Government announces next steps on service charges and leaseholder rights

The government has announced the next steps in implementing reforms intended to give leaseholders clearer information about service charges and stronger protections against unfair costs.

It has also launched two consultations that will help deliver wider reforms designed to make lease extensions and freehold purchases cheaper and easier.

The reforms form part of the Leasehold and Freehold Reform Act 2024. The relevant measures are not yet in force and will need to be implemented before leaseholders can use the new rights and protections.

Changes to service charges and legal costs

Following consultation with leaseholders, landlords and industry groups, the government has confirmed that it intends to proceed with measures designed to improve transparency and rebalance the service charge system as soon as possible from 2027.

The measures include:

• an annual report that landlords will have to provide to leaseholders, giving information about the condition of their building and plans for major works
• a new standard service charge demand form explaining the payments being requested and what they will cover
• a requirement for landlords to obtain approval from a court or tribunal before passing certain litigation costs on to leaseholders
• a right for leaseholders to apply to recover their own litigation costs, unless an exemption applies
• requirements for landlords to provide specified building information when requested by leaseholders, including information covering up to six years and within set timeframes.

The government says these measures will make it easier for leaseholders to understand what they are being charged, see how their service charge money is being spent and challenge unfair costs.

The detailed arrangements will be set out through secondary legislation (Statutory Instruments). The new rights and requirements will not apply until the relevant provisions have been brought into force.

Consultations on lease extensions and freehold purchases

The government has also launched two consultations as part of its work to implement reforms to statutory lease extensions and freehold purchases.

One consultation considers the valuation rates that would be used to calculate the price payable when qualifying leaseholders extend their lease or buy their freehold.

Setting specific valuation rates in regulations is intended to reduce disputes and give leaseholders greater certainty about how the price will be calculated.

The consultation will run until 23 September 2026. Views can be submitted here.

LEASE will deliver a webinar on the valuation rates consultation to help leaseholders understand the proposals and how they could affect lease extensions and freehold purchases. Further details, including the date and registration information, will be announced shortly. A recording of the webinar will be published soon afterwards.

The second consultation is about changes to who pays the process costs paid during the enfranchisement process.

Currently leaseholders pay their landlord’s costs but when commenced, the 2024 Act will require each party to pay their own costs, unless one of the limited exceptions applies, saving leaseholders hundreds, if not thousands of pounds.

The consultation considers the contribution that leaseholders should pay to other parties’ costs in a limited set of circumstances.

The consultation will run until 23 September 2026. Views can be submitted here.

“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.”