Leaseholders to get cheaper bills within months in crackdown on service charges

Millions of flat owners are set to have their bills cut as the Government moves forward with ending leasehold homeownership in England and Wales, The i Paper has been told. Housing and Planning Minister Matthew Pennycook said that Labour “will bring the [leasehold] system to an end…in a careful and methodical way”, which “means the change is lasting and permanent”. Around five million leasehold homes are thought to exist in England and Wales – the majority of them are flats. Property law is devolved in both Scotland and Northern Ireland, meaning any changes to leasehold ownership will only affect England and Wales. Leasehold homeowners live in buildings controlled by freeholder landlords, with many reporting rising service charges, unaffordable ground rents and high costs when they try to enfranchise (take control of) their building or sell their home. But from 1 April 2027, leasehold homeowners will receive new powers under the Leasehold and Freehold Reform Act 2024 to demand information about what they are being billed for in their service charge so they understand what they are paying and why. Once the new regulations come into force next year, landlords will need court or tribunal approval to pass on any legal costs to leaseholders who have challenged their service charge. Leaseholders will also get the new right to claw back their own legal expenses for the first time and will have new protections to stop freeholders passing their legal bills on as well. ‘Generational’ change to land and property law Pennycook said Labour’s overall “jigsaw” package of leasehold reform, which includes Labour’s forthcoming landmark Commonhold and Leasehold Reform Bill, was “the most ambitious overhaul of land and property law in a generation”.“Leaseholders are subject to a range of unfair and unreasonable practices, but chief among their complaints is rapidly escalating, frequently opaque service charges,” Pennycook told The i Paper. “They are putting huge financial strain on leasehold homeowners across the country.” Pennycook said the Government had not abandoned its pledge to end leasehold ownership (Photo: Alex Lancaster Lennox). The Commonhold and Leasehold Reform Bill, which will legislate to end leasehold for good, cap ground rents, make it easier for existing homeowners to transition to commonhold and prevent new leasehold homes being built and sold, is expected in Parliament before Christmas. The other changes to service charges and insurance levies will come into force between 1 April 2027 and November 2028. However, freeholders – who have brought their challenges to the Government to the Supreme Court – could continue to push against the government’s plans. Pennycook said Labour would “introduce a transparent permitted insurance fee to stop freeholders and managing agents passing on the cost of excessive commissions to leaseholders”. He explained that all of the new measures would “work as a package”, making it “easier for leaseholders to understand what they’re paying for, to identify when they’re paying for things that aren’t reasonable or services that aren’t provided, and then challenge those at tribunal”. Labour pledged to address the leasehold crisis in their 2024 manifesto, but at points since then, it has seemed as though the changes may be delayed, particularly after current Housing Secretary Angela Rayner was forced to resign from cabinet over her tax affairs. Despite prior delays to reforming the system, Pennycook sought to reassure leaseholders that change was coming and that Labour remained committed to reforming the “feudal” system of homeownership. Pennycook said that he hoped the new regulations would “protect” leaseholders and “empower” them to challenge freeholders’ service charges when they “feel they are unreasonable.” As The i Paper has reported, there are cases of leaseholders in blocks of flats being presented with service charge bills that are not itemised, leaving them concerned that they are being asked to stump up huge sums without oversight. This has caused financial hardship and extreme suffering for affected homeowners. Leasehold homeowners also regularly query insurance costs. Pennycook said the new regulation would mean they had the right to detailed information about their building insurance, along with more protections against unreasonable fees. The end of leasehold ownership As for the “end” of leasehold as promised by Labour in their 2024 manifesto, Pennycook insisted that it was imminent and said that Labour’s Commonhold and Leasehold Reform Bill would return to Parliament soon. Asked whether he could confirm this new legislation would bring leasehold homeownership to an end, he said: “We have not backed away from any of the commitments we made in relation to leasehold…we will bring the system to an end.” Pennycook described commonhold as a “radical improvement” on leasehold homeownership. Asked whether he could guarantee that it would be cheaper and easier for leaseholders to extend their leases and enfranchise under the new legislation and that ground rents would be capped at £250 a year before going to a peppercorn, Pennycook said: “We can guarantee that the process will be cheaper and easier because of all the different interlocking things that go into calculating the price paid for enfranchisement.” On enfranchisement specifically, he said: “It will be simpler and cleaner, and overall, yes, the process will be cheaper and easier.” The hope is that this will also make it easier for existing leaseholders to move to commonhold if that is something they want to do. The Commonhold and Leasehold Reform Bill seeks to overhaul the way that blocks of flats are owned and managed. Unlike leasehold homeownership, which means homeowners only buy the right to occupy their home for a specified period of time, commonhold means that people own their home and the building it is in, if it is a flat, without an expiry date on their lease. Scotland has had a commonhold system since 2012. Commonhold is also the homeownership structure used in Australia, New Zealand, much of Europe and North America. Commonhold means homeowners have a say over spending and repairs in their building; it also means they own their home outright.