On 4 July 2025, the Government issued a consultation asking for input as to how best to implement the sections of the Leasehold and Freehold Reform Act 2024 ("LAFRA 2024") which deal with improving the service charge regime for leaseholders paying both variable and fixed service charges. The Government also seeks to improve the regulation of managing agents, who it acknowledges are crucial for the successful management of both leasehold and commonhold schemes. The paper stresses that later this year, the Government will publish a draft Leasehold and Commonhold Reform Bill which will enact measures to reinvigorate commonhold through the introduction of a comprehensive new legal framework but it will also include a range of other vital reforms to the existing leasehold system.
1 What are the proposals regarding variable service charges?
The Government proposes to increase the transparency of service charge systems by implementing various parts of LAFRA 2024. This will be done by introducing the following:
1.1 A new mandatory annual report
This new document will have to follow a prescribed format and must be provided within the first month of every annual service charge period. It must contain key contact details for the managing agent, landlord(s), and where relevant, the Resident Management Company, fire safety responsible person, Principal Accountable Person under the Building Safety Act 2022, any Resident Tenants' Association, and any Right to Manage Company. It would also set out the important lease dates, such as interim service charge demand and financial year-end dates. It will also include basic information about the building's condition, including details of previous and planned annual statutory surveys, and details of any plans for major works in the next two years and whether anticipated costs are covered in whole or part by a reserve fund. A copy of a schedule of the mandatory administration charges should be clearly set out (see more information at section 1.6), along with details of someone to contact if leaseholders are unhappy with the service charge or have questions. Finally, the report should include information about any formal actions or statutory processes affecting the building, such as enforcement notices, litigation or enfranchisement claims. A mock-up of the proposed annual report is here.
The Government envisages that some properties will be treated differently. For example, they propose that the providers of retirement housing schemes which charge a combination of fixed service charges and event fees should publish a streamlined annual report which includes details of how the event fees work. Similarly, they recognise that a landlord is an intermediate landlord might face difficulties meeting some of the requirements of providing the minimum information proposed in the new annual report if the relevant documentation is held by the head lessor.
1.2 A new standardised service charge demand form
The Government suggests introducing a standardised service charge demand form, which should contain: the name and address of the leaseholder, the landlord and the property for which service charges are payable; the total amount payable for the period based on the budget; the payment details and deadline; the consequences of non-payment; and the details of planned expenditure on maintenance, insurance and management costs for the building. A mock-up of the proposed service charge demand is here.
The consultation asks for feedback on a number of issues including how the costs of compiling the new demands forms and annual reports will affect business and whether (and to what extent) these costs will be passed on to leaseholders.
1.3 A new notice of future service charge demands
Under Section 20B of the Landlord and Tenant Act 1985, a landlord must notify leaseholders of service charge costs being incurred or demanded within 18 months of incurring them. At present, there is no prescribed form for this notice. The consultation proposes to put this right by introducing a new standard form notice that would include the estimated amount of costs incurred; the amount an individual leaseholder is expected to be required to contribute to those cost; and a date on or before which it is expected that the service charge will be demanded. A suggestion of what the demand could look like is here.
1.4 Extended rights to obtain information on request
The consultation argues that leaseholders should have access to key documents about their building at any time. This list of documents would include fire risk assessments, lists of items of expenditure in the service charge as well as documents which deal with the management and maintenance of individual buildings. A list of the suggested documents that leaseholders could require is set out here.
Leaseholders would be able to request these documents in respect of the last six years and that landlords must provide the requested information within 28 calendar days. If the landlord needs to obtain this information from a third party, and the information spans many years and involves multiple agents, the Government is minded to allow an extension of seven extra calendar days should be appropriate. This does not seem like much time in which to obtain historic information, so a transitional regime might be sensible so that information can be compiled in an accessible place from the start of the new regime but there would not be a need to obtain pre-commencement information.
The landlord may charge the leaseholder for making copies, but not for viewing information in person unless copies are made.
Exemptions would only be available for commercially sensitive information or for vexatious requests where a leaseholder repeatedly asks for the same information within a short timeframe.
1.5 Application of proposals to tenants
The Government asks consultees whether social housing tenants of Private Registered Providers and Registered Social Landlords should also receive an annual report and have the right to access specific information.
1.6 A new duty to publish administration charge schedules
Section 61 of LAFRA 2024 introduces a duty on landlords to publish a schedule of the various administration charges that could be levied on leaseholders. The Government has produced a mock-up of such a table here and requests feedback on it.
1.7 Better information about insurance
Currently, section 30A of the Landlord and Tenant Act 1985 allows leaseholders to request a summary of their insurance policy from their landlord and to inspect the insurance documents. Section 60 of LAFRA 2024 places a duty on landlords to provide information about the insurance policy without leaseholders having to request it.
This provision could also help to address the incentive model whereby landlords or property managing agents working on their behalf receive a portion of the building insurance broker's commission for insurance-related activities. This could incentivise them to choose brokers on the basis of remuneration received rather than best value for the leaseholder. The Government is also considering requiring managing agents and landlords to declare any conflicts of interests with the insurance broker and insurer.
1.8 New standardised service charge accounts
Section 56 of LAFRA 2024 will, when implemented, imply into leases a requirement for landlords who charge variable service charges and manage blocks of four or more dwellings to provide a written statement of accounts within six months of the end of the accounting period. These provisions will not override any terms of a lease which would require more stringent requirements such as a statutory audit. A draft version of the proposed template form accounts is here. The consultation asks for feedback as to whether ISRS 4400 would be the appropriate standard for most leasehold blocks, and there are also questions about who should certify the accounts and in what manner. The consultation also stresses that the Government is keen to understand the cost to business of introducing these measures and, critically, where these costs might fall, including whether and how they might be passed on to leaseholders.
1.9 Rebalancing the litigation costs regime
Despite acknowledging that there are circumstances where landlords should be able to recover their litigation costs from leaseholders, the consultation states that the current regime creates an imbalance whereby the risk of having to pay their landlord's litigation costs often deters leaseholders from seeking redress in court because the responsibility lies with them to apply to limit their liability for their landlord's litigation costs under section 20C of the Landlord and Tenant Act 1985.
The Government intends to implement sections 62 and 63 of LAFRA 2024 to limit landlords' rights of landlords to claim litigation costs from tenants, and to provide a new right for leaseholders to apply to the relevant court or tribunal to claim their litigation costs from their landlord. They are interested in the industry's views on how best to achieve a successful rebalance, including in resident-led leasehold buildings.
2 What other changes could be made to service charges?
2.1 Mandating reserve funds and planning for major works
Lord Best's 2019 report recommended several reforms around major works, including mandating the use of a reserve fund in both new and existing leases and ensuring that such reserves are effectively funded, as well as being underpinned by a professionally certified asset management plan. The Government plans to implement these suggestions and therefore proposes making reserve funds and asset management plans compulsory in every lease. Exceptions might include local authority landlords, retirement housing with fixed service charges, and small resident-led schemes.
2.2 Reforming the major works consultation process
The 'major works regime' under section 20 of the Housing Act 1985 requires landlords to carry out a two-stage consultation process with leaseholders before carrying out any works which cost more than £250 per leaseholder. There are similar processes in place if a landlord enters into a 'Qualifying Long Term Agreement' ("QLTA"), meaning a contract which lasts more than 12 months and costs more than £100 per leaseholder.
The Government seeks feedback on its proposal to increase the threshold at which Section 20 consultations are required to £600 per leaseholder for major works and £300 per leaseholder for QLTAs.
The consultation canvasses views on whether new exemptions should be created for energy contracts and district heat networks.
2.3 Protecting leaseholders' money
Section 42A of the Landlord and Tenant Act 1987 is not yet in force. It would require landlords and managing agents to hold service charge funds from separate groups of service charge payer in designated separate accounts (subject to some limited exemptions such as local authority landlords). These accounts will be regarded as designated if the relevant UK financial institution has been notified in writing by the landlord that sums standing to the credit of the trust fund are to be held in it, no other funds are held in the account, and the account is of a description specified in regulations by the Secretary of State and Welsh Ministers.
There are concerns that implementing these rules would add to the administrative costs and the obligations facing landlords and managing agents, and may also negatively impact on the UK financial sector. However, the Government asks for feedback on how best these rules could be introduced, and is also open to new proposals on how to ensure service charge monies are kept safe.
2.4 Protections for leaseholders paying fixed service charges
The consultation asks for evidence of any significant challenges facing those paying fixed service charges, and what steps might be needed to protect them.
2.5 Powers to appoint a manager or replace a managing agent
In cases of serious management failure by the landlord, or landlord's managing agent, leaseholders can ask the tribunal to appoint a replacement manager. Leaseholders need to follow a process and prove substantive fault by the management. The landlord will usually be given time to remedy any concerns before the leaseholder may apply to the appropriate tribunal. The Government welcomes observations on the existing arrangements and where improvements may be made, and asks whether leaseholders should have rights to veto or force a change in managing agent, without the party responsible losing full control.
2.6 Providing information and services digitally
The consultations asks for views as to whether more documents or exchange of correspondence between landlords and leaseholders should be done via electronic means.
3 What does the consultation ask in relation to the regulation of managing agents?
The consultation refers to Lord Best's 2019 Regulation of Property Agents report, which made several recommendations, including developing new codes of practice, requiring that all agents hold relevant qualifications, and the introduction of a new licensing scheme overseen by a new regulator for all property agents.
This consultation proposes taking the first step towards implementing these recommendations, by introducing mandatory professional qualifications for managing agents in England now. They suggest that the required level of qualification should reflect the complexity of the work undertaken and should range between a level 3 qualification (using the Ofqual Regulated Qualification Framework) for simpler tasks, a level 4 qualification for complex leasehold block management roles (such as agreeing contracts and charges for property management services, and ensuring that landlords of higher risk buildings comply with their responsibilities under the Building Safety Act 2022) and a level 5 qualification for agents who take on higher levels of responsibility, such as directorships.
The Government wants feedback on these suggestions, and also wants to know if it would work better for these qualifications to be implemented by existing designated professional bodies (such as RICS and TPI), supported by local authority enforcement, or by government-approved redress schemes, supported by local authority enforcement. They acknowledge that for some agents this proposal will result in higher costs, which will likely be passed on to leaseholders through management fees. However, they think that the increase would be small, and that the new regime would introduce value for money improvements.
4 Conclusion
The consultation covers the implementation of Part 4 of LAFRA 2024, entitled 'Regulation of leasehold'. It is noticeable that it did not proceed to consider Part 5, entitled 'Regulation of estate management' which covers freeholders who pay service charges.
Many of the recommendations will make the provision of service charges more onerous and will therefore increase costs. The new regime may well improve standards, but it iwill remain to be seen whether leaseholders will welcome the additional professional fees.
The consultation closes on 26 Sep 2025. Landlords and agents should respond to it, in order to share their experiences and their in-depth knowledge of the sector. Owners and operators of retirement housing should explore the exemptions that the Government proposes for their sector. Please contact us if you would like to discuss any aspect of this consultation or your response to it.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
