Guidance

The Housing (Service Charge Loans) Regulations 1992

Updated 19 September 2025

Applies to England

This guidance is under review. Figures are for the year ending 31 March 2020 and included for indicative purposes only.

Summary

This document advises housing associations of the right to a loan for the year ending 31 March 2020.

Introduction

The Housing (Service Charge Loans) Regulations 1992 came into force on 17 August 1992. They state that, provided certain conditions are met, some leaseholders have the right to request a loan towards the cost of service charges for major repairs.

The conditions which have to be met are set out here. Any registered provider who issues a demand to pay service charges relating to major repairs must check this circular, and if it believes (having sought legal advice if necessary) that the leaseholder may be entitled to a mandatory loan, it must inform the leaseholder of their rights and how to claim the loan.

The amounts in the following text relate to the period 1 April 2019 to 31 March 2020.

Leaseholders entitled to a mandatory loan

Under these regulations, a leaseholder has the right to request a loan to cover the cost of major repairs to the property demanded as part of the annual service charges, provided that the following apply:

• the leasehold of the property was purchased under the Right to Buy legislation (not the Preserved Right to Buy). If the registered provider sold the leasehold to the leaseholder voluntarily, the leaseholder is not entitled to a mandatory loan
• the leasehold was purchased less than 10 years before the date of the invoice for service charges
• the amounts demanded for service charges in respect of major repairs and routine service charges are such that they qualify for a loan within the limits and calculations set out here

Financial restrictions

Accounting period

First, find the accounting period to be used. This is established from information in the lease. “Accounting period” is one of two possible annual time periods:

• if the lease states that service charges are to be paid in respect of a defined twelve month period, that is the accounting period, for example, the period 1 April to 31 March.

• if the lease does not specify a term, the accounting period is the 12 months starting from the date of the lease being granted or anniversary thereof.
• an accounting period must be within 10 years commencing with the start of the first defined twelve month period or the granting of the lease.

Maximum loan

The difference between the sum of both annual service charge and major repair service charge within the accounting period, less £3,131 (which must be met by the leaseholder) will qualify for a loan up to the lesser of the maximum of the major repair element or £41,740.

Minimum loan

The minimum eligible amount qualifying for a loan is £1,044.

You will not qualify for a loan if your annual service charge is less than £3,131, your major repair charge is less than £1,044 or you exercised your right to buy more than 10 years before the commencement of the current accounting period.

Adjustment for inflation

The thresholds in the regulations are adjusted by increases in the Retail Price Index for the preceding year.

	1 April 2019 to 31 March 2020	In the original Legislation
Leaseholder must pay the first:	£3,131 of all service charges issued in the year.	£1,500
Minimum amount eligible for a loan	£1,044	£500
Maximum loan per leaseholder at any time under these provisions	£40,740	£20,000

Revised limits are published in March each year.

Terms of the loan

Length of loan

The period over which repayment is to be made shall not exceed:

• loans less than £1,500: 3 years
• loans of amounts between £1,500 and £4,999.99: 5 years
• loans of £5,000 or more: 10 years.

Costs

Lender’s expenses up to a maximum of £130 may be charged to the borrower. These may be added to the amount of the loan if the borrower wishes.

Security

The loan will be secured by a mortgage on the property, whether or not it affords adequate security. For this reason borrowers are advised to seek the services of a solicitor or similar qualified person.

Time limits

The leaseholder must apply for the loan within 6 weeks of the date of the invoice for major repairs. If all of the above conditions are met and the landlord is a registered social landlord, the leaseholder will be offered a loan under the terms set out in this guidance. The leaseholder will have 4 weeks from the date of the offer letter to accept the loan, after which time the offer lapses.

Procedure for claiming loans

Introduction

If you are the leaseholder of a property purchased under the Right to Buy legislation in the last 10 years, you may have the right to a loan to cover service charges for repairs carried out by your landlord.

It does not matter whether you are the original buyer of the property, but your landlord must be a registered provider.

You do not have the right to a loan if you purchased your property under Preserved Right to Buy. Preserved Right to Buy operates after the landlord changes to charitable status, or property qualifying for Right to Buy is transferred to a different landlord such that any new tenants would not be entitled to a Right to Buy option; any tenants who would have been entitled to Right to Buy under the previous landlord have their rights protected as Preserved Right to Buy but do not qualify for a service charge loan.

Can I claim a loan?

Only service charges relating to repairs on land or buildings qualify, and there are limits on how much can be claimed.

The limits in this narrative apply to any claims based on invoices dated between 1 April 2019 and 31 March 2020. These limits are raised on 1 April each year to take account of the rate of inflation for all items as at the end of the previous January. The new limits are issued each year in late March.

First, find out whether your lease specifies if your service charges are based on a particular set of dates. For example, it might say that the service charges are to be paid by reference to 1 April to 31 March each year, in which case your present accounting year would run from 1 April 2019 until 3 March 2020. If it does not mention any dates, your accounting year will always start on the date your lease was sold to you.

Next, look at any service charges invoiced so far for this accounting year, apart from the repairs charges. You will have to pay the first £3,131 of service charges each year yourself. So if the amount of service charges invoiced so far this year is less than £3,131, take this amount away from £3,131 and take what’s left off the amount of repairs service charges demanded. This is how much can be claimed as a loan, although the smallest amount we will lend is £1,044, and the most you can borrow under this legislation is £40,740.

If the amount of service charges invoiced so far this year is £3,131 or more, and the repairs service charge is more than £1,044, you can claim the whole amount of repairs service charges as a loan. Remember, the most you can borrow under this legislation is £40,740.

If you have claimed a loan before, the amount still owed to us at the time you claim this loan will be included in the £40,740 maximum.

How do I claim the loan?

If your landlord is a registered provider and you are entitled to a loan, your request must be submitted within six weeks of the date of the invoice for repairs. It will be processed, and you will receive a letter with the offer of a loan. You will have 4 weeks from the date of that letter in which to accept the loan or reject it, after which time the offer is withdrawn. Our payment will be made direct to the registered provider.

What will the terms of the loan be?

The loan will be secured by a mortgage on your property.

A charge for administrative costs is allowed - up to a maximum of £130 — which you can either pay immediately or add to the loan. The interest rate is based on current market rates.

• if you have borrowed less than £1,500, you will have to repay the loan over 3 years
• f you have borrowed between £1,500 and £4,999.99, you will have to repay the loan over 5 years
• if you have borrowed £5,000 or more, you will have 10 years in which to repay the loan
• if you want to pay the loan over a shorter length of time, you can do so

What if I don’t agree with the amount of the repairs service charge?

You can still claim the loan, and should act quickly to get your claim in within the 6 week limit. Make it clear that you are contesting the amount of charge. If the charges are later reduced, the amount of the loan will also be reduced to match.