Leasehold consultation will boost rights for millions in England and Wales

A consultation to bring in sweeping reforms to overhaul what the government calls the ‘feudal leasehold system’ has been unveiled.

The move will address the challenges faced by nearly five million leaseholders in England and Wales.

The changes, to be enacted through the Leasehold and Freehold Reform Act 2024, aim to provide greater transparency and accountability.

The new rules will also offer financial relief for those grappling with escalating service charges amid ongoing cost of living pressures.

Greater rights for leaseholders

Housing and planning minister Matthew Pennycook said: “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.”

He adds that the government is pushing ahead to implement these reforms and is consulting over the best way forward to ensure they are robust, workable and protect leaseholders effectively.

Leaseholders gain new tools

Under the new measures, leaseholders will gain enhanced tools to scrutinise and contest excessive fees charged for the maintenance of shared building areas.

Standardised documentation will now detail how these charges are calculated and allocated, offering clarity where previously many faced opaque and unaffordable costs.

This transparency is designed to empower leaseholders to challenge unjustified expenses, potentially saving significant sums when bills lack proper justification.

The reforms also address longstanding issues with litigation costs, ensuring leaseholders are no longer automatically liable for their landlord’s legal expenses, even in cases they win.

There will also be improvements to the Section 20 ‘major works’ process will prevent leaseholders from being blindsided by sudden, hefty bills for significant building works, offering better notice and consultation.

Service charge disputes

The need for action was underscored by the Leasehold Advisory Service (LEASE), which reported that a third of its enquiries last year related to service charge disputes.

To further protect leaseholders, the government is consulting on additional measures, including improved transparency for buildings insurance and rebalancing litigation costs.

There will also be mandatory qualifications for managing agents to eliminate substandard practices.

Leaseholders will also gain the ability to influence or reject their landlord’s choice of managing agent, aligning with recommendations from Lord Best’s 2019 review.

Other proposals include protections for those paying fixed service charges, safeguards for client money and streamlined processes for appointing managers in cases of severe mismanagement.

The government is also exploring digital solutions to make information more accessible and cost-effective, while ensuring all leaseholders, regardless of digital access, receive necessary details.

Property sector reaction to leasehold reform

Timothy Douglas, the head of policy and campaigns at Propertymark, said: “Propertymark has long campaigned for reform of the leasehold system, including reducing costs and improving transparency to support agents and protect consumers. “Proposals for new standardised service charge demand forms are welcome, but the reforms should go further.

“It must include implementation of a code of practice and disclosure document concerning event fees in specialist retirement developments as drafted by the Law Commission in March 2017.”

Andrew Bulmer, the chief executive of The Property Institute, said: “We welcome the government’s consultation on strengthening leaseholder protections as a timely and necessary step towards improving the lives of residents in multi-occupancy buildings across England and Wales.

“Proposals to improve service charge transparency, rebalance litigation costs, and introduce mandatory qualifications for property managers represent a bold and meaningful advancement in leaseholder clarity, confidence, and protection.

“The Property Institute is particularly pleased to see that the Government is reviewing Lord Best’s 2019 report on Regulation of Property Agents and that they have made clear that this consultation is not the final step in the regulation of managing agents.”

Justin Young, the chief executive of RICS, said: “The 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.

“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.”