The government announced last week that millions of leaseholders will receive stronger rights, powers and protections to better challenge extortionate service charges thanks to major reforms to the feudal leasehold system. Leaseholders are required to pay a service charge to cover the upkeep of shared areas in their building, however in too many cases, they are left facing very unclear and unaffordable fees and through the Leasehold and Freehold Reform Act 2024 they will now get greater transparency allowing them to challenge these costs.
Under the proposals Leaseholders will receive standardised service charge documentation, which will spell out clear and detailed information about how their service charges are calculated and spent. This will make it easier for them to challenge unreasonable bills and potentially save money where expenses are unjustified, with further reforms to stop them having to automatically pay for landlords’ litigation costs even where they have won their case.
Stakeholders reacted positively to the news with RICS Chief Executive, Justin Young, saying:
“Today’s announcement is an important step forward in raising standards and improving transparency in the leasehold sector” whilst The Property Institute Chief Executive, Andrew Bulmer, said:
“We welcome this wide-reaching consultation which seeks to improve the lives of residents in shared buildings.
Key points being consulted on:
1. Better service charge transparency, including new standardised service charge demand forms, annual reports, service charge accounts and administration charges
2. Improving buildings insurance transparency, including what information should be provided to leaseholders, so they have assurance they are getting fair value and are better able to challenge any unreasonable insurance charges
3. Rebalancing the litigation costs regime and removing barriers for leaseholders to challenge their landlord
4. Reforming the section 20 ‘major works’ procedure that leaseholders must go through when they face large bills for such works
5. Considering the case for greater protections for leaseholders paying fixed service charges, protections for client money, or improvements to the process for appointing a manager in cases of serious management failure
6. Opportunities to encourage the provision of information and services digitally to be more accessible and reduce costs, but also ensuring safeguards so that all leaseholders receive the information they need
Introducing mandatory qualifications for managing agents to ensure that all agents have the knowledge and skills they need to provide a good service for leaseholders.
Service charges in Liverpool City Centre have increased dramatically over the last few years, the main reason bieng the ongoing challenges of the Building Safety Act. The fallout from the BSA has seen insurance costs rise dramatically, something that has limited the saleability of apartments in many developments in the city. Whilst the majority of the block management agents in the city already offer transparency there is always room for improvement, something that the new proposals will hopefully bring.
