record how and when each notice and demand was sent, using the addresses in the lease or those given by leaseholders.
6. **Check every demand is valid.** Include the summary of rights and obligations and the landlord's name and address, so you do not have to re-serve it later.
7. **Switch to the new form from April 2027.** Use the prescribed future demand notice once the regulations are made, and check the estimate is realistic.

Good records make this easy. Our guide to [accounting for leasehold blocks](https://manage.management/blog/accounting-for-leases-how-to-track-costs-correctly) covers how to track costs by invoice date, and the Manage.Management [service charges tools](https://manage.management/features/service-charges) keep budgets, demands and unit ledgers together with the date of each cost.

## What can a leaseholder do if a demand is out of time?

A leaseholder can refuse to pay the part of the charge that reflects costs incurred more than 18 months before the demand, if no valid notice was given. If the landlord or management company disagrees, either side can apply to the First-tier Tribunal (Property Chamber) to decide whether the charge is payable.

Start by asking, in writing, for the invoice dates behind the charge and for copies of any section 20B notice. Leaseholders have a right to a summary of costs under section 21 of the Landlord and Tenant Act 1985, and that right will widen from 1 April 2027. Our [leaseholder rights hub](https://manage.management/leaseholder-rights) sets out the other routes for challenging service charges. If the RMC or RTM company is run by your neighbours, raise it at a board meeting first; most late billing is an administrative slip, not a deliberate act.

## Frequently asked questions

### Does the 18-month rule apply to reserve fund contributions?

Usually not in the same way. Section 20B applies to costs that have been incurred, while reserve fund contributions are collected in advance for future spending. The rule may matter when reserve money is spent and the block later demands a top-up, because that top-up reflects costs already incurred. Track the invoice dates of anything paid from the reserve, as covered in our guide to reserve funds.

### Is a section 20B notice the same as a service charge demand?

No. A section 20B(2) notice simply warns leaseholders that costs have been incurred and will be charged later; it does not ask for payment. A demand asks for payment and must include the summary of rights and the landlord's name and address. Serving a valid notice keeps the costs recoverable, but a valid demand still has to follow before the leaseholder must pay.

### Can a new leaseholder be charged for costs from before they bought the flat?

Yes, if the costs are within the 18-month window or a valid notice was served on the previous owner. Service charge liability usually passes with the lease, and buyers should check the management pack for any section 20B notices and planned balancing charges. A notice served on the seller generally protects the landlord's position, so ask your solicitor to raise it before exchange.

### Does section 20B apply to RTM companies and RMCs?

Yes. Section 20B applies to whoever demands the service charge under the lease, which includes resident management companies and RTM companies exercising management functions. Volunteer directors face exactly the same 18-month time limit as a professional landlord. Late year-end accounts are the most common cause of lost costs in resident-led blocks, so set a clear timetable with your accountant.

### What happens to section 20B notices served before April 2027?

Notices served before 1 April 2027 are governed by the current rules, but the transitional detail will depend on the regulations the government makes under section 54. Until those are published, directors should keep serving clear written notices with actual cost figures, and plan to use the prescribed future demand notice for costs where the notice is given after the new rules start.

## Bill on time, or tell leaseholders in writing

Section 20B rewards blocks that keep tidy records and punishes late billing. Log every invoice date, issue balancing charges promptly and send a written notice whenever a cost will not be billed within 18 months. From April 2027, the notice gets a prescribed form, so build the habit now and the switch will be routine.

Last reviewed: 8 November 2026 by Franklin Baeza, Manage.Management. This article is general information for England and Wales, not legal advice. Check the current position with a qualified adviser before acting.

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Source: [Section 20B: The 18-Month Rule on Late Service Charge Demands](https://manage.management/blog/section-20b-the-18-month-rule-on-late-service-charge-demands) on the Manage.Management blog.