Leaseholders to be handed stronger powers to challenge rip-off service charges

Leaseholders will be handed stronger powers to challenge ‘rip-off’ service charges, the Government has said. 

Leaseholders, mostly flat owners, pay service charges to the building owner or freeholder for maintenance and repairs in communal areas as well as costs such as insurance. 

However, there have long been complaints that the annual charges are too expensive and that the way they are calculated is not transparent. 

Homeowners are set to be given the right to demand more information about their service charges for from April 2027, and freeholders will be prevented from charging the cost of legal challenges back to the leaseholder in many cases. 

It means the barrier for leaseholders to challenging an unfair service charge is now lower. 

The changes were included in the Leasehold and Freehold Reform Act 2024, which was passed by the former Conservative government, but are only now being enacted. 

They are part of wider reforms set to overhaul the existing leasehold system.

They will continue in a Bill that Prime Minister Andy Burnham is set to introduce in parliament before Christmas, which will cap ground rents at £250, make it easier for existing leaseholders to move to commonhold and to make commonhold the default for most new flats.

What will change?

Under the changes announced today, leaseholders will be able to demand more information from their freeholder about the service charges they pay. 

Currently, leaseholders have a right to know how their service charge is spent.

But the new rules widen these and leaseholders will be able to ask for information about maintenance, repairs, improvements and insurance of their building.

Plus, leaseholders will be able to request this information going back up to six years – and landlords will need strong grounds to refuse such a request.

There will be clear response times for landlords to get back to leaseholders and only limited circumstances where the information can be withheld.

This will make it easier for homeowners to see what they are paying for and why.

The cost of challenging an unfair service charge in court could also get cheaper.  

At the moment, leaseholders can be forced to pay their freeholder’s legal costs in some cases when challenging a change to their service charge – either directly or through an increase to future years’ service charge. 

But now, landlords will now need court or tribunal approval to pass legal fees on to leaseholders. 

And in some cases, leaseholders will also be able to claw back their own legal costs, although the Government says this will only happen where ‘appropriate’. 

Housing minister Matthew Pennycook said: ‘Rapidly escalating and frequently opaque service charges are placing huge financial strain on hard-pressed leaseholders across the country.

‘Today, we’re acting to protect them by introducing regulations that will improve the fairness and transparency of service charges so that unreasonable increases can be more easily challenged.’

The changes have been welcomed by the chief executive of the Leasehold Advisory Service, Kion Ahadi, who says: ‘Service charges are the most common issue leaseholders contact us about.

‘Better access to information and stronger protection from landlords’ legal bills will give them more confidence to hold their landlord to account.’

However, the Government has stopped short of capping service charges, which it says is because ‘buildings still need to be maintained.’