Stronger leasehold protections in crackdown on hidden fees

Leaseholders will be given clearer information about the service charges they pay and stronger protections against unfair costs, as the government takes the next step in its reforms to end the feudal leasehold system.

The key reforms set out in the Leasehold and Freehold Reform Act 2024 (LFRA) will give leaseholders greater control over their homes and their money, making it easier to see exactly what they are being charged for, understand how their service charges are being spent and challenge unfair costs when things go wrong.

Following consultation with leaseholders, landlords and industry groups, the government has confirmed it will proceed with a series of measures to increase transparency around service charge costs and rebalance the system.

Coming into force as soon as possible from 2027, the changes include:

• An annual report, which landlords will need to provide to leaseholders, giving a clear insight into the health and condition of their building and plans for major works.
• A new service charge demand form, setting out detailed information about service charge payments and what they will cover.
• Where disputes arise, such as over service charges, new rules will protect leaseholders from footing their landlord’s legal bills without challenge, and enable them to apply to recover their own costs.
• Landlords will need to provide certain building information on request, such as fire safety information and invoices for maintenance works, going back up to six years and with clear timeframes for responses.

This action will rebalance the system, increase transparency over charges and help minimise the costs falling to leaseholders.

Housing Minister, Matthew Pennycook said:

As we bring the feudal leasehold system to an end and move towards a commonhold future, existing leaseholders will not be left behind.

We are acting to enable more existing leaseholders to take control of their buildings and more easily convert to commonhold as and when they judge the time is right for them, and we are strengthening protections for existing leaseholders in the here and now by driving up service charge transparency and rebalancing legal costs so that leaseholders are empowered to challenge unreasonable charges.

In addition, two further public consultations have launched today to drive forward enfranchisement reforms – marking the next step in making it easier for leaseholders to extend their lease or buy their freehold.

They will explore plans to set specific valuation rates in regulations, reducing disputes over costs and giving leaseholders greater certainty about the price they will pay to enfranchise, as well as protect leaseholders from covering their landlord’s solicitor, valuer or administrative fees when going through the process.

Together, this will create a clearer system that helps more people secure their home for the long term and have greater control over where they live.

The measures set out today will be implemented as soon as possible and will complement the upcoming Commonhold and Leasehold Reform Bill, which will overhaul home ownership, ban leasehold for new flats and cap ground rents at £250.

Kion Ahadi, Chief Executive of the Leasehold Advisory Service said:

These reforms represent an important step towards a fairer and more transparent system for leaseholders. As the leasehold landscape continues to evolve, it is vital that consumers have access to clear, impartial and expert information so they can understand their rights and make informed decisions about their homes.

LEASE is committed to supporting leaseholders, commonholders and park home owners through this period of change. We will continue to provide trusted advice, practical guidance and educational resources to help consumers navigate the reforms with confidence.

Further information

The government’s consultation response published today on Strengthening Leaseholder Protections over charges and services: Part 1 is here.

The consultation launched today on valuation rates is here.

The consultation launched today on process costs exceptions is here. – A plain English explainer document on the enfranchisement reforms is here.

The LFRA sets a new method for calculating the price paid for a statutory lease extension or freehold acquisition. It removes the requirement for marriage value to be paid, caps the treatment of ground rents in the valuation calculation at 0.1% of the freehold value, and allows the government to prescribe the valuation rates (deferment and capitalisation rates) used to calculate the enfranchisement premium. The LFRA additionally requires that each party to the claim bears their own process costs, with exceptions. Together these measures will make enfranchisement cheaper and easier for leaseholders.