Millions of leaseholders will receive stronger rights, powers and protections to better challenge ‘extortionate’ service charges under major reforms to the feudal leasehold system announced by the government.
The announcement has been hailed as ‘an important step forward’ by the Royal Institute of Chartered Surveyors (RICS) and welcomed as ‘significant’ by the Residential Freehold Association. The campaign group Leaseholder Action said the plan is ‘a long overdue lifeline’ for the millions of people trapped in unfair leasehold systems.
The measures will see around five million leaseholders receive standardised service charge documentation that spells out clear and detailed information about how their service charges are calculated and spent, making it easier for them to challenge unreasonable bills and unjustified expenses. Further reforms will prevent leaseholders automatically having to pay for landlords’ litigation costs even where they have won their case.
‘The move to standardise service charge demands and ban landlords from recovering legal costs is a welcome step forward,’ said Liam Spender, counsel and head of real estate litigation at Velitor Law and lawyer with Leaseholder Action.
“It will finally put an end to the shell game that leaseholders are forced to play just to trace their own money. The success of these reforms will hinge entirely on the quality of the enforcement regime. For too long, freeholders and managing agents have acted as though the rules do not apply to them. Any enforcement system will need real strength and teeth to change that mindset.”
Announcing the reforms, housing and planning minister Matthew Pennycook said:
“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.
“This bold package of reforms will arm leaseholders with greater rights and protections and empower them to challenge poor practice and unreasonable charges and fees – driving up leaseholder living standards as we work to bring the feudal leasehold system to an end as part of our Plan for Change.”
Demands for service charges are currently only required by law to include a limited amount of detail, which can leave leaseholders unclear over what services or works make up their bill. This can leave them at risk of being overcharged for poor quality work, or out of pocket for work that hasn’t been carried out.
The government said it is ‘pushing ahead’ to implement the reforms and has launched a consultation to ensure the plans are ‘robust, workable and protect leaseholders effectively’.
The consultation, which is open until 26th September, seeks opinions on transparency of service charges and buildings insurance, the litigation costs regime, reforming the section 20 ‘major works’ procedure, the case for greater protections for leaseholders, opportunities to encourage the provision of more accessible information and services, and the introduction of mandatory qualifications for managing agents.
RICS CEO Justin Young said the organisation fully supports reform and welcomed the plans for mandatory qualifications. He commented:
“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.
“Mandatory qualifications for managing agents will help to achieve this.
“We fully support the Government’s ambition to deliver meaningful, proportionate reform that has lasting benefit for consumers. The consultation recognises that professional bodies play a critical role in delivering trust and confidence. RICS’ work seeks to ensure the highest level of professionalism across our membership – and around 30% of leasehold properties are managed by an RICS Regulated Firm.
“Qualifications alone, however, are only part of the solution. RICS looks forward to working closely with MHCLG to achieve their vision, drawing on our deep regulatory experience and existing infrastructure.”
Natalie Chambers, director of the Residential Freehold Association, also welcomed the announcement – but said the government must ensure reforms don’t heap further expenses on leaseholders:
“Reforms that improve service charge transparency will help to bring about better accountability and understanding for residents whatever the tenure of a building.
“The government must however be mindful of any reforms which will add unwanted costs for leaseholders. This includes sweeping reforms to the insurance regime and cost recovery mechanisms, which are designed to support the effective long-term management of buildings on behalf of all residents.”
“We look forward to collaborating with government to ensure these reforms deliver a positive outcome for all.”
