Section 20B Notices: The 18-Month Rule for Service Charge Recovery

TL;DR: Section 20B of the Landlord and Tenant Act 1985 gives you 18 months from the date you incur a cost to either demand payment through the service charge or serve written notice that the cost has been incurred. Miss this deadline and you cannot recover the money from your leaseholders -- regardless of what the lease says.

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#What Section 20B Says

Section 20B of the Landlord and Tenant Act 1985 imposes a strict time limit on recovering costs through the service charge. It contains two subsections, and both matter.

A tenant is not liable to pay so much of a service charge as reflects costs incurred more than 18 months before a demand for payment of the service charge is served on the tenant.

-- Landlord and Tenant Act 1985, s.20B(1)

Section 20B(1) is the core rule: if you incurred a cost and did not demand payment within 18 months, you cannot recover it.

Section 20B(2) is the safety valve: if you cannot issue the final demand within 18 months, you can preserve your right to recover the cost by serving written notice. That notice must tell the tenant that the cost has been incurred and that they will be required to contribute to it through the service charge.

This is not a discretionary rule. The First-tier Tribunal (Property Chamber) has consistently enforced it. A landlord who misses the deadline has no fallback -- no application for dispensation, no tribunal discretion to extend the time. The money is simply lost.

#When the 18-Month Clock Starts

The clock starts when the relevant costs are incurred -- not when you receive the invoice, not when you approve the payment, and not when you issue the year-end accounts.

In practice, costs are incurred when the landlord becomes liable to pay them. For most building works, this is when:

• The contractor completes the work and invoices you
• A supply is delivered and accepted
• An insurance premium falls due
• A management fee accrues under a contract

Consider a practical example. Your building has fire door remediation work completed on 15 July 2026. The contractor invoices you on that date. Your 18-month clock starts on the date of that invoice -- not the date you pay it, and not the date you include it in the next service charge budget.

If you do not demand payment from leaseholders or serve a Section 20B notice by 15 July 2026, you lose the right to recover that cost.

#What Counts as a "Demand"

A service charge demand that includes the relevant costs satisfies Section 20B(1). You do not need a separate notice if the demand itself arrives within 18 months.

For a demand to count, it must:

• Be served on the tenant (not just prepared or approved internally)
• Include the specific costs in question as part of the service charge
• Comply with the requirements in section 21B of the Landlord and Tenant Act 1985 -- demands must be accompanied by a summary of rights and obligations

A budget demand or estimated service charge does not satisfy Section 20B. The costs must have been actually incurred. An on-account demand for estimated future costs is not a demand for costs already incurred.

#How to Issue a Valid Section 20B Notice

When you cannot issue the final service charge demand within 18 months -- perhaps because the year-end accounts are not ready, or the costs form part of a larger project still being finalised -- a Section 20B(2) notice preserves your recovery rights.

Subsection (1) shall not apply if, within the period of 18 months beginning with the date when the relevant costs in question were incurred, the tenant 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.

-- Landlord and Tenant Act 1985, s.20B(2)

A valid Section 20B(2) notice must include:

1. A statement of the actual costs incurred -- you must state a figure. Estimates are not sufficient. The notice must relate to costs that have actually been spent, not costs you expect to spend.
2. Identification of the works or services -- the tenant needs to understand what the costs relate to.
3. A statement that the tenant will be required to contribute to those costs through the service charge under the terms of their lease.

#Template: Section 20B(2) Notice

Here is the essential content a Section 20B(2) notice should include:

• Date of the notice
• Property address the notice relates to
• Description of works or services for which costs have been incurred
• Amount of costs incurred (actual figures, not estimates)
• Statement that the tenant will be required to contribute to these costs by the payment of a service charge under the terms of their lease
• Date(s) when the costs were incurred

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#Worked Examples with Timelines

#Example 1: Routine Maintenance Within the Annual Cycle

A managing agent for a 30-flat building incurs lift maintenance costs of 4,200 pounds on 15 March 2026. The annual service charge accounts are finalised in September 2026, and demands are issued on 1 October 2026.

Timeline:

• 15 March 2026 -- cost incurred (lift maintenance completed and invoiced)
• 1 October 2026 -- service charge demand issued (7 months later)
• 15 September 2027 -- 18-month deadline

Result: No problem. The demand was served well within 18 months. No Section 20B notice needed.

#Example 2: Major Works with Delayed Final Account

An RTM company commissions fire stopping remediation. The contractor completes Phase 1 on 1 June 2025 at a cost of 85,000 pounds. The full project has three phases, and the board wants to issue a single comprehensive service charge demand once all phases are complete. Phase 3 finishes in March 2027.

Timeline:

• 1 June 2025 -- Phase 1 costs incurred (85,000 pounds)
• 1 December 2026 -- 18-month deadline for Phase 1 costs
• March 2027 -- Phase 3 completes

Result: The board must serve a Section 20B(2) notice for the Phase 1 costs before 1 December 2026. If they wait for the project to finish before issuing any communication, they lose the right to recover the 85,000 pounds in Phase 1 costs.

What the notice should say: "We write to inform you that costs of 85,000 pounds have been incurred for fire stopping remediation works (Phase 1) at [Building Name]. You will be required to contribute to these costs by the payment of a service charge under the terms of your lease."

#Example 3: Insurance Premium Paid Late

A building's insurance premium of 28,000 pounds is due on 1 April 2025. The managing agent pays it on 1 May 2025 (one month late). The service charge demand for the 2025/26 year is not issued until 15 December 2026.

Timeline:

• 1 May 2025 -- cost incurred (premium paid)
• 15 December 2026 -- service charge demand issued (19 months later)
• 1 November 2026 -- 18-month deadline (missed)

Result: The demand was served 19 months after the cost was incurred. Unless a Section 20B(2) notice was served before 1 November 2026, the insurance cost of 28,000 pounds cannot be recovered through the service charge.

#The Relationship Between Section 20B and Section 20 Consultation

Section 20B and Section 20 are separate obligations under the Landlord and Tenant Act 1985. They protect leaseholders in different ways, and you must comply with both.

There is no dispensation mechanism for Section 20B. Unlike Section 20, where the First-tier Tribunal can grant dispensation under section 20ZA, the 18-month deadline in Section 20B is absolute.

This creates a particular risk for building safety works under the Building Safety Act 2022. BSA-related remediation projects often involve:

• Multiple phases stretching over years
• Complex contractor procurement that delays Section 20 consultation
• Final accounts that depend on retentions and defect rectification periods
• Funding applications (e.g., Building Safety Fund) that delay cost confirmation

Each of these can push the service charge demand past the 18-month window. The solution is straightforward: serve Section 20B(2) notices for each batch of costs as they are incurred, even if the final service charge demand is months or years away.

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#Consequences of Missing the 18-Month Deadline

If you miss the 18-month deadline without serving a valid Section 20B notice:

1. The tenant is not liable to pay the portion of the service charge that reflects those late costs (Landlord and Tenant Act 1985, s.20B(1))
2. There is no dispensation -- unlike Section 20, no tribunal has the power to extend the deadline
3. The landlord or management company absorbs the cost -- it cannot be passed to other leaseholders either
4. The loss is permanent -- you cannot retrospectively serve a Section 20B notice

For an RTM company, this is particularly painful. The directors are themselves leaseholders. If the RTM board fails to serve timely demands or notices, the company -- and by extension all leaseholders -- bears the cost.

For a managing agent, missing the Section 20B deadline is a professional failure that could result in a claim from the client for the lost recovery.

#Forthcoming Changes: The Leasehold and Freehold Reform Act 2024

The Leasehold and Freehold Reform Act 2024 will amend Section 20B when the relevant provisions are brought into force. The key change replaces the current Section 20B(2) notice with a new "future demand notice" that will have prescribed form and content set out in secondary legislation.

The government has consulted on how to implement these changes, but the commencement date has not been confirmed. Until these provisions come into force, the current Section 20B rules apply in full.

#Practical Steps: How to Stay on the Right Side of Section 20B

1. Track cost incurrence dates -- not invoice dates or payment dates. The 18-month clock starts when you become liable for the cost, which is typically when the work is completed and invoiced.

2. Issue service charge demands promptly -- annual accounts should be finalised and demands sent within 6 months of year-end, leaving a comfortable margin within the 18-month window.

3. Serve Section 20B(2) notices for any costs at risk -- if you are running behind on accounts, or a project spans multiple accounting periods, serve notices for each batch of costs within 18 months of incurrence.

4. Keep records of when notices were served -- you may need to prove at tribunal that you served the notice within the 18-month period. Record the date, method of service, and retain copies.

5. Set calendar reminders -- for major works, set a reminder at 12 months post-incurrence so you have 6 months to issue either the demand or a Section 20B notice.

6. Review all outstanding costs quarterly -- cross-check your accounts payable against your service charge demands to identify any costs approaching the 18-month deadline.

This guide is for informational purposes. For building-specific advice, consult a qualified property management professional or solicitor specialising in leasehold law.

#Questions

#What is the 18-month rule for service charges?

Under Section 20B(1) of the Landlord and Tenant Act 1985, a tenant is not liable to pay service charge costs that were incurred more than 18 months before the demand for payment was served. The landlord must either demand payment or serve a Section 20B notice within 18 months of incurring the costs. This applies to all relevant costs that form part of the service charge, not just major works.

#What must a valid Section 20B notice contain?

A valid Section 20B(2) notice must state the actual costs incurred (not estimates), identify the specific works or services the costs relate to, and inform the tenant that they will be required to contribute to those costs through the service charge under the terms of their lease. It must be served in writing within 18 months of the costs being incurred.

#Can I use a Section 20B notice to buy more time for a service charge demand?

Yes. If you cannot issue the final service charge demand within 18 months of incurring the costs, a Section 20B(2) notice preserves your right to recover the costs later. The notice must be served within 18 months of the costs being incurred and must state the actual costs, not estimates. There is no limit on how long after the notice you can issue the final demand, though unreasonable delay could face other challenges.

#What happens if I miss the 18-month deadline without serving a Section 20B notice?

You lose the right to recover those specific costs through the service charge. The tenant is not liable to pay the portion of the service charge that reflects costs incurred more than 18 months before the demand (Landlord and Tenant Act 1985, s.20B(1)). Unlike Section 20 consultation, there is no dispensation mechanism -- the deadline is absolute.

#Does Section 20B apply to all service charges or only major works?

Section 20B applies to all relevant costs that make up a service charge, as defined by section 18 of the Landlord and Tenant Act 1985. This includes routine maintenance, insurance premiums, management fees, cleaning, gardening, and any other cost recoverable through the service charge under the lease. There is no minimum threshold.

#How does Section 20B interact with Section 20 consultation requirements?

They are separate obligations. Section 20 requires consultation before qualifying works exceed 250 pounds per leaseholder. Section 20B sets a time limit on demanding payment. You must comply with both. Running a Section 20 consultation does not extend or replace the 18-month deadline under Section 20B. Equally, serving a Section 20B notice does not satisfy your Section 20 consultation obligations.

#Further Reading

• Section 20 Consultation and the Building Safety Act -- how consultation requirements interact with BSA costs
• Service Charges and Building Safety Costs: A Guide for RTM Directors -- budgeting and communicating BSA costs
• LEASE: Recovering Payment Out of Time -- the Leasehold Advisory Service's guidance on s.20B
• Section 20B, Landlord and Tenant Act 1985 -- the full statutory text

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