Strengthening leaseholder protections over fees, charges and services: consultation

Accounting period

A period of 12 months specified in the lease as an accounting period or, if no such period is specified in the lease, a period of 12 months beginning with 1 April.

Administration charge

An amount payable by a leaseholder as part of or in addition to the rent which is payable, directly or indirectly (a) for or in connection with the grant of approvals under the lease, or applications for such approvals, (b) for or in connection with the provision of information or documents by or on behalf of the landlord or a person who is party to the lease other than the landlord or leaseholder, (c) in respect of a failure by the tenant to make a payment by the due date to the landlord or a person who is a party to the lease other than the landlord or leaseholder, or (d) in connection with a breach (or alleged breach) of a covenant or condition of his lease. 

Annual report

An annual report is a report, covering a range of financial and other information, that will be provided to leaseholders by their landlord before or within one month of a new 12-month accounting period.

Appropriate Tribunal or Relevant Tribunal

Appropriate tribunal or relevant tribunal refers to the First-tier Tribunal (Property Chamber), or where determined by or under Tribunal Procedure Rules, the Upper Tribunal, in England and the Leasehold Valuation Tribunal in Wales, which deal with settling disputes in relation to leasehold property, including service charge disputes and failure to provide information to leaseholders.

Asset management plan (AMP)

A written plan prepared and provided by the landlord to the leaseholder which assesses the condition of a property, forecasting future repairs and maintenance, and may project the costs of these works.

Building Insurance

It is common for the lease to require the whole building or a part of the building to be insured against risks such as fire, lightning, subsidence and even terrorism. Building insurance is usually but not always the responsibility of the landlord although the lease will usually require the leaseholder to pay a share of the cost.

Common parts

Any areas of the building which do not form part of a unit (or flat). Generally, this includes communal areas shared between unit owners (such as gardens, halls and staircases), structural parts of the building, such as the external walls and the roof, and any pipes, cables and other installations not situated within a unit, nor which serve only that unit. The exact definition depends on the wording of the lease.

Default judgment

A judgment by a court as an administrative act rather than a trial or hearing. A default judgment is the early determination of a claim where a defendant has failed to acknowledge a claim or file a defence within set time limits. 

Dispensation

A landlord may apply to a court or a tribunal to avoid serving a notice under the major works procedure set out in at s.20 of the Landlord and Tenant Act 1985. If they succeed, the court or tribunal issues a dispensation from serving that notice. 

Event fee

A fee payable under a term of or relating to a residential lease of a retirement property on certain events such as resale or sub-letting. Event fees may be referred to by a variety of names including exit fees, transfer fees, deferred management fees, contingency fees and selling service fees.

First Tier Tribunal (FTT)

The First-tier Tribunal (Property Chamber) deals with settling disputes in relation to leasehold property in England, including service charge disputes and failure to provide information to leaseholders.

Fixed service charge

A fixed service charge specifies the exact amount of service charge that leaseholders pay for the accounting period, for a specific list of services.

Head lessor

A landlord of an intermediate lease.

Indemnity basis

The basis upon which a court assesses a party’s litigation costs, which must have been reasonably incurred and are reasonable in amount in order to be payable.

Initial service charge demand

An initial service charge demand is the first demand after the end of the previous accounting year issued to a leaseholder, on account or in arrears, demanding payment of the service charge contribution for a period specified in the lease.

Intermediate landlord

A person who holds an “intermediate lease”. They hold a leasehold interest in, and in turn is a landlord under another lease of, all or part of the same property.

Landlord

Any person who has a right to enforce payment of a service charge.

A landlord may be either the freeholder of the property or hold a leasehold interest in the property themselves.

Lease

The legal document that allows the holder to occupy a property for a specific period of time. It contains the terms of the contractual arrangement, such as what landlord costs can be recharged to leaseholders via a service charge, any restrictions on the leaseholder’s ability to sublet or make alterations.

Leasehold

A form of property ownership which is time-limited, where control of the property is shared with, and limited by, the landlord.

Leasehold Valuation Tribunal (LVT)

The Leasehold Valuation Tribunal deals with settling disputes in relation to leasehold property in Wales, including service charge disputes, lease variations and the determination of premiums for freehold purchase and lease extensions.

Leaseholder

A leaseholder is a person or company who owns a property subject to the terms of a written lease agreement, typically for 99, 125 or 999 years. The lease creates obligations which a leaseholder must comply with, including the obligation to pay the service charge.

Litigation costs

Costs incurred by either a landlord or a leaseholder during legal proceedings. In section 62 and 63 of the 2024 Act, “litigation costs” means any costs incurred, or to be incurred, by a person in connection with relevant proceedings to which they are party.

Major works

“Qualifying works”[3] carried out to a building or other premises, such as decoration, repairs, improvements, or refurbishments, which are necessary to keep a block or estate in a satisfactory state of repair, which would cost each leaseholder either over £250 or, if a ”qualifying long term agreement”[4] was entered into, over £100.

Managing agent

An individual or company appointed to run and manage the building and services on behalf of a landlord or residents management company.

Reconciliation demand

A demand for payment following publication of service charge accounts. It seeks additional funds from leaseholders where there was an overspend for the previous accounting period against actual costs incurred.

Relevant costs [5]

Relevant costs are the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a superior landlord, in connection with services, repairs, maintenance, improvements, or insurance or the landlord’s costs of management.

Reserve fund/sinking fund

A pool of money which is collected to cover the costs of future, one-off or major works needed, such as replacement of a lift or roof.

Resident Management Company

A Resident Management Company is a company that is owned and run by leaseholders of a building containing flats who undertake the management and maintenance of the building. A Resident Management Company is usually a party to the lease and their duties to leaseholders are set out in the lease. A Resident Management Company may or may not own the freehold.

Right to Manage Company

A company created by leaseholders of a building containing flats to take over the management of the building from the freeholder, without buying or owning the freehold.

Section 20

Section 20 of the Landlord and Tenant Act 1985 sets out the consultation requirements that a landlord must follow for any qualifying works or qualifying long term agreements (major works).

Section 20B notice

A Section 20B notice is sent out by a landlord when they are unable to send a demand for payment to the leaseholder within 18 months of the cost being incurred. It informs the leaseholder that costs have been incurred during the service charge period that will be payable through the service charge.

Service charge [6]

A financial contribution payable by a leaseholder typically to a landlord, for a share of the cost of insuring, maintaining, repairing, cleaning, etc. the building.

Details of what can (and cannot) be charged by the landlord and the proportion of the charge to be paid by the individual leaseholder will all be set out in the lease.

Service charge accounts

A statement or statements issued to leaseholders by the landlord to account for actual service charge income and expenditure in the 12-month accounting period.

Service charge demand

A service charge demand is an invoice issued by the landlord or managing agent setting out the service charge contribution that a leaseholder is required to pay for a specified period as set out in the lease, to contribute to managing and maintaining the building.

Social landlord

An organisation such as an organisation such as a local authority, a Private Registered Provider in England, or registered social landlord in Wales, who provided housing. Most do not make a profit. Social landlords can rent their properties to social tenants. Leaseholders may have a social landlord if they have a shared ownership property or their property was previously owned by a social landlord.

Social housing tenant

For the purposes of this consultation, a tenant means someone who rents from a social landlord and is asked to pay a service charge.

Sub-lessee

A person who holds a “sub-lease” (a lease that has a leasehold interest above it). The individual holds a leasehold interest, and their immediate landlord is also a leaseholder.

Superior landlord

Where there are multiple leases or interests in a property, creating a chain of landlords and tenants, the superior landlord is usually the one who holds the highest interest in the chain.