More than three million leaseholders in England will be handed greater powers to challenge unfair service charges and the right to demand detailed information about how their money is being spent.
The changes, which were announced by the Government on 11 November, are part of a much-delayed programme of leasehold reform.
Prime Minister Andy Burnham said it was “simply wrong” that leaseholders could face hefty charges and then find themselves facing another bill simply for challenging them.
And he added that it was “only the beginning” of the Government’s plans to overhaul the leasehold system.
April 2027 – Information and legal costs
The new rules will come into force in two main stages. From 1 April 2027, leaseholders will have greater powers to demand information about their service charges, so they can see exactly what their money is being spent on and why.
This will include more detailed information about how their buildings are managed, maintained, repaired and insured. Leaseholders will also be able to request information from previous years, and landlords will need a good reason to refuse.
One of the most significant changes, though, concerns legal costs.
At present, leaseholders who challenge their service charges can find themselves liable for their landlord’s legal expenses, regardless of whether their challenge is successful. That discourages them from questioning unreasonable costs.
Under the new rules, landlords will need court or tribunal approval before passing on these expenses. Leaseholders will also gain new rights to recover their own legal costs.
November 2027 – Clearer bills
And then from 1 November 2027, leaseholders will automatically be entitled to clearer information about their charges.
This will include details of buildings insurance costs, greater protection against excessive insurance management fees and clearer information about administration charges.
Private freeholders and other private landlords responsible for service charges will also have to use simpler, standardised bills and provide financial accounts and annual reports showing how money has been spent.
Councils and housing associations will be required to follow the same reporting requirements from November 2028.
The Leasehold Advisory Service has welcomed the announcement, particularly the measures designed to make it easier for leaseholders to question charges without risking substantial legal bills.
Its chief executive, Kion Ahadi, said service charges were the most common issue raised by people contacting the organisation. He believes the reforms will give leaseholders greater confidence to challenge unfair costs and hold their landlords to account.
More reforms to come
The next stage of the Government’s reform programme will be the Commonhold and Leasehold Reform Bill, which is expected to be introduced to Parliament before Christmas.
It will propose capping existing ground rents at £250 a year and making commonhold the default form of ownership for most new flats.
It will also make it easier for existing leaseholders to switch to commonhold, giving flat owners outright ownership of their homes and a greater say over how their buildings are managed.
