The 18-Month Rule: Service Charge Arrears Time Limits

The 18-month rule is the most commonly missed compliance deadline for volunteer RTM and RMC directors. It's simple in principle — serve your demand within 18 months of incurring the cost — but easy to miss when you're managing a block in your spare time.

What the 18-month rule says

Section 20B of the Landlord and Tenant Act 1985 states that a leaseholder is not liable to pay a service charge if more than 18 months have elapsed since the costs were incurred — unless the leaseholder was notified in writing within that 18-month period both that the costs had been incurred and that they would subsequently be required, under the terms of their lease, to contribute to those costs by the payment of a service charge.

In plain English: if you spend money on the building, you have 18 months to either demand payment or give the leaseholder a written notification. The notification has to do two things, not one — say that the costs have been incurred, and say that the leaseholder will have to contribute to them under their lease. A note that says only "a demand is coming" does not meet the second half.

How the 18-month clock works

The clock starts when costs are incurred — meaning when you receive the invoice or pay the contractor, not when the work was commissioned or completed.

Example: Your block has emergency plumbing work done in January 2026. The plumber invoices you on 15 January 2026. The 18-month clock starts on 15 January 2026 and expires on 15 July 2027.

If you haven't served a service charge demand by 15 July 2027 — or at minimum sent a written notification meeting both limbs below — the leaseholder is not liable to pay their share.

The written notification safety net

You don't necessarily need to issue the full demand within 18 months. A written notification is sufficient to preserve your right. This notification must:

Be in writing (email with proof of delivery, or letter)
State that the costs have been incurred
State that the leaseholder will subsequently be required, under the terms of their lease, to contribute to those costs by the payment of a service charge

⚠️ Both of the last two are required, and the second one is the one people miss. Section 20B(2) is conjunctive: the tenant must be notified "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". A notification that says only that a demand will follow states the first limb and asserts that something is coming; it does not state that the leaseholder is liable to contribute under the lease. If the notification does not engage subsection (2), subsection (1) applies and the costs are irrecoverable.

This is particularly useful for year-end accounting. If your financial year ends in March but you don't produce accounts until September, costs incurred early in the year might be approaching the 18-month mark. A simple written notification sent with the year-end accounts covers you.

Template notification:

Dear [Leaseholder],

This is to notify you that service charge costs totalling £[amount] have been incurred in respect of [description] during the period [dates]. You will subsequently be required, under the terms of your lease, to contribute to these costs by the payment of a service charge. A formal service charge demand will follow. This notification is provided in accordance with Section 20B of the Landlord and Tenant Act 1985.

Common scenarios where directors miss the deadline

Inherited arrears from a previous managing agent

When your RTM company takes over management, you may inherit service charge debts. If the previous agent failed to demand payment within 18 months of the costs being incurred, those charges are irrecoverable — even though the failure wasn't yours. Check the dates on any inherited arrears before pursuing them.

Large one-off costs at the end of a financial year

An unexpected repair in month 11 of your accounting year might not make it into the year-end demand if accounts are delayed. If the demand is served more than 18 months after the invoice date, the cost is irrecoverable.

Reserve fund expenditure

Spending reserve money you have already collected is not a new demand. But if the works cost more than the reserve covers and you demand the balance, that demand must be served within 18 months of the cost being incurred, or a notification under section 20B(2) given in time.

Multi-stage projects

For works that span several months (e.g., a phased refurbishment), the clock runs separately for each invoice. An invoice from Month 1 has a different 18-month deadline from an invoice in Month 6.

What to do if you've missed the deadline

If the 18 months have passed without a demand or notification:

Check your records — did you send anything in writing that could count as a notification? An email or letter can count, but only if it told the leaseholder in writing both that the costs had been incurred and that they would be required, under the terms of their lease, to contribute to them by the payment of a service charge. A message saying only that a demand is coming is not enough.
Check the lease — some leases have their own demand timeframes that may differ from the statutory position.
Seek legal advice — a solicitor specialising in leasehold law can assess whether any exception or argument applies.
Accept and prevent — if the deadline is genuinely missed, the cost is irrecoverable from leaseholders. Put systems in place to prevent recurrence: calendar reminders, quarterly demand cycles, or software that tracks demand deadlines automatically.

Practical steps to stay compliant

Issue demands promptly — don't wait for year-end. Quarterly or half-yearly on-account demands are safer.
Set calendar reminders — for every significant expenditure, set a reminder at 12 months and 15 months.
Send interim notifications — if the full demand isn't ready, send a written notification to preserve your right.
Track invoices against demands — maintain a log that links every contractor invoice to the service charge demand period it's included in.
Use the arrears letter generator — our free tool produces a template chase letter at one of three stages, stating what is outstanding and when it fell due. It asserts no deadline, charge or legal consequence.

For a full guide to recovering unpaid service charges, see our arrears recovery guide.

Sources

This guide applies to England and Wales. This is general information, not legal advice.