Speak out in this government consultation by 26 September – because freeholders and their army of helpers will certainly do so

Ex-civil servant lobbyists and lawyers are hard at work to emasculate any efforts to reform the iniquities of the leasehold system and keep the cashcow going.

It is vital that leaseholders share their experiences with government of service charge obfuscations, legal cost strategies in freeholder lawfare and insurance cheating.

Below is an guide by a commercial solicitor – and leasehold litigant -to the government consultation for the secondary legislation to the 2024 Leasehold and Freehold Reform Act.

LKP suggests at a minimum answering the FIVE questions in Sections 2.4, 2.8, 2.9, 3.1 and 3.2.

Also below, an insurance executive and leaseholder shares their response to the insurance element of the consultation

Strengthening leaseholder protections over fees, charges and services: consultation

Find and participate in consultations run by Ministry of Housing, Communities and Local Government

By Liam Spender

Leaseholders have until 26 September 2025 to contribute to a wide-ranging consultation on service charge protections.

Leaseholders are rightly fed up with being consulted: there are important consultations on capping ground rents and banning insurance commissions that have yet to result in any action.

The government has also delayed consulting on the new method for setting the rates to be used to calculate the price payable for lease extensions. It looks as if that has been held back until the result of the freeholders’ judicial review is known. Perhaps for good reason, given the freeholders would go to court to challenge a birthday card from the government.

Frustrating as it is, it is important leaseholders grit their teeth and complete at least some of the parts of this consultation. Freeholders, managing agents and surveyors will all be busily weighing in to water down the proposed reforms. It is important that as many leaseholders as possible contribute their case studies to the consultation.

Where you can make a difference is by telling your own story. The more hard evidence the government receives about what goes on, the more power to its elbow to swat away self-interested submissions from freeholders and their enablers.

The consultation is wide-ranging and consists of many questions. Many of the questions are very important because they go to the heart of service charges. Particularly how they are accounted for, what information has to be provided and how major works are planned and communicated.

The consultation also deals with the totally one-sided regime by which landlords can always recover their legal costs.

It is not necessary to answer all of the questions. We summarise the key sections below and suggest points leaseholders may like to make.

The government will usually reject any copied and pasted responses. Please try to put the answers in your own words and to give examples from your own experience.

You can complete the consultation here

The key topics covered by the consultation are numerous and are as follows:

1) Creating a new annual report for leaseholders showing how their service charges have been used (consultation section 2.1);

2) Creating a new standardised form for demanding service charges (consultation section 2.2);

3) Creating a new “future demand” standardised form for the costs of major works (consultation section 2.3);

4) Extending rights to obtain information (consultation section 2.4);

5) Extending rights to obtain information to social housing renters who also pay service charges (consultation section 2.5);

6) The new administration charge schedule (section 2.6)

7) Giving better information about insurance (section 2.7);

8) New standardised service charge accounts (section 2.8);

9) Changes to the legal costs regime (section 2.9);

10) Mandatory reserves for major works and plans for major works expenditure (section 3.1);

12) Reforming consultations on major works (section 3.2);

13) Protecting leaseholders money (section 3.3);

14) Protecting leaseholders who pay fixed service charges (section 3.4);

15) Powers to replace a managing agent or appoint a manager (section 3.5);

16) Providing information and services digitally (section 3.6);

17) Regulation of managing agents (section 4);

18) Mandatory qualifications for managing agents (section 4.1);

LKP suggests at a minimum answering the questions in Sections 2.4, 2.8, 2.9, 3.1 and 3.2.

We also offer some general commentary on the proposal to regulate managing agents below.

The more information you can give in your own words in your answers to the questions the more valuable the leaseholder responses to the consultation will be.

What good is this if I still have to challenge the landlord?

Ultimately – absent every building in the land becoming leaseholder controlled overnight – there is going to have to be a responsibility on leaseholders to challenge unreasonable charges. Of course, LKP and the National Leasehold Campaign have long campaigned, and continue to do so, for this to happen.

In the meantime, it is important leaseholders have easier means to access information and to challenge what is going on with their money.

Section 2.4: Better information rights

This part of the consultation deals with what replaces sections 21 and 22 of the Landlord and Tenant Act 1985. Theoretically these provisions allow leaseholders to receive a statement of expenditure and to inspect the receipts and other documents that support that statement of expenditure.

Very often freeholders and managing agents erect barriers to these rights being exercised. Common tricks include ignoring requests, redacting invoices, hiding behind data protection as grounds for not providing information and making leaseholders attend far away offices to inspect paper records.

Other tricks, which are already banned, including demanding that leaseholders pay extortionate hourly rates for the inspection and any questions arising to be answered.

The poor quality of service charge accounting means that when inspecting invoices for service charge accounts prepared by large managing agents means they shed no light on the expenditure. One often sees one part of the managing agent invoicing another without showing the underlying invoice for the cost.

The periods allowed for landlords to respond and to provide access are also too long.

Six months to provide a summary of service charge expenditure is far too long when vast multinationals like Shell can prepare and file infinitely more complicated accounts in three months.

One month to respond to a request to see invoices supporting a statement of accounts is also too long. All of this leads to delaying tactics by freeholders – they take the maximum time allowed in the hope that the leaseholder simply goes away.

What is required is a fast and simple process of providing all relevant information – including details of any true and fair accounting adjustments (such as prepayments and accruals) – that enable the leaseholder to understand the full picture without accounting qualifications

Section 2.8: New standardised service charge accounts

Unlike commercial service charges, there is no common reporting framework for residential service charges. This means freeholders and managing agents are free to adopt a form of reporting that suits them.

This often means landlords can play a shell game. Spending can be shifted between different categories over different years, being renamed, joined together and split apart, all to make it difficult to track what is being spent, where and when.

A standardised form of accounting will prevent this from happening. It also means that the accounting form should be set up in a way that makes it easier for leaseholders to understand what is happening with their money.

A standardised report also means it will be possible to compare costs across different developments. A simple way of comparing costs will make it far harder for landlords and managing agents to justify their charges when challenged.

Any examples you can give of what has happened with your accounts, or struggles to get information, will be valuable.

Section 2.9: Reforming the legal costs regime

This is perhaps the most important part of the consultation. The current system of legal costs is “heads: the landlord wins; tails: the leaseholder loses”. One-sided lease terms mean that landlords can collect all their legal costs from service charges even when the leaseholders are challenging unreasonable costs.

Measures designed to protect leaseholders, such as the requirement under section 146 of the Law of Property Act 1925 to serve notice of a breach of the lease before taking legal action, have been subverted by landlords to allow them to collect all their legal and other costs as soon as they even begin contemplating serving such a notice.

Mortgage lenders panic when section 146 notices – forfeiture threats – are served, often paying up the full debt plus the legal charges and adding them to the mortgage to avoid the lease being forfeited. The leaseholder may then find that payment counts as an admission that the service charges were due and reasonable, meaning the charges cannot then be challenged.

Even when leaseholders club together and challenge costs, the terms of many modern leases will favour the landlord and his legal costs.

This lopsided regime also means it is not unusual for law firms to charge thousands of pounds for collecting debts of a few hundred pounds.

To give one example, the well-known provincial law firm J. B. Leitch adds on a £350 “breach of lease fee” to any cases passed its way. This amount is not chosen by accident. £350 is the limit triggering the right to seek forfeiture.

It also allows the landlord to serve a section 146 notice before forfeiting the lease for non-payment, entitling the landlord to recover all of its legal costs (i.e. those of J. B. Leitch) regardless of whether the underlying debt is actually due and regardless of whether the poor leaseholder pays up.

J. B. Leitch generates vast fee income from its Dickensian debt collection practices. Its most recent accounts show a 2024 turnover of £9.8 million and a profit of £2.1 million, up from £8.5 million and £1.8 million in 2023. The same accounts show that in 2024 and 2023 Mr and Mrs Leitch shared a total of £1.5 million in dividends from those profits. The Leitches also have £10.2 million in retained earnings in their law firm, ready to paid out when they sell up or retire.

J. B. Leitch is of course no better than the landlords and managing agents it usually represents. There are at least two examples of its clients ARC Time Freehold Income Fund and Long Harbour continuing to charge legal fees to leaseholders even after after orders have been made by the FTT preventing them from so doing. Both have also forced or dragged leaseholders into long-running disputes that have reached at least the Court of Appeal, at both Hippersley Point and St. David’s Square.

What the consultation proposes to do is to activate a ban in the Leasehold and Freehold Reform Act 2024. This ban prevents freeholders from charging any legal costs to service charges unless they first obtain an order from a court or tribunal.

Collecting legal charges from individual leaseholders is also going to be regulated. These are known as “administration charges”. The consultation seeks views on how these charges should be regulated.

Of course, leaseholders who do not pay what they properly owe should not force costs on to leaseholders who pay their bills. The same would be true even if leaseholders controlled all sites. The consultation is trying to strike that balance by saying that costs may still be recoverable from individual leaseholders who do not pay proper bills and then fail to defend claims issued in the County Court.

The consultation also seeks views on how resident owned or resident managed sites can still charge legal fees. Without that ability resident owned or controlled sites would struggle to stay solvent.

Again, this section is an opportunity for you to tell your stories of what really goes on when landlords and managing agents think no-one is watching.

Section 3.1: Mandatory reserve funds

Many sites do not maintain reserve funds for long-term maintenance. This can mean that instead of money being built up to replace the roof or overhaul the lifts large bills can land without notice. The lack of a reserve fund also means that costs for long-term maintenance are not shared fairly between past, present and future owners. Leaseholders who live in flats in earlier years should share a fair proportion of the long-term maintenance of the building by paying something into the reserve fund.

Of course, it is important to guard against managing agents making huge demands for reserve contributions that they then treat as their own piggy banks.

The current law on how these funds are held — the Landlord and Tenant Act 1987 — also provides that any money left in a reserve fund at the end of the building’s life goes to the landlord. This raises the spectre of landlords engineering and obtaining unearned windfalls and should be addressed.

The consultation seeks views on how best to set up these reserve funds and how to ensure cost-effective segregation of the bank accounts used to hold the funds.

Section 3.2: Consultation on major works

Section 3.2 of the consultation deals with the frequently controversial issue of costs and information about major works and long-term contracts. Currently these are defined as works that cost any leaseholder more than £250, or certain types of contract longer than 12 months under which any one leaseholder will have to pay more than £100.

Examples of major works include replacing the roof or external redecorations. Examples of long-term contracts include multi-year insurance contracts, or framework agreements for repairs.

Aside from the vast cost of these works, often inflated by the managing agent adding on 10% or 20% for itself, the key issue for leaseholders is that there is very often no meaningful consultation on the works.

Supposedly there is a three stage process allowing leaseholders to submit their own estimates and to obtain information on the tenders.

A 2013 Supreme Court decision (Daejan v Benson) found that landlords could bypass even these inadequate consultation requirements without having to provide any reason or without there being any urgency. Ongoing building safety and fire safety issues have routinely been cited as reasons for freeholders to seek dispensation from consultation.

Even where leaseholders successfully challenge costs in excess of £250 or £100 at the FTT landlords can apply for retrospective dispensation from consultation, nullifying the decision in favour of the leaseholders. And usually at leaseholders’ expense because they can dump their legal costs via the service charge.

Perhaps the most dangerous part of the consultation is that it floats a freeholder favourite of whether the £250 or £100 limits should be raised. Without resolving the issues above, such as limiting dispensation from consultation to cases of genuine urgency outside the freeholder’s control, raising the limits should not be entertained.

Again, these questions are an opportunity for you to tell your stories of how the system works in practice.

Section 4 – Some general views

The consultation seeks views on the regulation of managing agents and whether they should have professional qualifications.

LKP has long campaigned for this. What matters is the effectiveness of the regime. We must not have a situation where regulation entrenches poor quality large agents and pushes up the cost for leaseholders.

Any regulatory regime must also have quick and effective means of redress for leaseholders. That means the ability to shut down agents who repeatedly flout the rules. Any regulatory regime should do much better than the slap on the wrist of a three month suspension recently handed out by The Property Institute to FirstPort. LINK

There is not enough detail in the consultation paper to know what type of regulation the government is thinking about. What is clear is that the [Lord] Best Review’s proposal of certifying senior managers of managing agents will not solve the problem of poor quality service, albeit it is a welcome step in the right direction.

Over to you

You can complete the consultation here: https://consult.communities.gov.uk/leasehold-and-private-rented-sector/strengthening-leaseholder-protections-consultation/

It is open until 26 September 2025.

It is best to complete the sections you can in your own words and with your own experiences. That way the genuine leaseholder voice can be heard alongside the paid-for voices of freeholders and their industry supporters.

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Below is how an insurance professional and leaseholder responded to the insurance element of the consultation

Better insurance information information to be shared with leaseholders

54 Do you think that managing agents and landlords should also have to declare conflicts of interests with the insurance broker and insurer?

Yes

Please explain your answer:

Many property managing agents and landlords have set up their own broking firms and/or so-called “captive” (re)insurance companies, often incorporated cell companies, domiciled abroad to take advantage of leaseholders, charge additional commissions and hide them offshore. In some cases the reinsurance contract and transactions between the UK FCA regulated insurer are the offshore captive reinsurance company are fictitious, with no real risk transfer, but are only devices to transfer risk-free insurance premium from the insurer to the property managing agents and/or landlord through such offshore reinsurance captives. It is not sufficient that the law requires such conflicts of interest to be disclosed, as most leaseholders are unable to understand such transactions and must instead be prohibited altogether, as they are designed to extract money from leaseholders.

55 Are there any other conflicts in the chain of organising, managing and providing insurance that should be declared to a leaseholder?

Provide details:

There are are conflict of interest involving surveyors which evaluate the building for insurance purposes and are owned by the property managing agents or by the landlord. They artificially inflate the value of the building, which then causes to increase the insurance premium and the insurer pays a commission or kickback to the property managing agent or landlord. The loss adjusters could be owned by the property managing agent or the landlord, with the intention of suppressing claims or paying lesser amounts of claims to the detriment of affected leaseholders to increase the profit of the insurers who then pay commissions or kickbacks to the property managing agents or landlord. However, often it is the property managing agent or the landlord directly who prevent the leaseholders from claiming under the insurance policy, again to ensure high profits to the insurer who then shows it gratitude to them by sharing the unlawful profit through commissions and kickbacks. Such conflicts of interest must not be permitted: it is not sufficient just to disclose them.

56 Do you think that the FCA definition of a conflict of interest covers conflicts that are relevant to leaseholders?

No

If not, how should conflict of interest be defined? Are there existing definitions of conflict of interest in other industries or countries that could be followed?:

The FCA definition of conflict of interest is very limited and refers to the 10% of more threshold of shareholding between insurer and broker and has been in place for decades on the insurance market. It is mostly irrelevant to leaseholders, whose main concern is a conflict of interest involving the property managing agents and/or the landlord. The FCA “SYSC 10 : Conflicts of interest” says “A firm must take all appropriate steps to identify and to prevent or manage conflicts of interest…”. A property managing agent or landlord setting up their broker or reinsurance company are clearly not preventing a conflict on interest: they are deliberately creating a conflict of interest. UK insurers must be prevented from paying commissions to a broker or reinsure to a captive owned by a property managing agent or landlord, as doing so they are facilitating and creating a conflict of interest. The UK Government website defines conflict on interest as” a conflict of interest exists when an organisation or an individual has competing interests, which might impair its or their ability to make objective, unbiased decisions.” This is clear enough. 

57 If the information required under FCA rules, additional details about conflicts of interest and making a claim were sent to all leaseholders, would this be the right amount of information?

Not enough information

If you answered yes, give reasons :

The amount of information provided are not sufficient to protect leaseholders and give them enough information to challenge unlawful practices. If you answered not enough information, give reasons. What additional information should be provided about building insurance?:

The following information must also be provided:

1) Information about Terrorism Insurance, currently omitted by broker and insurers, claiming that FCA rules do not apply to terrorism insurance

2) Engineering insurance for lifts

3) Employer’s liability insurance and certificate in respect of employees or Residents Management Companies and Right to Manage Companies

4) Full copy of policy wording, policy schedule, endorsements

5) Clarify how the excess work and who is liable to pay it. It should be paid by the landlord, but often it is charged to the individual leaseholder. Exorbitant excess levels between £ 10,000-£ 50,000 are quite frequent and they have the intent of dissuading leaseholders from claiming under the policy.

6) Contact details of the claims department of the insurer

If you answered too much information, please give reasons. What information should not be required to be shared with leaseholders?:

58 Do you think there should be any circumstances where the duty to provide information on insurance does not apply?

No

If yes, please give detail on when you think the duty should not apply, for example a specific type of landlord or type of insurance:

Better insurance information: form and timing of information

59 Should landlords be required to provide information in a set template?

Yes

Please explain your answer. :

A set template imposes some rules, discipline and standardisation, which are welcome also compare costs and information over time and across different buildings

60 What is your opinion of the proposed template provided at Annex E?

Provide details:

The Proposed template E is useful but incomplete as it must include also the following:

– Coinsurers names and contact details

– Type of insurance must include Terrorism Insurance, Engineering Lift insurance and employers’ liability insurance and certificate

– Claims: leaseholders must always have direct contact with the insurers. “Notifying the landlord or managing agent depending on the lease and insurance contract” is inaccurate, as the insurance contract and the lease are separate contracts. Any unfair terms in the lease, such as charging the insurance excess to an individual leaseholder must be disclosed and flagged very clearly. High excesses. i.e. more that £ 1,000, must be prohibited. – Risks insured by the policy: the full policy wording, schedule and endorsement must be provided

– Upon request: Claims history at individual claim level for the previous 10 years.

– Shopping around information: upon request, copy of quotations and declinatures received from any insurer approached, with copy of the risk submission sent to each insurer

– Conflict on interest: the amount of the conflict of interest should be disclosed, e.g. reinsurance premium paid to a captive

61 Should landlords be able to provide leaseholders with insurance information only by email?

No

If the landlord can send insurance information only by email and does so, what safeguards, if any, should be put in place to make sure the leaseholder received it? :

Communication by e-mail is welcome and should be the preferred option, but leaseholders should be able to request information by post as well if necessary.

62 Do you think 30 days is enough time to give landlords to provide building insurance information to leaseholders?

Yes

If no, please give a reason and whether you think landlords should have more or less time to provide the specified information once the insurance comes into effect :

63 Do you think there are any circumstances where this time period should be extended?

No

If yes, give reasons and when you think the time period should be extended :

64 Should landlords be required to request information from a third person in a certain way?

No

If yes, please give reasons why:

65 Should there be any circumstances where a person is exempt from the duty to provide information to the landlord?

No

If yes, please give detail of the circumstances when you think the duty should not apply, for example a request for a certain of type of information or a category of third party that should be exempt. :

66 Should there be a set time period within which a request for information from a landlord to a third party be made?

Yes

If yes, what should that time period be? :

10 working days

67 [If you are a landlord or managing agent] What do you think transitioning to these new arrangements would cost your organisation?

Provide details:

68 [If you are a landlord or managing agent] How much would it cost you to obtain the required information that you do not currently have?

Provide details:

69 Do you think that 3 months is the right amount of time to allow landlords and managing agents to adjust their systems and train their staff to carry out the new arrangements?

Yes