Leaseholders granted stronger rights and protections

A significant reform in the leasehold system will provide millions of leaseholders in England and Wales with the power to challenge high service charges, which are often opaque and unclear. The Leasehold and Freehold Reform Act 2024 introduces measures to increase transparency in service charge documentation, helping leaseholders understand how their fees are calculated and reinforcing their ability to contest unreasonable costs. Housing and Planning Minister Matthew Pennycook remarked, “The cost of living remains a pressing concern for leaseholders and many are struggling financially as a result of high and rising service charges, and other opaque and excessive leasehold costs.” With these reforms, leaseholders will not only save money but will also benefit from protections regarding litigation costs.

The announcement has been welcomed by various stakeholders in the property sector. RICS Chief Executive Justin Young highlighted, “Today’s announcement is an important step forward in raising standards and improving transparency in the leasehold sector. Accountability and professionalism in property management is essential to give leaseholders confidence.” Young outlined how mandatory qualifications for managing agents are critical to achieving these goals, ensuring that leaseholders receive the service they require.

Andrew Bulmer, Chief Executive of the Property Institute, echoed this sentiment, stating, “We welcome this wide-reaching consultation which seeks to improve the lives of residents in shared buildings.” He underscored the importance of transparency in service charges, indicating that such measures will empower residents and enable them to challenge unjust costs effectively.

Currently, service charge demands include limited details, causing leaseholders to be unsure about the fees they are being charged. This ambiguity may lead to overcharging for poor-quality work or charges for services not rendered, compounding the challenges posed by the rising cost of living.

The government aims to implement reforms swiftly while consulting stakeholders on ensuring these measures are robust and protective of leaseholders. Queries regarding service charges comprised one in three enquiries to the Leasehold Advisory Service last year, underscoring the need for urgent action.

Additional planned reforms include improving the Section 20 ‘major works’ process to prevent leaseholders from facing large and unexpected bills with minimal notice. Leaseholders will also gain the ability to veto their landlord’s choice of managing agent, ensuring better services and accountability. Furthermore, there will be a push for mandatory qualifications for managing agents, addressing the concern of inadequate service.

These efforts are part of the government's broader 'Plan for Change,' aimed at fostering higher living standards and transitioning towards commonhold as the default for new flats. The expected publication of a draft Leasehold and Commonhold Reform Bill later this year is a crucial step in this direction. As ongoing consultations outline essential improvements regarding service charge transparency and management, leaseholders can look forward to a more equitable and transparent residential property sector.