Service charges, for many leaseholders, have been increasing year on year, way beyond inflation, often with no accountability, and with no easy legal recourse. So the Government’s new consultation on how to implement reform is welcome.
Walthamstow’s Warner flats typically don’t pay service charges for maintenance, but they are billed for insurance. So even if you don’t pay service charges, this consultation is still relevant to you. It addresses the hidden broker fees that are often added to the bill, and invites feedback on how to avoid these conflicts of interest, or at least make them more transparent.
Completing these consultations is not exactly fun, but managing agents and freeholders will also be submitting their views, and it’s important the perspective of leaseholders is heard too. The consultation can be found here and runs until 26 September 2025.
In a nutshell the reforms require managing agents and freeholders to get their act together and treat leaseholders as co-equal stakeholders rather than simply cash cows.
Standard documentation
The freeholder must provide standard documents at set times of the year, including year end accounts, a budget, an annual report on the condition of the building, and a standardised service charge demand. They must also provide a mid-year update and a reconciliation statement showing any difference between budgeted costs and actual expenditure. Leaseholders will also have more rights to see documents relating to the condition of the building. For those of us who currently don’t pay charges for maintenance it’s well worth adding that we do not want, need or expect to be charge for these items
Litigation costs
The current law allows freeholders to claim back the costs of litigation, regardless of outcome, if this is in the terms of the lease. Obviously this is a huge barrier to any leaseholder seeking justice. The reforms propose that either side can apply to the tribunal to recover costs.
Reserve funds
Funds set aside from the service charges to cover big ticket items will be mandatory. Currently newer leases have this built in but older ones don’t. So this will ensure all freeholders follow best practice.
Minimum qualifications
Staff at managing agents will be required to have relevant qualifications, eg either a Level 3 (equivalent to A level) or L4 (equivalent to a degree). But there’s a 3 year pause to allow people to get trained up.
Managing agent veto
There’s also a recognition that leaseholders should be able to veto and switch to another managing agent where necessary, and the consultation invites feedback on how this should be regulated.
Right of access to information
Leaseholders and shared ownership tenants with local authority landlords will also be able to request information under the Freedom of Information Act 2000. The proposed reforms include a long list of the type of information that can be requested and the consultation invites leaseholders to add any they think are missing.
Finally some comments from a leaseholder who has already completed the form.
- The costs of transparency should be low. Providing more information should not become an excuse to increase costs.
- Interest accruing on the reserve fund should appear in the annual statement of accounts.
- for leaseholders to make decisions eg on changing a managing agent, they need a statutory right to contact information of other leaseholders in the building.
If you have any further points please feedback to the Facebook group.