Service Charge and Ground Rent on a Flat Stuck in Probate

If your aunt's leasehold flat is going through probate, the estate pays the service charge, and the demands do not stop while you wait for the grant. A lease is a contract that binds whoever owns the flat, and from the moment of death that owner is her estate. So the managing agent is right that the money is owed. What it is usually vaguer about is who has to hand it over, and when, before probate has actually been granted.

The same applies to the ground rent and to any major works demand that happens to land during the administration. None of these leaseholder bills pauses because the leaseholder has died. They keep falling due on the dates the lease sets, interest can be added to anything left unpaid, and in the worst cases persistent arrears give the freeholder a route towards forfeiting the lease, which would put the estate's most valuable asset at risk.

The reassuring part is that you are not personally liable for these bills simply because you are an executor or a beneficiary. They belong to the estate and are payable from the estate's money. The difficulty is purely one of timing: the estate's cash is frozen until the grant arrives, the bills are due now, and someone has to bridge that gap before arrears reach the point where the freeholder can act.

Why the bills keep arriving after a death

A leasehold flat is not owned outright in the way a house on the same street might be. The leaseholder owns a long tenancy of the flat, granted by a freeholder, and the lease sets out obligations that run for its whole length: to pay a service charge towards the upkeep of the building, often a ground rent to the freeholder, and to contribute to the cost of larger repairs when they fall due. Those obligations attach to whoever holds the lease at the time.

Death does not end the lease and it does not suspend those obligations. The lease simply continues, now held by the estate, until it is either sold, assigned to a beneficiary, or comes to the end of its term. So the service charge that was due every quarter is still due every quarter. The ground rent demanded each year is still demanded each year. The managing agent's systems carry on issuing paperwork against the flat exactly as before, because from their point of view nothing about the building's costs has changed.

This catches families out because so much else does pause after a death. Direct debits from the deceased's own account stop the moment the bank is told, and it is natural to assume the flat's bills have gone quiet too. They have not. They have simply stopped being paid, which is a very different and more dangerous thing, because unpaid leaseholder charges tend to attract interest and administration fees under the terms of the lease itself.

Who is actually liable, and who has to fund it

Two questions get tangled together here, and separating them is the key to the whole problem.

The first is who is liable. That answer is the estate. Once the flat forms part of the estate, the ongoing service charge, ground rent and repair contributions rank as debts and expenses of the estate, met from its assets before anyone inherits. A beneficiary who is due to receive the flat does not become personally liable for these charges before they actually take a transfer of the lease, and an executor is not personally liable in their own right for a debt that is properly the estate's.

The second question is who has to fund it in the meantime, and that is where the practical pain sits. The estate's bank accounts are frozen until probate is granted, which can take months, while the charges are due now. In practice one of a few things happens. Sometimes an executor pays the demands personally and reclaims the money from the estate later as an administration expense; if you do this, keep every invoice, every receipt and a note of what you paid and when, because you are entitled to be reimbursed but only against evidence. Sometimes there is money the bank will release before the grant, or the flat is being sold and the arrears are cleared from the proceeds on completion. Occasionally a beneficiary who wants the flat funds the charges directly to protect the asset they are going to inherit.

What you should not do is quietly pay a large sum out of your own pocket without telling the other beneficiaries and without keeping records, and you should not pay one demand you are unsure about without querying it. If the estate might turn out to be insolvent, paying a leasehold bill ahead of other creditors can create problems, which is one reason to understand where all the estate's debts sit before you start settling any of them. Our guide to probate, the estate and inheritance tax sets out the wider order in which an estate's debts and expenses are dealt with.

The three demands that land during probate

There are three separate charges that tend to arrive, and it helps to treat them as distinct because the rights attached to each are different.

The service charge is the regular contribution towards running and maintaining the building: cleaning, insurance of the structure, communal lighting, lifts, gardens, a sinking fund for future works. It is usually demanded quarterly or half-yearly in advance. It continues to accrue throughout probate, and the lease will normally allow interest on late payment.

The ground rent is a payment to the freeholder for the land, usually a smaller annual sum on older leases. Many long leases still carry one. A freeholder cannot treat ground rent as unpaid unless it has been formally demanded in the prescribed form, so if a ground rent demand looks informal or has not actually been served correctly, that is worth checking rather than simply paying.

A major works demand is the one that frightens people, because it can be large and it can arrive without warning: a new roof, external decoration, replacement windows, a lift overhaul. Where the cost passed on to each leaseholder is above a set amount, the freeholder must consult leaseholders in advance under a statutory procedure before it can recover the full sum. If the major works demand relates to a consultation that was under way before the death, ask the managing agent for the consultation paperwork, because a failure to consult properly can cap what the estate has to pay.

Forfeiture: the real risk, and why it is slower than it sounds

Forfeiture is the freeholder's power to bring the lease to an end for breach, including for unpaid charges. It is the nightmare outcome, because losing the lease means losing the flat, and in a probate context that means losing the estate's main asset. It is worth understanding precisely because the threat of it is sometimes used to hurry families who have every intention of paying.

The important thing to know is that forfeiture for money owed is hedged with protections, and it is slow. In England a freeholder cannot exercise forfeiture for unpaid service or administration charges unless the amount owed is more than a prescribed sum, or has been outstanding for more than a prescribed period. Below those limits the debt can be pursued as an ordinary debt, but it cannot be used to end the lease.

Source: Commonhold and Leasehold Reform Act 2002, section 167, and the Rights of Re-entry and Forfeiture (Prescribed Sum and Period) (England) Regulations 2004, which set the prescribed sum at £350 and the prescribed period at three years (legislation.gov.uk).

On top of that, a freeholder generally cannot forfeit for a disputed service charge unless the charge has first been admitted by the leaseholder or determined as payable by the First-tier Tribunal (Property Chamber), and even where forfeiture proceedings are brought, the court has a wide power to grant relief so that a leaseholder who pays what is owed keeps the lease. None of this makes the charges go away. It means the estate has time and protection, and that a managing agent who talks about forfeiture on a modest, recent arrears figure is describing a remedy it cannot yet reach.

Holding the managing agent off while you wait for the grant

The single most useful thing you can do is tell the managing agent and the freeholder about the death promptly and in writing, giving the date of death, confirming you are dealing with the estate, and asking them to correspond with you. Ask specifically for a full statement of the account: what is owed to the date of death, what is accruing, on what dates, and at what rate of interest. You cannot manage a problem you cannot see in full.

Then be honest about timing. Explain that the estate's funds are frozen pending a grant of probate, tell them roughly where the application has got to, and ask them to agree in writing to hold recovery action while the grant is awaited. Most reputable managing agents deal with bereaved families regularly and will agree to a reasonable pause, particularly if you keep paying what you can and keep them updated. Get any agreement in writing so that a change of staff at the agent does not undo it.

If you are being pressed unreasonably, or threatened with forfeiture over a small or recent sum, free and independent help is available. The government-backed MoneyHelper service explains leaseholders' rights, and Citizens Advice can help you deal with a freeholder or managing agent that is not treating a grieving family fairly. Neither will sell you anything.

Selling the flat, or deferring the major works bill

If the plan is to sell the flat rather than keep it, the arrears do not have to be cleared out of pocket first. Service charge and ground rent owed to the date of sale are normally apportioned and settled from the proceeds on completion, with the buyer's solicitor and yours dealing with the figures between them. The managing agent will provide a leasehold management pack for the sale, which itself carries a fee, and any arrears will be shown in it.

A large major works demand is more awkward, because a buyer will factor it into what they offer, and because the freeholder wants certainty it will be paid. Freeholders and managing agents will sometimes accept payment of a major works bill on completion of a sale rather than up front, especially where a solicitor gives a formal undertaking to settle it from the proceeds. This has to be agreed in advance and in writing, and you should expect the sum to be reflected in the price a buyer is willing to pay. If the flat is being retained by a beneficiary, the same beneficiary will usually need to fund the works, since they are inheriting both the flat and its liabilities.

While you are dealing with the flat, remember it is not the only asset with running costs and paperwork that outlives its owner. If the estate also has to keep a leasehold flat that nobody lives in insured and paid for, the empty-property angle brings its own conditions. And if you turn up paper share certificates left in a drawer or find that a sole-name overdraft is frozen but the estate still owes it, those are separate strands of the same administration to work through methodically.

Scotland and Northern Ireland

The leasehold model this article describes is an England and Wales one, and the forfeiture protections, the £350 threshold and the tribunal route all belong to that system. Do not assume they apply elsewhere in the UK.

Scotland is very different. Long residential leases of the kind that create leasehold flats were largely converted to outright ownership under the Long Leases (Scotland) Act 2012, and flats in Scotland are usually owned outright with shared maintenance obligations governed by the title deeds and by tenement legislation rather than by a service-charge lease and a freeholder. If the flat is in Scotland, the estate is dealt with through confirmation rather than probate, and where the estate is modest you may be able to use the simplified route we describe in small estate confirmation and the help the sheriff clerk gives. Northern Ireland has its own leasehold and ground rent regime, again with different procedures, so take local advice there.

Wherever the flat is, one point holds: the ownership of the flat and who ends up liable for its charges depends on how it was held and on what the will or the intestacy rules say. Where a flat was owned as tenants in common so that the deceased's share passes to their children rather than a partner, more than one person may have an interest in the asset the charges are secured against, which makes agreeing who funds them all the more important.

Where life cover fits in

The reason a frozen estate becomes a crisis is almost always cashflow: the bills are due long before the estate's own money is reachable, and there is nothing liquid to meet them. A life insurance policy written in trust can pay out to the family on the death certificate alone, without waiting for probate, which is exactly the money that lets an executor keep a leasehold flat's charges, ground rent and works bills current instead of paying them personally or watching arrears build. It does not change who is liable, but it changes whether the estate has cash when it needs it.

If you are reading this because a death has exposed how little ready money there is to hold things together during probate, and you want to make sure your own family is not left funding bills out of pocket, you can get life insurance quotes and have an FCA-authorised broker look at cover that would pay out quickly and be held outside the estate. Whether any policy pays, and on what terms, always depends on underwriting and on how the policy is set up.

Frequently asked questions

Who pays the service charge on a flat during probate?

The estate remains liable as leaseholder from the date of death onwards. Demands keep arriving and interest can be charged on arrears. Until estate funds are released an executor often has to pay personally and reclaim the money later, so tell the managing agent about the death straight away and ask for a full statement of the account.

What happens if nobody pays the ground rent or service charge?

Arrears build up with interest and administration costs, and in serious cases a freeholder can pursue forfeiture of the lease, putting the estate's main asset at risk. In England, though, forfeiture for service charge arrears alone is not available for small or recent sums, and a set procedure must be followed first. Engage early: most managing agents will agree a short hold while a grant of probate is awaited.

Can a major works bill be deferred until the sale?

Sometimes. Freeholders and managing agents will occasionally accept payment on completion of a sale, especially where a solicitor gives an undertaking to settle it from the proceeds. It must be agreed in advance and in writing, and the sum will be reflected in what a buyer offers for the flat.