Create a new body to regulate landlord and freeholder service charges

We want the Government to create a new body that is empowered to monitor and regulate private, council, and housing association service charges, and impose meaningful penalties for unfair, inaccurate, and unreasonable service charges.

It should provide free support to people to challenge charges.

Service charges are financial contributions requested by a landlord for the costs of day-to-day management, maintenance, and sometimes improvement of leasehold properties. They present a significant financial outlay for many leaseholders and tenants. At a time when costs are rising, they need assurance that the money is well spent, as well as fair access to redress when things go wrong.

The way service charges are organised, including what services are paid for, individual contributions, and payment schedules, are set out in individual leases or tenancy agreements. By law, variable service charges must be reasonable, and the works or services must be of a reasonable standard. Leaseholders and housing association tenants may contest the reasonableness of their service charges by applying to the First-tier Tribunal (or Leasehold Valuation Tribunal in Wales).

There are two service charge codes of practice approved by the Secretary of State for the residential leasehold sector and private retirement housing. They promote good practice and can be considered in court or tribunal proceedings. Leaseholders may seek free information and advice funded by the Department and provided by The Leasehold Advisory Service (LEASE), which offers online resources, telephone, and email enquiry services. Free advice can also be obtained from Citizens Advice.

The Leasehold and Freehold Reform Act 2024 contains provisions to standardise and increase the transparency of service charges, enabling leaseholders to scrutinise and challenge costs if they consider them unreasonable.

These provisions include:

· Standardising the information freeholders will be required to provide leaseholders with, by introducing a standardised service charge demand form; · Mandating the provision of an annual report, setting out key information of importance to leaseholders; · Compelling landlords to provide more relevant information to leaseholders on request; · Ensuring service charge accounts be provided within six months of the end of the previous accounting period that it covers, regardless of the lease terms. This will be subject to a number of exemptions; and · Requiring freeholders to proactively disclose to leaseholders’ details of the building insurance policy that was purchased.

Measures in the 2024 Act will also remove barriers to leaseholders challenging their charges at a tribunal by requiring landlords to apply to the relevant court or tribunal to pass any or all of their legal costs onto leaseholders and giving leaseholders a new right to apply to the relevant court or tribunal to claim their legal costs from their landlords. As stated in our Written Ministerial Statement (WMS) of 21 November, we will be consulting on implementing these measures this year.

The WMS also set out our intention to consult this year on new reforms to the Section 20 process that leaseholders must go through when a landlord wants to carry out ‘major works’ funded by a service charge. Managing agents play a key role in the maintenance of multi-occupancy buildings, and their importance will increase as the country transitions towards commonhold as the default tenure. The Government will strengthen regulation of managing agents to drive up the standard of service, including mandatory professional qualifications, and will consult on this matter this year.

All social housing tenants in England should be supplied with clear information on how service charges are set. When new or extended services are introduced, Registered Providers are expected to consult with tenants. The Social Housing (Regulation) Act 2023 gives the Regulator of Social Housing new standard-setting powers relating to the provision of information by private registered providers (PRPs) to tenants in England. The Government will direct the Regulator of Social Housing to introduce new Social Tenant Access to Information Requirements (STAIRs) that will enable tenants of PRPs to access information held by their landlords about the management of their homes.

The 2023 Act also strengthened the Housing Ombudsman Service, so tenants or leaseholders of social landlords have somewhere to turn when they are not getting the answers they need from their landlords. The Ombudsman was given the power to issue a statutory code of practice on complaint handling alongside duties to consult on any code issued and monitor the compliance of member landlords with the code.

The Ombudsman’s Complaint Handling Code, which was put on a statutory footing in April 2024, sets out best practice for landlord’s complaint handling procedures. The Ombudsman can investigate complaints about the communication, transparency, and fairness of service charges, but not the amount of the charges themselves. These measures provide oversight and protection for leaseholders and tenants who pay service charges, and we do not consider that there is a need for a regulatory body.

Ministry of Housing, Communities & Local Government