New measures for leaseholders will provide more transparency over costs say the government, although acknowledged the package would not drive down costs in the short term.
As part of its continued efforts to tackle the “feudal” leasehold system, the government have committed to empowering leaseholders to request clearer information about the charges they are being asked to pay, regardless of whether the freeholders is a private landlord, council or housing association.
The transparency requirements includes detailed information about the building insurance and any commissions passed on to leaseholders. The government added leaseholders will also receive clearly set out information on admin fees they could face.
Legislation to stop the practice of leaseholders paying landlord’s legal costs when they challenge a charge is also to be introduced to reduce the current disincentive.
Speaking on the BBC Housing Minister Matthew Pennycook said leaseholders are subject to “unfair and unreasonable practices at the hands of leaseholders and managing agents” but acknowledged the measures would not reduce fees.
“The aim of these regulations in the first instance is to make bills more transparent” said Pennycook, with the objective to help leaseholders; understand what they’re paying for and any undelivered or duplicate services. He added they would still need to be challenged through the current tribunal system adding the new measures would remove barriers by removing the ability of freeholders to reclaim legal costs.
He said the government was taking action on the “underlying drivers” of service charge increases which he said currently “arrive in all manner of different forms”. Transparency and standardised forms is the starting point to allow future challenges.
Standardised forms for service charges will be introduced in the private-rented sector with requirements to provide financial accounts and annual reports for clearer information on charges.
The same requirements will be introduced for councils and housing associations from 1st November 2028.
Housing Minister Matthew Pennycook said: “Rapidly escalating and frequently opaque service charges are placing huge financial strain on hard-pressed leaseholders across the country.
“Today, we’re acting to protect them by introducing regulations that will improve the fairness and transparency of service charges so that unreasonable increases can be more easily challenged.”
“As we work to dismantle the feudal leasehold system in this Parliament, we won’t leave existing leaseholders behind.”
The regulations will be laid in Parliament this week with the staggered implementation “giving landlords time to make the necessary changes to their billing, accounting and service charge systems. Responses to the government’s consultation made clear that organisations would need sufficient time to prepare for the new requirements”
Prime Minister Andy Burnham added: “It is simply wrong that millions of leaseholders can be hit with unfair charges, then face another bill just for challenging them. That isn’t right, and where we can act quickly to change it, we will.
“Today’s changes are only the beginning. We’re giving leaseholders stronger rights now, while we press ahead with the bigger reforms needed to put power back in homeowners’ hands and end the feudal leasehold system for good.”
Commenting on the changes Mark Chick, Director of ALEP said services charges have long been one of the “most contentious and least understood aspects of leasehold ownership.” Providing leaseholders with greater transparency was welcome he added.
“These changes will represent an important shift from leaseholders having to ask for information to receiving it as a matter of course. Better disclosure of service charges, insurance costs and administration fees should lead to greater scrutiny of costs and higher standards of accountability across the sector.
“The phased implementation timetable recognises the practical realities facing landlords, managing agents and social housing providers, many of whom will need to make significant changes to systems, reporting processes and documentation. It is important that these reforms are introduced in a way that delivers meaningful benefits for leaseholders while remaining workable for those responsible for managing buildings.”
