Strengthening leaseholder protections over fees, charges and services: consultation

For far too many leaseholders in England and Wales, the reality of home ownership has fallen woefully short of the dream – their lives marked by an intermittent, if not constant, struggle with punitive and escalating ground rents; unjustified permissions and administration fees; unreasonable or extortionate charges; and onerous conditions imposed with little or no consultation. This is not what home ownership should entail.

The UK government is committed to bringing the feudal leasehold system to an end and we are progressing the wider set of reforms necessary to do so. On 3 March we published the Commonhold White Paper as a crucial first step in ensuring commonhold becomes the default tenure.

Later this year, the UK government will publish an ambitious draft Leasehold and Commonhold Reform Bill. A central focus of the Bill will be reinvigorating commonhold through the introduction of a comprehensive new legal framework but it will also include a range of other vital reforms to the existing leasehold system.

We are, however, acutely aware that leaseholders currently subject to unfair and unreasonable practices need urgent relief. Chief among the concerns for many leaseholders are opaque and unaffordable service charges which represent the single biggest subject of enquiry among those seeking advice and support from the Leasehold Advisory Service.

The Leasehold and Freehold Reform Act 2024 contains a number of provisions designed to standardise and increase the transparency of service charges so that leaseholders are better able to scrutinise and challenge costs if they consider them to be unreasonable. The Act also includes provision to scrap the presumption for leaseholders to pay their landlords’ legal costs, thereby removing a significant barrier to challenging poor practice.

Implementing the 2024 Act requires an extensive programme of detailed secondary legislation. While we want to act as quickly as possible to provide homeowners with greater rights, powers and protections over their homes, we have been clear that we must balance speed with care if we are to ensure that measures brought into force are to the lasting benefit of leaseholders.

Service charges are no exception when it comes to the importance of taking the necessary time to ensure that reforms are watertight. Given the wide variation of leases across five million dwellings, it is essential that we engage comprehensively to get the technical detail right. While we want the input of all those involved in managing leasehold buildings, we also want to hear from leaseholders themselves as to how best they believe that the service charge and legal costs measures in the 2024 Act should be implemented.

Through this consultation we are also proposing new reforms to the Section 20 process that leaseholders must go through when a landlord wants to carry out ‘major works’ funded by a service charge. One-off, unexpected, and often very large bills for major works can place huge financial strain on leaseholders. Far too many receive little or no notice about these works and so have little time to obtain sufficient funds.

It is not in dispute that buildings must be properly maintained, but major works, such as repairing a roof or replacing a lift, should be properly planned for in so far as possible with leaseholders kept fully informed. We know that the current system does not work for anyone, leaseholders, managing agents or landlords, and are seeking views on how we can improve it to make it fit for purpose.

We are also taking steps through this consultation to strengthen the regulation of managing agents. Managing agents play a key role in the maintenance of multi-occupancy buildings and freehold estates, and their importance will only increase as commonhold becomes the default tenure and existing leaseholders are empowered to exercise their Right to Manage, collectively enfranchise, or convert to commonhold.

While we know that there is good practice in the sector, far too many leaseholders suffer abuse and poor service at the hands of unscrupulous managing agents. While further reform will be necessary to drive up the standard of service provided by managing agents and ensure they are made more accountable to leaseholders, the introduction of mandatory qualifications in England is an important first step to ensuring all agents have the knowledge and skills they need to do their jobs effectively.

Finally, we also want to use this opportunity to review longstanding aspects of the system to ensure they remain fit-for-purpose. This includes protections for leaseholders who pay a fixed service charge, especially where costs are estimated each year. They presently have fewer rights than those who pay a variable service charge, and we are keen to explore what more can be done to help them.

Taken together, this is an ambitious package of measures designed to empower and protect leaseholders currently suffering as a result of unfair and unreasonable practices.

Matthew Pennycook MP
Minister of State for Housing and Planning

Jayne Bryant MS
Cabinet Secretary for Housing and Local Government