Consultation on introducing permitted insurance fees for landlords, freeholders and property managing agents

Topic of this consultation

The Leasehold and Freehold Reform Act 2024 brought in a range of measures to give more powers and protections for homeowners and leaseholders. It established powers to rebalance the legal costs regime and remove barriers that may deter leaseholders from challenging their landlord. It also introduced powers to enhance the transparency of service charges, allowing leaseholders to better scrutinise and challenge unfair costs. These powers will require secondary legislation to give full effect to the Act.

The Leasehold and Freehold Reform Act 2024 also created powers to address longstanding concerns that some leaseholders are being charged costs for the arranging and managing of insurance by their landlords, freeholders or property managing agents that are opaque and not justified on the basis of work contributed.

The concern for our governments is that these leaseholders are being charged significant insurance costs whilst having little influence or ability to scrutinise these costs, or to challenge those costs if they are unreasonable. This could include disproportionate remuneration for services in the arranging and managing of insurance, or even commissions – and other financial benefits – being given to landlords, freeholders or property managing agents that are unconnected to the services provided.

This consultation looks to put forward proposals to address this issue. Our objective is to ensure that any costs in relation to the management and arranging of insurance charged to leaseholders by landlords, freeholders or property managing agents are fair and transparent.

The Leasehold and Freehold Reform Act 2024 allows for the replacement of the current practice of paying landlords, freeholders and property managing agents for arranging and managing insurance, which at the moment is most commonly done through an insurance broker sharing a proportion of their commission. 
 
The Leasehold and Freehold Reform Act 2024 instead allows for a new permitted fee that landlords, freeholders and property managing agents would charge leaseholders separately from the insurance premium. This fee would be fair, transparent and reflective of the work contributed. We want to understand with the help of responses to this consultation what payments will be permitted within this fee so as to inform secondary legislation. 

Throughout the rest of the consultation document, we will use the term “freeholders” as shorthand for “freeholders and landlords”. This is to reflect that in some cases the landlord for a leaseholder may not be their freeholder, for example where the landlord is a head leaseholder.

Geographical scope

These proposals relate to England and Wales. The consultation will inform UK and Welsh governments who will bring forward separate secondary legislation.

Impact assessment

An Impact Assessment was previously published as part of the Leasehold and Freehold Reform Act 2024 which covered the relevant overarching measures. Any regulations brought forward as a result of the consultation will be subject to appropriate assessment.

Our governments are mindful of their responsibilities under the Public Sector Equality Duty to have due regard to the potential impact of its proposals on people with protected characteristics, and their responsibilities to consider environmental principles in any proposals as set out in the Environment Act 2021.

Consideration of these duties informed the passage of the Leasehold and Freehold Reform Act 2024, and we welcome evidence and views on the impact of this policy as part of this consultation. Any regulations bought forward following the consultation will be subject to appropriate assessment.

Duration

This consultation will last for 12 weeks.

Enquiries

For any enquiries about the consultation please contact: CommissionsConsultation@communities.gov.uk