Fresh hope for thousands of households suffering with extreme service charges planned by government law change

The Sun

16 hours ago

THOUSANDS of households will be able to challenge extortionate leasehold service charges more easily, the government has said.
Households who live in leasehold properties pay fees to the person who owns the building or their managing agents for services including building insurance and maintenance.
These service charges can include repairs and maintenance for things such as the roof, windows, drains and gutters.
The payments are usually due twice a year and the exact amount can vary depending on the costs the landlord incurs.
This can mean that they can be hit with surprise bills that can often run into thousands of pounds.
Almost five million homeowners pay service fees, which have risen by 11% in the last year to an average of £2,300 a month, according to Hamptons.
Leaseholders have been promised that the system will change by several governments and Labour when it was in opposition.
The government is hoping to tackle this problem by forcing companies to be transparent about the fees they are charging, Sky News reports.
The reforms will be introduced after a consultation, the government said.
Leaseholders will receive standardised service charge documentation that will explain clearly and in detail how the fees are calculated and where their money is being spent.
Other reforms will stop leaseholders from automatically having to pay for a landlord's legal costs even if they have won their case.
The changes will allow homeowners to challenge unreasonable service charges more easily, housing minister Matthew Pennycook said.
He added that the changes will put pressure on managing agents to reduce the fees.
It will also introduce a strict new qualification system for managing agents to try and improve standards in the sector.
Mr Pennycook told Sky News: "The system has some inherent inequities in it that do allow leaseholders to be gouged and particularly when it comes to managing agents there are unscrupulous people out there.
"They are abusing leaseholders and there's poor practice.
How do service charges work?
Service charges are fees paid by a leaseholder or resident and are set by the landlord.
The amount varies every year depending on costs to the landlord.
The details are usually set out in your lease.
Landlords usually calculate the fee based on what they think they will spend.
At the end of the year they should provide a statement.
Some leases allow landlords to ask for contributions towards a "sinking fund" which is a reserve that can be built up for larger scale works.
These could include repairing the roof of the building or fixing issues with the foundations.
"The reforms we are announcing today and reforms that are to come are going to bear down managing agents and ensure the sector as a whole is properly regulated."
Unfair charges
Some leaseholders have said that they have been charged unfair fees.
Judges have made some landlords pay back up to £100,000 after the leaseholders took them to tribunal.
In one example, the leaseholders were charged £135 to change two lightbulbs.
In February 2023, it was revealed that landlords and insurance brokers were taking up to 60% of the £1.6billion leaseholders paid for building insurance as hidden commissions.
New rules now stop insurance companies from choosing policies just to earn the highest commission.
But brokers and managing agents are still allowed to take commissions.
The government has previously promised to ban excessive building insurance commissions through the Leasehold and Freehold Reform Act 2024.
Instead, landlords will only be able to charge a straightforward and fair "permitted insurance fee" for the work they actually do, making costs clearer and protecting leaseholders from hidden charges.
However, these proposed laws still need further legislation to come into effect, and the government hasn't yet provided a timetable for this.
A spokesperson for the Ministry of Housing previously sold The Sun that "far too many leaseholders" are being hit with "unreasonable and extortionate charges".
New rules planned by the government also plan to introduce commonhold agreements to replace leasehold ones.
Commonhold allows flat owners to jointly own and manage their buildings, which cuts out landlords and property management companies.
But the proposed rules only apply to new homes.
How to challenge fees
Leaseholders have the right to request extra information from their landlord within six months of receiving a summary of costs.
You can challenge a cost if you think it's unreasonable, the standard of work is poor or you don't think you should have to pay it.
For example, you could question why you need to pay for lift maintenance if you live in a ground-floor flat and it's not included in your lease.
Or you can challenge for communal services, such as a garden that is always closed or a concierge that never has any staff.
To challenge these services you need to apply to a tribunal which has the power to rule on whether the service charge is reasonable or payable.
In England this is the first-tier tribunal (property chamber).
In Wales it's the leasehold valuation tribunal.
Applying to the tribunal usually costs a fixed fee of £114, but you may be able to waive it if you have certain benefits.
If your case is transferred from court to the tribunal, you'll only pay the difference between the court fees and the tribunal fee - or nothing if you've already paid more than £114 in court fees.
If a hearing is scheduled, you'll need to pay an additional £227 hearing fee.
Speak to the Leasehold Advisory Service online at lease-advice.org or call them on 020 7832 2500 to find out more and get free advice on service charge issues.
You could also apply to the Housing Ombudsman if you want to complain about how your service charge fees have been managed.
The Ombudsman said cases have jumped by 25 per cent in the last four years.
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