Home Buying Packs must reveal who controls your building

By Alexander Hamilton

 Dr Alexander Hamilton  is an economic adviser and development economist at the UK’s FCDO, where he specialises in the economies of the Middle East and North Africa. He writes on the economics of leasehold in a private capacity. The views in this article are his own, and do not necessarily reflect those of the FCDO or the UK government. His scholarly work can be found here: Alexander Hamilton – Google Scholar‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬‬.

Imagine buying your dream home—only to discover later that the biggest cost of owning it, the service charges, can soar well beyond expectations because someone else controls them. This is the hidden risk facing leasehold property buyers today.

The UK government has recognised that homebuyers in general often get critical information about a property too late in the purchase process.

Its proposed standardised Home Buying and Selling Pack is a welcome step to inform buyers upfront about key details about a property. This information will include “tenure type (e.g. freehold, leasehold, etc.).. [and]…leasehold and freehold estate terms (e.g. service charges, ground rent, estate rent charges, managed freehold charges, etc.)” (see Annex B ).

However, even with these facts, one vital piece of information is still missing: who will be in charge of managing the building—and therefore who sets the service charges. 

For leasehold flats, the financial dynamics are often misunderstood. According to the English Housing Survey 2023–24, the median leaseholder who pays ground rent pays £120 per year, whereas the median annual service charge for leaseholders who pay service charges is £1,375—over eleven times higher. In other words, service charges are typically the dominant ongoing cost for flat owners.

This doesn’t mean ground rent isn’t a problem—some leaseholders suffer from burdensome escalation clauses or doubling ground rents. Furthermore, even a token ground rent, being  money paid without any service in return, is difficult to justify.

However, for most flat owners, service charges pose a greater long-term financial risk. Unlike ground rents, which can be reduced to zero with a statutory lease extension or don’t exist for new leases, service charges continue for as long as the building stands. 

The impact of rapidly escalating service charges is now a significant financial problem for a large minority of leaseholders. When service charges exceed 1% of the value of a property it can become difficult to obtain a mortgage. As Hampton’s Service Charge Index 2025 notes, almost 4 in 10 (37%) of leasehold properties in England and Wales now have service charges that exceed 1% of a property’s value, up from 29% five years ago. 

If a leaseholder has no direct control over who manages their building and how their service charges are spent, they are exposed to a potentially unlimited and unpredictable expense. In theory leaseholders can challenge ‘unreasonable’ service charges through the tribunal system. However, this is a costly, and unpredictable exercise, and as explained here , the prospect of challenge at tribunal is unlikely to significantly diminish the incentives of third-party landlords to make excessive service charge demands. 

Thus, while Annex B of the government’s Home Buying Reform Roadmap indicates that the pack will list critical facts for leasehold properties, likely including remaining lease length, current ground rent and any review terms, current annual service charge and recent service charge history, any planned major works, and details of disputes, arrears, or tribunal actions. These are essential facts, but still don’t answer the key question: 

Who controls the Building? 

For a leasehold flat, one of the most important questions influencing its long-term costs is who controls the building’s management and maintenance decisions. In other words, who has the authority over decisions that directly impact leaseholders’ service charges? When someone buys a leasehold property, they are not just taking on a financial arrangement; they are entering a governance system. The structure of control—who makes decisions about maintenance, services, and spending—can dramatically shape what they may pay in the future. 

If this governance structure aligns incentives properly (for example, when leaseholders themselves run the building through a Residents’ Management Company (RMC) or a Right to Manage (RTM) company, there should be a greater chance of cost-conscious decision-making. But if those who pay the service charges are not the ones who control how that money is spent, the incentives are fundamentally misaligned.  

Leasehold’s built-in incentive problem 

This example of the principal–agent problem—where one party pays and another party decides how to spend—is built into the leasehold system.

The misalignment is by design, not by accident. Leaseholders are the principals who fund the expenses and bear all the financial risk, while freeholders or head lessors and their chosen managing agents act as agents controlling the budget for maintenance, insurance, and repairs.

Because these agents don’t personally pay the bills, their incentives can drift away from efficiency and value for money. In fact, some freeholders and managing agents profit from the services they contract, such as through commissions on insurance or repairs. The result is a predictable tension: costs tend to rise or be higher than necessary because the people deciding on expenditures benefit from higher spending, and those who pay have little recourse. 

It’s a system that almost guarantees friction and potential overcharging when it comes to service charges and management decisions (see; here for further details). 

Why past service charge data can be misleading 

Another challenge is that even if the home buying pack provides a buyer with recent service charge figures for the flat, historical costs can give a false sense of security.

Many new developments start out with artificially low service charges—developers might deliberately keep early costs down to make flats more attractive to buyers. This often involves deferring maintenance, underestimating future repairs, or not funding the reserve (sinking) fund adequately during the initial sales phase. As a result, a building that appears cheap to run in its first years can face steep hikes later when the true costs of maintenance and major works surface.  What matters more are the decisions and policies that will determine those costs over time, such as: 

• Budgeting and reserve funds: Who sets the annual budget and ensures enough is saved for future repairs? 
• Choosing contractors and suppliers: Who decides which companies do the maintenance, and under what terms? (This can include whether commissions or mark-ups are taken, for example on insurance or building work, which can drive costs up.) 
• Approving major works: Who has the power to authorise expensive renovation or refurbishment projects? 
• Managing contracts and performance: Who is responsible for replacing underperforming management agents or contractors? 

All of these are fundamental governance decisions with potentially major implications for leaseholders’ financial positions. A building’s history of low service charges is irrelevant if a new management regime could later impose far higher costs. 

Why governance matters: A tale of two flats 

Let’s illustrate why effective control is as important as other attributes of leasehold. Consider two identical flats in neighboring buildings. They are the same in size, age, and construction, and each is part of a similar development with comparable service charge needs. 

• Flat A is in Building 1 with a 999-year lease, a peppercorn (zero) ground rent, and a service charge of £1,300 per year. 
• Flat B is in Building 2 with a 125-year lease and a £120 fixed annual ground rent and a service charge of £1,300 per year. 

On paper, Flat A appears more attractive – one would never have to worry about extending the lease or the ongoing cost of ground rents. However, Building 1 is controlled by an external landlord (freeholder or head leaseholder), meaning the leaseholders do not control their service charges or management agent. Building 2, by contrast, is leaseholder-controlled via an RTM company. In Building 2, the flat owners themselves collectively decide on management and spending, aligning their interests with cost efficiency. If they choose to hire a management agent, and the said agent does not perform satisfactorily, they can be replaced. 

This critical information about a building’s governance arrangements leads to a trade-off that was not visible before: Flat A’s owner has no immediate lease extension or ground rent issues, but zero say in the building’s management and no control over potentially rising service charges. Flat B’s owner faces a shorter lease and modest ground rent (which might require a lease extension in the future) but enjoys direct control over how the building is managed, including the power to keep service charges in check. 

So which flat is actually the better buy? The answer depends not just on the headline financial terms, but on who controls the building’s costs.

For a prospective buyer, understanding governance is crucial. A flat with a well-run, leaseholder-controlled building management may ultimately be more affordable and stable than one with superficially better lease terms but an outside landlord who can impose costly fees. In short, buyers should know whether their service charges will be set by fellow leaseholders or by a third-party landlord whose incentives might not align with their own. 

Right to Manage: Easy in theory, Difficult in practice 

If a building isn’t already leaseholder-controlled, why can’t leaseholders just take over management later? In principle, the Right to Manage (RTM)—a key reform from the Commonhold and Leasehold Reform Act 2002—gives flat owners the ability to collectively assume management of their building without proving wrongdoing by the landlord. It was designed as a “no-fault” mechanism to empower leaseholders to control service charge spending and management standards. 

In practice, however, using RTM can be much more difficult than the law intended. Even when a building technically qualifies, forming an RTM company and successfully navigating the legal process require close cooperation among leaseholders, identification of all “qualifying tenants,” and exact adherence to complex procedures and timelines.

In many blocks, these conditions are hard to meet as ownership can be fragmented, leaseholders might not know one another, and communication can be poor, especially if many flats are sublet with difficulty reaching absentee owners. 

The Leasehold and Freehold Reform Act 2024 (LAFRA), which came into effect in 2025, made some welcome improvements to the RTM regime. It raised the cap on non-residential space from 25% to 50% so that more mixed-use buildings can qualify, and it, ordinarily relieved leaseholders from having to pay the landlord’s legal costs when they pursue RTM. These changes remove some barriers and disincentives for leaseholders. Yet the fundamental procedural hurdles remain.

As LKP contributor Liam Spender has documented (in an article aptly titled “Right to Manage or Right to Endless Misery in the Courts?”), what should be a simple process often turns protracted and adversarial. Landlords and managing agents sometimes fight RTM claims with technical objections and court challenges, turning a straightforward right into a costly legal battle. In short, legal eligibility for RTM isn’t the same as achieving real control. 

Right to manage or right to endless misery in the courts?

Estates and split control 

The governance picture gets even more complicated in large estate developments. A block of flats might be RTM-managed or have its own RMC, yet still not control everything that affects residents’ costs. Often, broader estate facilities—shared gardens, parking areas, roads, or communal amenities—remain under a separate freeholder or management company’s control. This is a form of layered governance where control is split between the building level and the estate level. 

In a standalone building, all maintenance decisions typically fall under one authority (be it the freeholder or the leaseholders’ RMC/RTM). But in a multi-building estate, leaseholders could manage their individual block while a third-party landlord manages the estate’s common areas – meaning some costs are still outside leaseholders’ control. This fragmentation can lead to confusion and further issues: even an owner who exerts control within their building might still face rising costs from estate-wide fees dictated by someone else. 

What Home Buying Packs should disclose 

Given how crucial control over building management is to the long-term costs and experience of owning a leasehold flat, the new home buying packs must explicitly disclose who controls the setting of service charges. A simple label or section in the pack could outline the governance situation. For example, it might state: 

• Management control of the building: Is it leaseholder-controlled (via an RTM or RMC) or managed by an external landlord (e.g. freeholder or head lessor)? 
• Freehold ownership: Is it owned collectively by leaseholders (commonhold or shared freehold) or by an external freeholder? 
• If part of a larger estate: Are estate-wide services (grounds, parking, common facilities) managed by leaseholders (via an RTM or RCM) or by a third-party landlord (e.g. a freeholder or head lessor)? 

Armed with this information, prospective buyers can better judge the true value and risks of the property. They will know not just the basic costs, but also whether those costs are likely to remain fair and under their influence and control—or whether they’re at the mercy of outside parties. 

Conclusion:  control is key

Leasehold reform debates have rightly targeted visible issues like excessive ground rents, one-sided fees, and improving transparency. But these measures alone are insufficient if they ignore the deeper issue: control. A leaseholder can pay to extend their lease and eliminate ground rent, but if they don’t have control over their building’s management, they’re still vulnerable to whatever costs a third party decides to charge. 

The forthcoming home buying packs present a golden opportunity to empower leasehold buyers and prevent nasty surprises. These packs shouldn’t just list the current numbers and attributes of a leasehold property – they should clearly identify who wields the power over those numbers. Every leasehold buyer deserves to have two essential questions answered upfront:

• What will it cost to run this property?
• Who controls how those costs are set? 

The answer to the second question will often determine the first. It’s time to shine a light on building governance and ensure that no one purchasing a flat is left in the dark about who truly holds the reins on their future home’s costs.