Open consultation

Strengthening leaseholder protections over charges and services: consultation

Published 4 July 2025

Applies to England and Wales

Scope of this consultation

Topic of this consultation

The Leasehold and Freehold Reform Act 2024 (“the 2024 Act”) introduces a range of reforms to improve home ownership for millions of leaseholders in England and Wales. It includes measures to improve the rights of existing leaseholders and help them better hold their landlords to account by increasing transparency of service charges and building insurance policies, as well as by tackling unjustified litigation costs. This will help leaseholders to better scrutinise and challenge unfair fees and charges as well as the reasonableness of the services they pay for. This consultation seeks views on how to implement these new requirements.  

This consultation also seeks views on new proposals for reform around the charges leaseholders pay and services they receive. These include the UK government commitments set out in the Written Ministerial Statement of 21 November 2024 to reform the major works regime and introduce mandatory qualifications for managing agents.

Throughout this consultation document, we will use the term “landlords” as shorthand for “freeholders, landlords of intermediate leases, Resident Management Companies, and Right to Manage Companies”, as these are the people who are able to demand a service charge. We also use the term “leaseholder” to refer to those owning houses or flats who are liable to pay a service charge (including those owning their homes on a shared ownership basis). The exception to this is where we refer directly to legislation where we use the term “tenant” which in this context also means a leaseholder as this is how legislation often refers to them (and not someone who rents a property). We will also refer to the “appropriate tribunal” or “relevant tribunal” for litigation costs in reference to the First-tier Tribunal in England or the Leasehold Valuation Tribunal in Wales.

Geographical scope

These proposals relate to England and Wales.

Responses to the questions in Part 1 of this document will be taken into account by the Secretary of State in decisions about implementing the relevant parts of the 2024 Act in England, and by the Welsh Ministers in decisions about implementing the relevant parts of the 2024 Act in Wales. The 2024 Act conferred the powers to implement the relevant parts of the 2024 Act on the Secretary of State, in relation to England, and the Welsh Ministers, in relation to Wales.

Responses to the questions about other potential future reforms (in Part 2 of this document) will be taken into account by the Secretary of State, in decisions about future legislative reforms for England, and the Welsh Ministers, in decisions about future legislative reforms for Wales. 

The consultation will inform the development of secondary legislation by both the UK and Welsh governments.

Mae’r ddogfen yma hefyd ar gael yn Gymraeg / This document is also available in Welsh

Impact assessment

An Impact assessment was previously published during passage of the 2024 Act which covered the relevant overarching measures. All regulations brought forward as a result of this consultation will be subject to appropriate assessment.

The UK and Welsh governments are mindful of their responsibilities, including those under the Public Sector Equality Duty to have due regard to the potential impact of their proposals on people with protected characteristics, and their responsibilities to consider environmental principles in any proposals, including, in relation to England, as set out in the Environment Act 2021.

Consideration of these duties informed the passage of the 2024 Act, and we welcome evidence and views on the impact of this policy as part of this consultation. All regulations bought forward as a result of this consultation will be subject to appropriate assessment.

Basic information

Bodies responsible for the consultation

The Ministry of Housing, Communities and Local Government and the Welsh Government.

Duration

This consultation will last for 12 weeks from 4 July 2025 to 26 September 2025.

Enquiries

For any enquiries about the consultation please contact: protectingleaseholders@communities.gov.uk

How to respond

You may respond by completing an online survey on Citizen Space.

Alternatively, you can email your response to the questions in this consultation to protectingleaseholders@communities.gov.uk

When you reply it would be very useful if you confirm whether you are replying as an individual or submitting an official response on behalf of an organisation, and if so, include the name of the organisation and your position.

Ministerial foreword

For far too many leaseholders in England and Wales, the reality of home ownership has fallen woefully short of the dream – their lives marked by an intermittent, if not constant, struggle with punitive and escalating ground rents; unjustified permissions and administration fees; unreasonable or extortionate charges; and onerous conditions imposed with little or no consultation. This is not what home ownership should entail.

The UK government is committed to bringing the feudal leasehold system to an end and we are progressing the wider set of reforms necessary to do so. On 3 March we published the Commonhold White Paper as a crucial first step in ensuring commonhold becomes the default tenure.

Later this year, the UK government will publish an ambitious draft Leasehold and Commonhold Reform Bill. A central focus of the Bill will be reinvigorating commonhold through the introduction of a comprehensive new legal framework but it will also include a range of other vital reforms to the existing leasehold system.

We are, however, acutely aware that leaseholders currently subject to unfair and unreasonable practices need urgent relief. Chief among the concerns for many leaseholders are opaque and unaffordable service charges which represent the single biggest subject of enquiry among those seeking advice and support from the Leasehold Advisory Service.

The Leasehold and Freehold Reform Act 2024 contains a number of provisions designed to standardise and increase the transparency of service charges so that leaseholders are better able to scrutinise and challenge costs if they consider them to be unreasonable. The Act also includes provision to scrap the presumption for leaseholders to pay their landlords’ legal costs, thereby removing a significant barrier to challenging poor practice.

Implementing the 2024 Act requires an extensive programme of detailed secondary legislation. While we want to act as quickly as possible to provide homeowners with greater rights, powers and protections over their homes, we have been clear that we must balance speed with care if we are to ensure that measures brought into force are to the lasting benefit of leaseholders.

Service charges are no exception when it comes to the importance of taking the necessary time to ensure that reforms are watertight. Given the wide variation of leases across five million dwellings, it is essential that we engage comprehensively to get the technical detail right. While we want the input of all those involved in managing leasehold buildings, we also want to hear from leaseholders themselves as to how best they believe that the service charge and legal costs measures in the 2024 Act should be implemented.

Through this consultation we are also proposing new reforms to the Section 20 process that leaseholders must go through when a landlord wants to carry out ‘major works’ funded by a service charge. One-off, unexpected, and often very large bills for major works can place huge financial strain on leaseholders. Far too many receive little or no notice about these works and so have little time to obtain sufficient funds.

It is not in dispute that buildings must be properly maintained, but major works, such as repairing a roof or replacing a lift, should be properly planned for in so far as possible with leaseholders kept fully informed. We know that the current system does not work for anyone, leaseholders, managing agents or landlords, and are seeking views on how we can improve it to make it fit for purpose.

We are also taking steps through this consultation to strengthen the regulation of managing agents. Managing agents play a key role in the maintenance of multi-occupancy buildings and freehold estates, and their importance will only increase as commonhold becomes the default tenure and existing leaseholders are empowered to exercise their Right to Manage, collectively enfranchise, or convert to commonhold.

While we know that there is good practice in the sector, far too many leaseholders suffer abuse and poor service at the hands of unscrupulous managing agents. While further reform will be necessary to drive up the standard of service provided by managing agents and ensure they are made more accountable to leaseholders, the introduction of mandatory qualifications in England is an important first step to ensuring all agents have the knowledge and skills they need to do their jobs effectively.

Finally, we also want to use this opportunity to review longstanding aspects of the system to ensure they remain fit-for-purpose. This includes protections for leaseholders who pay a fixed service charge, especially where costs are estimated each year. They presently have fewer rights than those who pay a variable service charge, and we are keen to explore what more can be done to help them.

Taken together, this is an ambitious package of measures designed to empower and protect leaseholders currently suffering as a result of unfair and unreasonable practices.

Matthew Pennycook MP
Minister of State for Housing and Planning

Jayne Bryant MS
Cabinet Secretary for Housing and Local Government

About you questions

Question 1
Where are you based?

a. England
b. Wales
c. Other

If other, please specify. [Free text]

Question 2
What is your name? [Single line text]

Question 3
What is your email address? [Email address]

Question 4
Are you responding on behalf of an organisation?

a. Yes
b. No

If “Yes” what is the name of the organisation? [Free text]

Question 5
If you are responding on behalf of an organisation, which of the following best describes you:

a. I am responding as a leaseholder representative organisation
b. I am responding as a property managing agent organisation (private)
c. I am responding as a property managing agent organisation (social landlord)
d. I am responding as a freeholder organisation (private)
e. I am responding as a freeholder organisation (social landlord)
f. I am responding as an insurance broker organisation
g. I am responding as an insurer organisation
h. Other (please specify). [Free text]

Question 6
If you are responding as an individual, are you a:

a. Leaseholder or resident of private housing
b. Leaseholder of social housing
c. Tenant of social housing (housing association / local authority/other social landlord)
d. Owner of shared ownership property
e. Landlord
f. Managing agent
g. Insurer or insurance broker
h. Legal representative
i. Other (please specify). [Free text]

Question 7
If you are a managing agent: How many staff members do you employ? [Number]

Question 8
If you are a managing agent: How many blocks do you manage? [Number]

Question 9
If you are a managing agent: How many leasehold units / dwellings do you manage? [Number]

Question 10
If you are a landlord or managing agent: How many properties (e.g. individual flats) are you responsible for? [Number]

Question 11
If you are a landlord or managing agent: Do you charge a fixed or variable service charge? [fixed service charge/variable service charge]

Question 12
If you are a landlord or managing agent: How many times a year do you issue a service charge demand form to each of the leaseholders you manage? [Number]

Question 13
If you are a landlord or managing agent: When issuing a service charge demand form, do you:

a. Collect and provide the required information yourself?
b. Outsource the process?

If you Collect and provide the required information yourself, how long does it take? How much does it cost you? [Free text]

If you outsource the process, who to? How much does it cost? [Free text]

Question 14
If you are a landlord or managing agent: Do you rely on an external software provider for general data collection? [Yes/No]

If so, what is their precise role (i.e. do they provide standardised templates which you, the landlord/managing agent, complete, or do they actively provide said data)? [Free text]

Question 15
In your role as landlord or managing agent, have you been involved in proceedings related to a leasehold issue before a relevant court or tribunal?

Please select all that apply:

a. Yes, I’ve brought a claim against a leaseholder/s in a court or tribunal
b. Yes, my leaseholder brought a claim against me in a court or tribunal
c. No
d. I don’t know

Question 16
If you are a leaseholder: Have you been involved in proceedings related to a leasehold issue before a relevant court or tribunal?

Please select all that apply:

a. Yes, my landlord brought a claim against me in a court or tribunal
b. Yes, I brought a claim against my landlord in a court or tribunal
c. No
d. I don’t know

1. Introduction

1. It is vitally important that buildings are effectively insured, maintained and managed so they are appropriately looked after and are safe to live in for the benefit of those that live there and so that homes retain their value.

2. These activities of course cost money. But those who pay fees and charges and receive associated services, should have confidence that they know what they are paying for, that these costs represent value for money, and the services they expect are indeed provided and to a reasonable standard. And where disputes arise, they should not be deterred from challenging costs for fear of incurring even more expense through unfair litigation charges.

3. Most charges that leaseholders pay form part of their ‘service charges’. These are financial contributions requested by a landlord (or managing agent acting on the landlord’s behalf) for the costs of the day-to-day management and maintenance of leasehold properties. They cover expenditure such as general maintenance and repairs, building insurance, utility costs and cleaning or upkeep of grounds or communal areas, as well as contributions to major works, such as repairing a roof or replacing a lift. They may also include the costs of management services provided by a landlord or managing agent and contributions to a reserve fund.

4. Individual leases set out details of what landlords can and cannot charge for, the share each leaseholder is required to make, and the frequency of how often service charge demands are issued (the bills they must pay). Many leases also require the landlord to produce an end of year report, including a summary of year end accounts together with a brief explanation of expenditure over the past year. There are also a number of existing statutory rights and protections for leaseholders concerning the charges they pay and services they receive. These include:

a) That variable service charges must be reasonably incurred and, where they relate to work or services, the work or services must be of a reasonable standard;

b) The reasonableness of these costs may be challenged through the First-tier Tribunal in England or Leasehold Valuation Tribunal in Wales (“the appropriate tribunal”);^{[footnote 1]}

c) Demands for service charges must be in writing and must contain the landlord’s name and address (unless the service charge is paid direct to a management company);^{[footnote 2]}

d) With any service charge demand, landlords must provide a statutory Summary of Rights and Obligations, which briefly sets out a leaseholder’s rights and obligations when paying a variable service charge. Failure to provide this means that the service charge is not deemed payable until it is provided;

e) A legal right to ask the landlord for a summary of costs relating to their service charges for the last accounting year, within a specified time period. Leaseholders may request a written summary of costs for the past 12 months. The landlord is required to provide a report within one month of the request or within 6 months of the year end, whichever is later;

f) The right to inspect documents relating to the service charges within six months of receiving the summary of costs (such as, invoices and receipts). Failure to do so can result in a summary offence against the landlord and a fine of up to £2,500;

g) A legal right to ask to inspect the buildings insurance policy and any associated documents, and to request a written summary of the insurance; and

h) Landlords and managing agents must hold variable service charge monies on trust.

5. Where leaseholders either have or do not have the information they need, disputes may need to escalate to the appropriate property tribunal or court. Here, there is also power imbalance between landlords and leaseholders with regards to litigation costs. These can deter leaseholders from disputing charges they consider unreasonable. Currently, most leases have a contractual term allowing the landlord to recover litigation costs from leaseholders, for costs incurred by the landlord if there is a legal dispute between landlord and leaseholder. Leaseholders can apply to limit their liability for their landlord’s litigation costs, but the onus is on them to do so. Furthermore, leaseholders currently do not have a contractual right to recover their litigation costs from their landlords.

6. These existing transparency requirements and protections for leaseholders are limited and it has been clear for some time that they do not go far enough. Enquiries about service charges represent the single biggest issue leaseholders seek help with from the Leasehold Advisory Service (LEASE), representing over 12,000 enquiries over the last 12 months, and over 90,000 service charge searches on its website. In 2023/24, service charge enquiries alone made up over a quarter of enquiries to LEASE. It is clear that for many leaseholders, they do not understand what they are paying for, are often not assured that costs are reasonable, and also lack confidence in disputing charges.

7. Concerns about transparency and accountability of fees and charges have become ever more pressing alongside cost of living pressures over recent years. The level of service charges has, for many, increased significantly. These charges represent a major financial outlay for many leaseholders, alongside other living costs, so it is important that they have the assurance that they are not being asked for more money than is necessary to manage their buildings, and that buildings are well managed and maintained. Leaseholders also need fair access to redress for when things go wrong.

8. Many landlords, or managing agents acting on their behalf, provide a good service and are responsive to the needs of their leaseholders. However, where things do go wrong, we have heard from leaseholders and from landlords and managing agents themselves that the existing statutory provisions are not fit for purpose. Some of the main complaints include:

a) Leaseholders are not provided with sufficient information or with sufficient detail to understand the charges they are asked to pay;

b) Information presented to leaseholders can be hard to understand or hard to compare between different years or between different properties;

c) Leaseholders are not provided with sufficient information about the physical condition of their building;

d) Leaseholders are often unable to access relevant information to understand what major works are needed and how costs for them are calculated;

e) The costs to leaseholders of acquiring information to help make a decision on whether to challenge fees and charges can be expensive and time consuming;

f) Landlords may be able to charge their litigation costs back to the leaseholder through the service charge, regardless of the outcome of a dispute.

9. The UK and Welsh governments are committed to strengthening protections over the fees and charges leaseholders pay and services they receive. That is why we are implementing measures in the Leasehold and Freehold Reform Act 2024 (“the 2024 Act”). But also to go further to provide greater protections over major works costs and to regulate the managing agent sector, which provides the building management services on which many leaseholders rely.

10. These reforms sit alongside our wider package of leasehold and commonhold reform, so that in future leaseholders will more easily be able to take control of their buildings themselves by exercising their Right to Manage; enfranchising (buying their freehold); or converting to commonhold. Outside of this consultation the UK government is also committed to bringing forwards further new reforms to make life better for existing leaseholders. This includes removing the draconian and disproportionate threat of forfeiture and tacking unregulated and unaffordable ground rents.

11. The UK government also want new flats to be sold as commonhold so that homeowners can benefit from full freehold ownership from the outset. On 3 March, the UK government published the Commonhold White Paper as the first step towards that ambition. While more and more leaseholders exercise new rights to take greater control over their homes and as we transition to greater use of commonhold, existing leaseholders will not be left behind.

1.1 Implementing the Leasehold and Freehold Reform Act 2024

12. Part 4 of the 2024 Act contains a number of reforms to improve the statutory protections for leaseholders and help them challenge the charges and services they consider unreasonable. These measures focus on making more, and better accessible, information available to them and to ensure that where disputes arise, leaseholders are not liable to pay for unjustified litigation costs. These include:

a) Standardising the information landlords will be required to provide leaseholders, by introducing a new standardised service charge demand form and annual report;

b) Requiring landlords to provide leaseholders with greater certainty of cost and timing of any future demand for payment which is expected more than 18 months after the cost was incurred;

c) Expanding the amount of information on request that landlords must provide to leaseholders;

d) Introducing an administration charge schedule, which sets out the minimum level of information that landlords must provide leaseholders about administration fees;

e) Requiring landlords to proactively disclose to leaseholders details of the building insurance policy that was purchased;

f) Ensuring most service charge accounts be provided within 6 months of the end of the previous service charge accounting period, regardless of the lease terms; and

g) Requiring landlords to apply to the relevant court or tribunal for approval to pass their litigation costs onto leaseholders (i.e. the landlord’s right to recover litigation costs is no longer automatic) and giving leaseholders the right to apply to claim their litigation costs from their landlord.

13. Once implemented these reforms will improve transparency so leaseholders have a better understanding of the charges they are asked to pay, can better understand how their building is managed and hold their landlords to account, and have greater confidence that should a dispute escalate to the appropriate tribunal or courts, the awarding of litigation costs will be fair.

14. Through improved transparency and removing barriers to challenge, we also expect to limit opportunities for abuse or poor practices in the first place.

15. In addition to implementing these measures in the 2024 Act, we want to provide a comprehensive set of reforms around the charges that leaseholders pay and services they receive. Key gaps in protections for leaseholders will remain. That is why we propose further reforms. Firstly, to address the stress and harm that may be caused by large and unexpected bills for major works. And secondly, to improve the standards of managing agents, who for many leaseholders, provide the management and services on which they rely and pay for, but are not directly appointed by or accountable to them.

1.2 Proposed new reforms, including for ‘major’ works and managing agents

16. There are frequent headlines of leaseholders suddenly facing bills for thousands of pounds, seemingly out of nowhere. While buildings will from time to time need significant repairs to its fabric, such as a roof repair, or replacement of expensive assets, like a lift, it is not right that poor planning and communication should lead to leaseholders having to suddenly find huge amounts of money to pay for major works. Behind the headlines there are countless instances of the existing major works regime failing leaseholders but also failing landlords. Be it adding bureaucracy to unnecessarily delay even relatively minor repairs or standing in the way of them shopping around to get the best deal or tariff from an energy company.

17. The major works process, set out in “Section 20” of the Landlord and Tenant Act 1985 (“the 1985 Act”) and accompanying regulations, was introduced to provide leaseholders with the right to influence one-off bills. The existing regulatory framework, including the thresholds for consultation, has remained unchanged for over 20 years and is no longer fit for purpose. We set out proposals to improve the process to ensure it meets the needs of leaseholders while also seeking to avoid unwieldy or unhelpful burdens on landlords.

18. As the UK government set out last year, we also intend to act to protect leaseholders from abuse and poor service at the hands of unscrupulous managing agents. We committed to strengthen regulation of managing agents to drive up the standard of their service. As a minimum, this should include mandatory professional qualifications which set a new basic standard that managing agents will be required to meet. Managing agents play a crucial role in managing and maintaining buildings and freehold estates on behalf of the landlord and estate manager. Managing a building has become more complex in recent years, as landlords have greater legal obligations. This is confounded by the current system where anyone can practise as an agent. There is no current requirement on agents to be qualified.

19. The importance of having a suitable and competent person to manage shared buildings will also increase as the UK and Welsh governments move towards a future where more and more homeowners of shared buildings have control over how their building is run and will need to rely on the support that managing agents can provide. In all settings, homeowners should expect that where a managing agent is employed by them or on their behalf, that they are operating to an effective and appropriate standard as a matter of course.

20. There are a number of other matters regarding leaseholder charges and protection of their money, where we would welcome further thoughts on whether existing arrangements remain sufficient or whether further changes are required. These include protections for those paying fixed service charges and whether all service charge monies held by landlords or managing agents on leaseholders behalf are sufficiently protected. We are also seeking views about whether changes are required to improve the current right for leaseholders to apply to the appropriate tribunal to appoint a manager in cases where there is significant management failure by either the landlord or managing agents acting on their behalf. We also want views on the opportunities and benefits of greater provision of information through digital means. We are interested in exploring how digital and electronic communication can improve access to information and the efficiencies that could be realised as well as ensuring there are safeguards so that all leaseholders can access the information to which they are entitled.

21. We want your views on each of these proposals to improve the leaseholder experience, and to ensure that the package as a whole works for leaseholders, landlords and managing agents alike.

Part 1: Implementing the Leasehold and Freehold Reform Act 2024

2. Driving up transparency of fees and charges

22. Under the terms of existing leases and legislation, most leaseholders receive or are entitled to request information about their building at various points of the 12 month accounting year. Typically, they receive annual accounts and interim service charge demands, but landlords usually don’t have to disclose budgets or detailed plans for the building, such as for future major works. This means for example, that leaseholders often don’t understand the detail of what they are being asked to pay for, and may only learn about major works and associated costs, only a few months before they are due start.

23. Our aim is to improve the amount and type of information leaseholders receive. Broadly speaking, leaseholders currently get the following information over the course of a year, as set out in Figure 1 below:

a) a service charge demand before the beginning of the accounting year (with or without a budget) with a request for advance payment for the year ahead;

b) an interim demand 6 months later for advance payment to cover the remaining estimated service charge costs;

c) a financial statement of accounts and a demand or credit note for any overspend for the previous 12-month period, about 6 to 9 months into the year; and

d) other information provided will depend on individual circumstances.

Figure 1: Current provision of information to leaseholders over the course of a year

Figure 1 illustrates the current information that leaseholders can expect to receive throughout the year. This includes service charge demands and year end accounts.

24. Implementing measures in the 2024 Act will give leaseholders more and timelier information, that is accessible and standardised, and represents a significant improvement on the current requirements which have been largely unchanged for more than twenty years. This includes both better information about their regular service charge as well as wider information about forthcoming plans for managing and maintaining their building. The way in which these new arrangements will flow over the course of a year is set out at Figure 2 below. Under our reforms, leaseholders will get:

a) a standardised service charge demand form at the beginning of the accounting year to provide clarity about what they have to pay (with a budget) for the year ahead;

b) a new annual report (containing key information about their building) either at the same time as the demand, or within the first month of the accounting year;

c) a standardised interim service charge demand for the remaining estimated service charge costs for that year, 6 months into the year;

d) a full and accredited financial statement of accounts and any demand or credit note for any underspend or overspend for the previous 12-month period (provided within 6 months into the accounting year, for all leaseholders in blocks of four or more properties); and

e) other information which will depend on individual circumstances, but with enhanced rights to request information on demand.

Figure 2: Impact of new measures on provision of information to leaseholders over the course of a year

Figure 2 sets out the information that leaseholders can expect to receive throughout the year once the new measures are implemented. This includes service charge demands, annual report and service charge accounts.

25. While essential to provide leaseholders with the information they need, it is important to ensure landlords, or managing agents, are not unduly burdened, and that any added costs are reasonable and result from the provision of information that is beneficial to leaseholders. Particularly, as the costs of providing information will likely be borne, as it is now, by the leaseholder. Therefore, as part of this consultation we are seeking views on the time and costs associated with providing information to help strike the right balance for leaseholders.

2.1 New annual report

26. Measures in the 2024 Act will require landlords to provide an annual report before, or early in the 12-month accounting year. It is proposed that this report should go beyond current practice for many landlords, which often only includes provision of service charge demands, budgets (in some cases), and the statutory Summary of Rights and Obligations.

27. The Secretary of State and Welsh Ministers have powers to prescribe the annual report’s format, content and how it is provided to leaseholders. They can also exempt certain categories of landlords or types of service charges from this requirement if considered appropriate.

28. The annual report must be provided within one month of the new accounting period’s start, but it can be published earlier as long as it covers the “relevant” 12-month period. This means that landlords could combine this report with the service charge demand if they wished, for example, to reduce costs.

i) Proposed format and contents of the annual report

29. The aim is to make the annual report clear, accessible and useful for leaseholders and in one place provide most of the key information they will need about what they will be charged for over the year ahead and any significant planned expenditure beyond it. We propose the annual report includes the following minimum information:

a) Key contact details – such as managing agent, landlord(s), and where relevant, the Resident Management Company, fire safety responsible person, Principal Accountable Person under the Building Safety Act 2022, any Resident Tenants’ Association, and any Right to Manage Company;

b) Important lease dates – such as interim service charge demand and financial year-end dates;

c) Basic information about the building’s health and condition – including details of previous and planned annual statutory surveys;

d) Administration charges – a copy of a schedule of the mandatory administration charges required by Section 61 of the 2024 Act (see section 2.6);

e) Major works – plans for major works in the next two years and whether anticipated costs are covered in whole or part by a reserve fund;

f) Handling disputes – information to sign post leaseholders where to go if they are unhappy with the service charge or have questions (e.g. details of the landlord’s complaint procedure, contact details of the Leasehold Advisory Service, and rights to demand key documents); and

g) Details of formal actions or statutory processes affecting the building – for example, enforcement notices, litigation (within the confines of General Data Protection Requirements^{[footnote 3]}, or enfranchisement claims. A mock-up of the proposed annual report is at Annex A.

Question 17
Do you agree with the minimum information proposed for the annual report (at paragraph 29)? [Yes/No]

If no, what additions or changes would make it more effective? [Free text]

Question 18
Should the information in the annual report be set out in a prescribed and standardised manner? [Yes/No]

ii) Exemptions to the requirement to provide an annual report

30. The Secretary of State and Welsh Ministers have the power to grant exemptions from providing an annual report based on landlord type, description of service charge or any other specified matter. Our starting position is that there should be no exemptions. This is to ensure leaseholders get the essential information they need. We are aware, however, of some cases that may justify different arrangements, and our consideration of each of these is set out below.

a) Fixed service charges and event fees in the retirement sector

31. There is less of a direct relationship between the amount paid by leaseholders charged fixed service charges and the landlord’s costs. This is particularly the case in specialist retirement housing where many leaseholders’ costs are managed through a combination of fixed service charges and event fees.^{[footnote 4]}

32. Given this, we propose that an annual report should still be provided, but to exempt landlords who charge both fixed service charge and event fees from requirements to include in it, minimum information part g) “Details of formal actions or statutory processes affecting the building” (see paragraph 29). However, we propose that in return these landlords should disclose details of any event fees as and when they apply to retirement properties as part of the annual report. This will be a useful reminder of the event fee obligation which owners will have agreed on purchasing the property but could later be overlooked, particularly for those which are only triggered on exit from or sale of the property which may be some years later.

b) Intermediate and superior landlords

33. Some landlords may face difficulties in meeting some of the requirements of providing the minimum information proposed in the new annual report. In particular, landlords of intermediate leases (“head lessors”). Head lessors will be entitled to receive information from their landlord (or “superior landlord”) through the annual report. However, their leaseholders (or “sub-lessees”) should also be entitled to receive information from the head lessor who, as their immediate landlord, are also required to prepare an annual report. As such, the head lessor may not have all the required contents of the annual report to be able to pass on to the sub-lessee and, furthermore, the accounting period for the head lessor may be different to that of the superior landlord.

34. Two options are proposed to address this concern:

Annual report exemption Option 1: Delay the requirement to provide the annual report to the sub-lessee until the superior landlord provides the relevant information to the head lessor. Leaseholders would receive the service charge demand form in line with the head lessor’s accounting period but would need to wait to receive information held by the head lessor until it could be combined with information held by the superior landlord, at the end of the superior landlord’s accounting period. The information would be provided all together as one report, but this could mean a delay for leaseholders; or

Annual report exemption Option 2: Require all head lessors provide the minimum information they hold as part of the proposed annual report within the statutory time frames. For example, information that the head lessor could provide as part of the annual report, which may be provided alongside the service charge demand, would be a subset of the proposed minimum information (at paragraph 29) and include:

a) Table of contact details;

b) Key basic information relating to the health and condition of the building; and

c) Handling disputes.

35. The initial information provided in Option 2 would then be supplemented with the remaining minimum information provided by the superior landlord at a later date. While leaseholders will get more information upfront, it will be incomplete and may burden landlords administratively having to provide information in separate batches. We would welcome views, especially from leaseholders and head lessors, on which option is preferable.

c) Lack of information

36. Due to their working practices, some landlords, particularly social landlords, might struggle to provide parts of the minimum information proposed for the annual report, or provide information in the manner prescribed. Possible instances might include:

a) Where the landlord would need to provide more information than is relevant to the individual building. For example, reports, such as fire risk assessments can cover multiple buildings. In such circumstances we propose that this information should still be provided, but in doing so the landlord should make it clear where information provided does not apply solely to that building;

b) Where the landlord does not hold the information. We think this will be rare but could potentially occur for example, when information is transferred under a change in landlord or managing agent. To help us determine whether an exemption might be needed, we would welcome views on the minimum information proposed to be required by the annual report that a landlord might not reasonably hold, and in what circumstances, and the burden of proof that landlords should need to demonstrate to qualify for such an exemption; or

c) Where existing legislation provides a formal exemption. For example, a Fire Risk Assessment may not cover every type of building (for example, a maisonette).

Question 19
Do you agree with the proposals for the annual report for leaseholders in retirement properties and pay both fixed service charges and an event fee? [Yes/No]

Please, explain your answer. [Free text]

Question 20
For those with a superior landlord, how do accounting periods differ between that of the superior landlord and the head lessor? [0-1 month/1-3 months/4-6 months/over 6 months]

Question 21
Where there are different accounting periods between head lessors and superior landlords, do you agree with annual report exemption Option 1 or Option 2 as a means to ensure leaseholders receive timely information? [Option 1/Option 2/neither]

If neither, please suggest what other arrangement should be in place? [Free text]

Question 22
What circumstances are there where the proposed minimum information may not be available to the landlord to provide the annual report in the specified time period? Please, explain your answer. [Free text]

Question 23
Should there be any other exemptions for provision of some or all parts of the proposed annual report which should apply? [Yes/No]

If so, please explain [free text]

2.2 New standardised service charge demand form

37. A service charge demand is an invoice issued by a landlord or managing agent outlining how much an individual leaseholder must pay for their buildings management, maintenance and insurance. The services or works for which monies may be collected and the period of time each invoice covers will be determined by individual leases. Each leaseholder receives at least one such demand over a twelve-month period.

38. Currently, the law only requires that the service charge demand forms include the following information:

• the landlord’s name and address or, if the landlord is outside England and Wales, the demand must contain an address in England and Wales at which notices may be served on the landlord by the leaseholder;^{[footnote 5]} and
• the Summary of Rights and Obligations.^{[footnote 6]}

39. Beyond these requirements, the service charge demand must be provided in accordance with the lease, but otherwise landlords can determine the format and contents of the demands as they wish. The HCLG Select Committee’s 2019 report on Leasehold reform, and Lord Best’s Regulation of Property Agents report, both recommended standardising service charge demands to ensure consistency and help leaseholders understand costs better.

40. The Secretary of State and Welsh Ministers have powers in the 2024 Act to prescribe the format and content of service charge demand forms.  This includes all demands for payment made throughout the 12 month accounting year, including any demand that accompanies the serving of the financial statement of accounts (and occurs where costs for the previous accounting period are more than anticipated in the estimated costs). The 2024 Act also repeals Section 21B of the 1985 Act, enabling us to update or replace the current Summary of Rights and Obligations.

41. Our proposals to standardise the service charge demand form seeks to set a minimum level, rather than limit the level of detail that must be provided. Landlords can choose to provide more detail if they wished. We would like to get views on the minimum level of information and detail at which it should be provided that leaseholders and landlords consider would be appropriate for the new standardised service charge demand form.

i) Proposed contents of the new service charge demand forms

a) The initial service charge demand form

42. Given the level of information proposed for inclusion in the annual report (see section 2.1), we propose that the initial service charge demand form (which is the first demand issued in the accounting year) should focus on the financial contribution that individual leaseholders must pay towards the management and maintenance of the building for that period, and include:

a) Name and address of leaseholder, landlord and property for which service charges are payable. In cases where the party serving the demand is not the landlord, the landlord’s details should also be given where possible;

b) The total amount payable for the period based on the budget;

c) Payment details and deadline;

d) Consequences of non-payment; and

e) Annual Budget – details of planned expenditure on maintenance, insurance and management costs for the building.

43. Most leases will set out the time periods when a landlord may issue a service charge demand to their leaseholders. Some leaseholders may also receive interim demands, issued mid-year or at other intervals. We are minded that these should include the same information as initial demands except for details of the annual budget (on the grounds that it is not necessary to provide this information repeatedly). We would welcome views on this approach.

44. As part of proposing the detail of the service charge demand form, we have had regard to requirements for England what are set out in Section 113 of the Building Safety Act 2022. This has not yet been commenced, but will introduce a new requirement that, for buildings over 18 metres, a service charge is not deemed as being served until the landlord has provided relevant building safety information to the leaseholder.^{[footnote 7]} This means that the information must be provided with the service charge demand. It is right that leaseholders in buildings over 18 metres receive this information, but we want to seek views on whether this information should be provided with every service charge demand or could be provided once as part of the new Annual Report.

45. A mock-up of the proposed service charge demand is at Annex B.

b) Details of the annual budget

46. The annual budget is a key component of any information provided to leaseholders. It is intended to clearly show an estimate of what the landlord intends to spend money on and recover through the service charge. In many blocks, all leaseholders will pay for exactly the same services. In others, costs vary depending on who has access to or uses specific facilities, like a car park or exclusive access to certain communal areas. In such cases, the budget may be divided into different parts or schedules to reflect this to make it easier for individual leaseholders to understand what they are expected to contribute.

47. Our preferred approach is to require the budget to be provided as part of the initial service charge demand form and, as part of the demand form it should cover the budget for both the previous and existing accounting period. We recognise that there is a risk that the budget for the accounting period might be an estimate, but we consider that even an estimate will give leaseholders a clear idea of where there are likely to be changes in expenditure. We do recognise though that there are also grounds to have the budget form part of the annual report, which would mean that landlords would have to submit a budget within a month from the end of the accounting period, regardless of the terms of individual lease. We are seeking views on when the budget should be provided.

48. We are also seeking your views on two options for the level of detail for which the annual budget should be broken down. Information is intended to provide leaseholders with a better understanding of what their service charge pays for, but we want your views on what level of information you think is sufficient and proportionate for leaseholders’ needs.

49. Annual budget Option 1: A simple breakdown under a limited number of standardised high-level headings for heads of costs as follows:

a) Management fees
b) Utilities
c) Security costs
d) Grounds maintenance
e) Health and Safety Obligations
f) General repairs and maintenance
g) Building insurance costs
h) Professional fees
i) Contribution to reserve fund
j) On-site staff wages

50. This seeks to give a high level of detail, but without seeking to overload leaseholders with potentially too much information (noting they will also have wider rights to request further information should they wish, see section 2.4), nor increasing landlords costs too much. See Annex B for an illustrative example of Option 1.

51. Annual budget Option 2: Proposes a more detailed breakdown, which more closely follows the recommendation in Lord Best’s report on the Regulation of Property Agents, with subcategories under each heading. For example:

a) Management fees - Further broken down into, for example, concierge/reception, managing agent fee, stationery and postage, directors and officers insurance, etc.

b) Utilities - Further broken down into gas, electricity, water etc.

52. While this approach further increases transparency, it could raise costs for landlords which would likely be passed on to leaseholders, who may also find this level of detail overwhelming. See Annex B2 for an illustrative example of Option 2.

Question 24
Do you agree with the proposed contents of the initial service charge demand form? [Yes/No]

If not, what changes to the proposed contents would you like to see? [Free text]

Question 25
[England only] Do you consider that the new building safety information should be provided as part of the service charge demand or annual report? [Yes/No]

Please explain your answer [Free text]

Question 26
Which option do you think provides the most appropriate level of breakdown of heads of costs budget headings for the annual budget document? [Option 1/Option 2]

Explain why you prefer Option 1 or Option 2. [Free text]

Question 27
Do you consider that details of the budget should be provided as part of the initial demand form or as part of the annual report? [Yes/No]

Explain your answer [Free text]

c) Reconciliation demand forms

53. Reconciliation demands are issued alongside a financial statement of accounts. These show whether there was an over or underspend in the previous accounting year. If costs were higher than expected, leaseholders will receive a further demand for payment. If costs were lower, leaseholders may get either a credit note for a refund, or a deduction carried forwards for their next service charge demand.

54. The 2024 Act gives the Secretary of State and Welsh Ministers powers to prescribe a specific format for reconciliation demands.^{[footnote 8]} We propose that the reconciliation demand form should include a single demand and an explanation of the nature as well as amount of the over or underspend, and use of a table comparing the budget with actual costs incurred. It is proposed that landlords can decide how to explain any differences, but that it should be made clear to leaseholders the reason for the demand and to also empower leaseholders to ask the landlord for more detail if they wish. An example of the proposed new reconciliation demand form is at Annex B3.

Question 28
Do you agree with the proposed interim and reconciliation demands forms? [Yes/No]

Please explain your response. If you disagree, please suggest an alternative approach. [Free text]

ii) Exemptions for new service charge demand forms

55. Our starting point is that there should be no exemptions to providing the new service charge demand forms to leaseholders. The intention with the proposed approach is that these forms should provide a simple, accessible and cost-effective way of giving leaseholders clear information about their obligations. We would however, welcome views on whether there are any circumstances or justifications for any exemptions. We will also keep matters under review over time, should future grounds for any exemptions arise.

Question 29
Should there be any exemptions from providing service charge demands using standardised forms? [Yes/No]

If yes, please explain what exemptions should apply, and why? [Free text]

iii) Manner of provision of service charge demand forms

56. Measures in the 2024 Act allow us to prescribe how service charge demands are provided to leaseholders. Currently, the method is determined by the lease, which may require demands to be sent by post or that the landlord must follow relevant notice provisions under Section 196 of the Law of Property Act 1925. The current requirements set minimum expectations on a landlord, while giving leaseholders flexibility to agree informally on a different means of receipt with landlords (e.g. use of email).

57. We are not minded to prescribe any new arrangements, as the current system allows helpful flexibility. We do however recognise the growing use of digital communication and benefits this may offer in terms of improving accessibility and reducing costs. This issue is considered further across the wider provision of information to leaseholders in section 3.6.

Question 30
Do you agree that existing flexibilities to agree how service charge demand forms are provided should continue to apply? [Yes/No]

Please explain your answer [Free text]

iv) Transition arrangements and costs for service charge demand forms and annual report

58. Landlords, managing agents and leaseholders will need to adapt to the new requirements for standardises service charge demand forms and the provision of an annual report. Landlords and managing agents may need to update IT systems, train staff, or adjust their processes to meet the new standards. That said, the new service charge demand forms will likely be similar to demands currently used by most landlords and should integrate into existing practice. Much of the information required for the annual report is also likely to be already readily available.

59. The costs of these new arrangements were not costed as part of the Impact Assessment that accompanied the 2024 Act as further detail is required of the information requirements to make that assessment. This detail is set out in proposals in this consultation and we are seeking views on likely one-off costs for setup and familiarisation as well as ongoing provision. Once implemented, ongoing costs we expect should be limited.

60. We want to understand how these costs will affect businesses and whether and if so to what extent, they will be passed on to leaseholders through the service charge. We also recognise that, to prepare for the new arrangements, a transition period is likely to be needed, and which takes account of the service charge cycle. We want the transition period to be as short as feasible and would welcome views on informal suggestions from stakeholders we have received that a 12 month transitional period from the commencement of these regulations would be appropriate to prepare for the new requirements for demand forms and the annual report to take effect.

Question 31
Landlords and managing agents only: Is there any information for the proposed service charge demand and annual report that you do not already collect? [Yes/No].

If yes, what is this information and how much time and cost would it take to collect this information? [Free text]

Question 32
Landlords and managing agents only: Do you use management software, or do you manually process demands? [professional management software/manually process/other]

If other, please provide details [Free text]

Question 33
Landlords and managing agents only: Would you need to make significant adjustments to your systems to meet the new information requirements? [Yes/No]

If yes, would any adjustments be outsourced (for example, to an IT software provider)? [Free text]

Question 34
Landlords and managing agents only: How long would it take and how much would it cost you (or, if outsourced, the provider) in terms of set up costs to adjust systems to collect and provide the information proposed in the demand forms or annual report and thereafter additional ongoing costs? [Free text]

Please provide a breakdown of both set up costs which may be required and any additional costs of providing the information on an ongoing basis after set up. [Free text]

Question 35
Do you agree that 12 months is an acceptable transition period for landlords to prepare for the new demand form and annual report arrangements to commence? [Yes/No]

If no, what should be an appropriate period and why? [Free text]

2.3 A new notice of future service charge demands

61. Under Section 20B of the Landlord and Tenant Act 1985, a landlord must notify leaseholders of service charge costs being incurred or demanded within 18 months of when the costs were incurred. This is intended to ensure timely billing and to avoid disputes over expenditure which has occurred long in the past. Case law has determined that these costs are counted from either when the landlord is billed by the supplier or when they pay the supplier themselves.

62. If landlords miss this 18 month deadline, leaseholders are not liable to pay these costs unless the landlord sends a written notice within this period about the costs and their future responsibility to contribute. Case law has determined that a landlord demand in this context must be both a request for payment of money and be a demand for actual expenses incurred under the provisions of the lease.

63. There is no prescribed format for this notice, which has caused confusion as information provided within notices is not always considered sufficient. Currently, the notice only needs to state the overall cost to the landlord, but it may not necessarily explain how much each individual leaseholder owes, whether they will need to pay, or when the payment will be due.

64. The 2024 Act seeks to provide clarity by requiring landlords to issue a new ‘future demand notice’ to leaseholders where they are required to notify leaseholders of future service charge costs.

65. The 2024 Act gives the Secretary of State and Welsh Ministers powers to specify the form of the notice, the information to be included in it, and the manner in which it must be given to the leaseholder. We propose that this includes:

a) the estimated amount of costs incurred;

b) the amount an individual leaseholder is expected to be required to contribute to those cost; and

c) a date on or before which it is expected that the service charge will be demanded.

66. Once a future demand notice is issued, the Secretary of State and Welsh Ministers have powers to limit the amount that landlords may charge as well as the time limit by when a demand for payment must be made. Landlords may extend the expected demand date under specified circumstances.

67. For multi-year programmes of works, we expect landlords to issue a future demand notice for each new set of works. For existing works, where there is a further increase in costs incurred after the initial future demand notice, we also expect landlords to issue a further future demand notice to cover these additional costs incurred before the expiry of the existing demand notice and within 18 months of those costs being incurred. This is subject to any limitations imposed by the Secretary of State and Welsh Ministers.

68. It is the intention of this proposed approach to provide greater certainty and transparency for leaseholders while also holding landlords more accountable and ensuring that costs are billed in a timely manner, or otherwise appropriate communication is provided to leaseholders.

i)      Form and manner of notice to leaseholders

69. It is important that landlords provide leaseholders with clear, timely and accessible information about future costs. Annex C sets out the detail of the proposed standard future demand notice. The form should be sent out to leaseholders in accordance with the lease. However, as indicated in section 3.6, we do recognise the growing use of digital communication, and we will keep under review a shift toward electronic delivery in future.

Question 36
Do you agree with the proposed structure and content of the future demand notice in Annex C? [Yes/No]

If no, what changes do you consider are needed and why? [Free text]

ii) Grounds (reasons) for extending the estimated demand date

70. There may be justifiable reasons why landlords might sometimes need to delay asking leaseholders for payment beyond the expected demand date, even if the total costs stay the same. This might be because of disputes over the quality of works or delays to finishing them. There may also be instances where an overspend relates to a major works project which is subject to either a reasonableness or dispensation dispute at the relevant tribunal which has not yet been determined. The Secretary of State and Welsh Ministers have the power to prescribe valid reasons for changing the demand date and we propose the following grounds:

a) Delays to major works; and

b) Disputes which delay the invoice of the final bill.

71. We welcome views on the appropriateness of these grounds and if other grounds should be considered.

Question 37
Do you agree with the proposed grounds for extending the estimated demand date? [Yes/No]

If no, under what other reasons should landlords be able to change the demand date? [Free text]

Question 38:

Should we legislate so that costs should not be recovered if the time limit has lapsed on the initial future demand form or capped if the estimate on the initial form has been exceeded? [Yes/No]

If no, please explain why and what limitations you would consider acceptable?

2.4 Extended rights to obtain information on request

72. Leaseholders currently have the right to a written summary of costs and can inspect related documents (e.g. accounts, receipts and other documents related to the service charge information) within 6 months of receiving the summary.^{[footnote 9]} If necessary, landlords are required to provide a suitable place for inspecting the documents within one month of the leaseholder’s request. While they provide some benefit for leaseholders, these provisions are restrictive and limit the amount of information that landlords are obliged to provide.

73. While landlords will provide more information to leaseholders through the annual report and on buildings insurance (see section 2.1 and section 2.7), leaseholders may still have further questions and want to have access to various additional documents to understand matters in more detail. We believe leaseholders should have access to key documents (e.g. fire risk assessments) at any time, not just to inform prospective buyers when selling a property. This will help those that wish to have further details of what they are paying for and help them to better hold landlords to account. It may also help avoid disputes from escalating if leaseholders can find assurance on a particular matter with the provision of additional information. Information available on request should include access to documents that relate to items of expenditure in the service charge as well as those which deal with the management and maintenance of individual buildings.

74. In addition to the existing rights, leaseholders with local authority landlords may request information under the Freedom of Information Act 2000 and, in England, the UK government is also seeking to increase transparency for tenants (renters and extended to leaseholders that are shared owners with less than a 100% share) of private registered providers of social housing (PRPs). The UK government will direct the Regulator of Social Housing to introduce new Social Tenant Access to Information Requirements (STAIRs) for PRPs. STAIRs will require PRPs to proactively publish specific information about the management of their homes.

75. The 2024 Act repeals the existing rights and replaces it with new enhanced leaseholder rights to request more detailed information about service charges, building management, insurance and maintenance from their landlord. Leaseholders can also request access to relevant information held by third parties, and they can request to inspect information either in person or to receive copies of documents sent to them. The landlord may charge the leaseholder for making copies, but may not charge leaseholders for viewing information in person unless copies are made.

76. The Secretary of State and Welsh Ministers have a range of new powers to create a robust yet proportionate framework to ensure leaseholders receive information they are entitled to.^{[footnote 10]} Here, we are seeking views on how to implement this new enhanced regime.

i) Information that can be requested from landlords

77. We propose the following prescribed list of financial and non-financial information that leaseholders can request, see Table 1 below. This includes details on ‘building and site management’ and ‘financial management’ associated with a leaseholder’s property.

Table 1. Information leaseholders are entitled to receive

Category of information: Building and site management

Information to be provided	Notes
The existing and/or previous year’s fire risk assessments
PAS 9980 assessments of external walls and cladding
EWS1 certificates
Building surveys
Asbestos surveys
Electrical Safety testing report
Legionella surveys
Safety Management Plans
Planned maintenance plans and programmes
Specifications for major works	Covers work proposed and carried out under S20 of the 1985 Act. Includes tender documents.
Fire safety and building safety enforcement notices
Other documents related to meeting health and safety requirements	Includes Remediation Orders and Remediation Contribution Orders under the Building Safety Act 2022.
Details around the building’s construction such as type of construction, proximity to large bodies of water and flooding risk
Information regarding the installation of heat networks (including notices served by the zone administrator)

Category of information: Financial management

Information to be provided	Notes
Contracts (for supplies and services), including details such as overall costs and additional costs (e.g. call out rates)	Includes details of managing agent contracts.
A summary may be appropriate where there are GDPR concerns
Qualifying Long Term Agreements	As set out in Section 20 and 20ZA of the 1985 Act
Managing Agent contracts and services provided	Covers core services and fees for additional services paid for separately
Invoices and receipts for any service charge cost passed on to leaseholders	Covers all documents relating to the management, maintenance and improvement of the building paid for through the service charge
Details of reserve or sinking funds	This might include the current balance, summary of how much has been entered into and drawn from over a time period, details of individual transactions
Buildings insurance claims history
Summary of costs of the previous accounting period	Similar to the existing provisions in S21 of the 1985 Act
Statements of major works estimates
Budget for major works
Details of expenditure from reserve funds
Copy of previous year’s annual report
Copy of previous year’s service charge demands
Copy of the administration charge schedule

78. We would welcome views on the appropriateness of disclosing the information listed in Table 1 and whether you think there is any further information that leaseholders should be able to access.

Question 39
Do you agree with the proposed list of information that leaseholders can request from their landlords in Table 1? [Yes/No]

If no, what changes do you think are needed? [Free text]

ii) How documents should be provided and time periods covered

79. We propose that leaseholders should be able to request information from their landlord through a range of channels, for example, by email or in writing (see section 3.6) to make requests more accessible for them.

80. Landlords should make a reasonable effort to provide the requested information in an accessible format and manner, including information obtained from third parties (as set out in paragraphs 85 to 87). Many people prefer to receive documents digitally, and landlords should use email where practical to do so.

81. We propose that leaseholders can request documents from previous years. For example, the Limitation Act 1980 allows challenges to the reasonableness of variable service charges up to 6 (or sometimes 12) years, while homebuying processes allow conveyancers to ask for some documents (such as service charge accounts) going back three years. We are minded to be consistent with the period for challenging service charges, given the information may be sought in relation to supporting a service charge challenge, and therefore propose setting the limit at 6 years.

Question 40
Do you agree with the proposal to give leaseholders the right to request to retrieve documents relating to matters for up to six years? [Yes/No]

If no, please explain why [Free text]

Question 41
Please comment or suggest any changes to the proposals to the enhanced rights to request information. [Free text]

iii)Timeframe for providing requested information

82. The 2024 Act requires that landlords must provide requested information within a specified time period. If they fail to do so, leaseholders can apply to the appropriate tribunal, which can both enforce the request as well as make an award of up to £5,000 in damages. The timetable for providing information should also be fair and reasonable with regards to the needs of landlords and managing agents working on their behalf.

83. We propose that gathering, and providing to the leaseholder, all relevant information requested should generally take no more than 28 calendar days. Though how feasible this is may depend on factors like the nature of the request, whether the landlord holds the necessary information, and whether documents can be sent electronically. We welcome views on this proposed time limit.

84. We consider that extensions to the proposed 28 day limit should only be justified in specific circumstances. For example, where a large volume of information is required from a third party. Since landlords usually already hold most of the relevant proposed information (as at Table 1), the cases for seeking extensions should be rare.

85. Where the landlord does need to seek information from a third party, and for example, the information spans many years and involves multiple agents, our provisional view is that an extension of seven extra calendar days should be appropriate. In such circumstances we expect landlords to provide a clear explanation to the leaseholder on why the additional time is required. We welcome views on the period and the limited circumstances when it should be granted.

Question 42
Do agree that 28 calendar days is a reasonable timeframe for a landlord to provide requested information to a leaseholder (in Table 1)? [Yes/No]

Please provide reasons for your answer. [Free text]

Question 43
Do you agree with the circumstances under which the overall 28 day time period should be extended, and the proposal to allow an additional 7 extra calendar days? [Yes/No]

Please provide reasons for your answer. [Free text]

iv) Timeline when information is required from a third party

86. When meeting a leaseholder’s request for further information, there will be times when landlords may need to get information from a third party (also known as “the Receiving Party”) if they do not hold it themselves. For example:

a) a superior landlord for building insurance or other information relating to the management of the building;

b) a landlord where a Right to Manage Company does not take over all the management functions; or

c) a previous representative of the landlord, like a managing agent no longer employed for the building.

87. The 2024 Act requires the Receiving Party to provide the requested information within a specified period. Our provisional view is that 15 calendar days would be appropriate and that this period should fall within the landlords 28 calendar day timeframe. This means that, in order to meet the overall 28 day limit (described in paragraphs 83-84), the landlord would need to identify early on in the time period that they did not hold the information and make representations to the Receiving Party.

Question 44

Do you agree that the Receiving Party should respond to the landlord’s request within 15 days? [Yes/No]

v) Time period for inspecting documents in person

88. There may be circumstances where it may be easier to access the information and leaseholders may wish to inspect documents in person. Currently, landlords must provide access to their offices (or another suitable location) for two months, starting one month after the request is made. The 2024 Act removes the minimum period that landlords have to prepare documents and allows the Secretary of State and Welsh Ministers to set a maximum timeframe for leaseholders to inspect documents, at a suitable facility. We propose that leaseholders should have a longer period from the date of the original request to access documents and are seeking views on whether three months would be more appropriate. Within this timeframe, it will be for landlords to work with the leaseholder to determine how long they need to be in attendance to inspect the required information and to agree a suitable location to do so.

Question 45
Do you agree that leaseholders should have a maximum of three months after making a request to inspect documents in person? [Yes/No]

Please provide reasons for your answer and any changes you consider necessary. [Free text]

vi) Exemptions from the duty to comply with an information request

89. There are circumstances where it may not be appropriate for landlords to provide requested information to leaseholders. We are minded to provide exemptions to landlords to provide information on request to leaseholders in only limited circumstances. We propose that exemptions should be limited to:

a) Commercially sensitive information: if it cannot be redacted, the landlord should provide a summary of the information and explain why the full document cannot be provided; and

b) Vexatious requests: for instance, if a leaseholder repeatedly asks for the same information within a short timeframe (e.g. within 3 months of each request).

Question 46
Do you agree with the proposed exemptions to the duty to provide requested information? [Yes/No]

If not, what exemptions, if any, do you think should be provided and why? [Free text]

2.5 Application of proposals to those who rent

90. Many “social housing tenants” also pay a service charge.^{[footnote 11]} Landlords can only charge for services explicitly listed in the tenancy agreement. Common services covered by the service charge include:

a) Cleaning/caretaking, such as maintenance of internal communal areas and stairs;

b) Gardening and grounds maintenance, such as grass cutting and planting;

c) Management fee, such as staff costs and administrative tasks, including preparing service charge demands, collecting fees and preparing annual statements; and

d) Lighting, such as costs for communal lighting, including replacing bulbs.

91. The 2024 Act provides social housing tenants of Private Registered Providers in England and Registered Social Landlords in Wales with new rights and protections, whether they pay fixed or variable service charges.^{[footnote 12]} We would welcome views on how they should be applied.

i) Service charge demands

92. As discussed in section 2.2, the focus of the new service charge demand is to set out how much each leaseholder or social housing tenant is required to pay for the management and maintenance of their building. We believe the updated approach for leaseholders, as set out in Annex B, should also apply to social housing tenants, and we do not propose any modifications to it.

ii) Annual report

93. The new annual report, as proposed in section 2.1, will provide timely information about service charges and building management plans. For social housing tenants, we propose a simplified version that excludes information about services not typically covered by their service charges. This will reduce burdens on social landlords in providing information and will ensure that the information provided is only relevant to the charges to which these tenants pay.

iii) Right to information

94. Measures in the 2024 Act give social housing tenants the right to request and inspect documents (see Table 1). We propose that a bespoke list of prescribed information may better suit their needs, and welcome views on particular costs or services that should be included or excluded from Table 1.

95. Paragraph 74 explained that social housing tenants (including leaseholders of shared ownership homes with less than a 100% share) of Private Registered Providers of social housing in England will benefit from the new Social Tenants Access to Information Requirements (STAIRs), which will oblige Private Registered Providers to proactively publish information about service charges and to answer requests for further information from their tenants. We do not consider that these new rights to information will cause any problems to social housing tenants or landlords.

Question 47
Do you agree that social housing tenants of Private Registered Providers and Registered Social Landlords should receive an annual report and right to access specific information? [Yes/No]

Please explain your answer [Free text]

Question 48
Would you suggest any modifications to our proposed format of the annual report and information that may be requested? [Yes/No]

If no, please give your specific reasons [Free text]

Question 49
What would be the additional cost to Private Registered Providers and Registered Social Landlords of obtaining and supplying this information to social housing tenants? [Free text]

Please provide a breakdown of both initial costs and long term sustained additional costs. [Free text]

Question 50
Do you think that 12 months is an acceptable transition period for Private Registered Providers and Registered Social Landlords to adjust their systems and train their staff to the new arrangements? [Yes/No]

If no, what should be an appropriate period and why? [Free text]

2.6 New duty to publish administration charge schedules

96. Administration charges are one-off charges which may be charged to an individual leaseholder in addition to service charges, for specific requests outlined in the lease (e.g. permission for keeping a pet, making property alterations or subletting).^{[footnote 13]} Existing legislation defines what is meant by an administration charge and includes a requirement that, where an administration charge is variable, it must be reasonable and can be challenged at the appropriate tribunal.

97. Leases specify when these charges apply but rarely state the amount or require landlords to proactively publish information about administration charges or the levels at which they are set. Many leaseholders are unaware of potential costs, what levels they are set at, or their existing rights to challenge them.

98. We want to ensure that leaseholders are better informed of all the charges they may face. The 2024 Act introduces a new requirement on landlords to publish an administration charge schedule, detailing administration charges leaseholders may be liable to pay. It also requires landlords who change the costs of their administration charges to publish a revised schedule 28 days before new charges take effect.

i) Form and content of the new administration charge schedule

99. The new administration charge schedule should be clear, easy to understand and detailed enough to inform leaseholders about potential costs. If an exact cost cannot be provided upfront (e.g. a licence for structural alterations involving multiple parties such as surveyors), an alternative method for calculating the cost should be included. We propose that this should include estimated costs for the parties involved, providing the leaseholder with an indication of what the charges are likely to be. See Annex D for the proposed structure and contents of the administration charge schedule, which sets out fixed costs where an exact cost can be provided and variable costs where information on how the estimated cost is calculated is set out.

Question 51
Do you agree with the proposed structure and contents of the administration charge schedule as set out at Annex D? [Yes/No]

If no, what changes do you think are needed? [Free text]

ii) Manner of providing the new administration charge schedule

100. We propose that landlords provide a copy of their administration charge schedule in the annual report (see section 2.1) for all leaseholders. They should provide any updated versions to leaseholders by the same means separately (e.g. if the annual report has already been provided) when changes are made. We also propose that the schedule must be made available upon request at any time.

Question 52
Do agree that landlords should make the administration charge schedule available on request (see Table 1), in addition to as part of the annual report? [Yes/No]

Question 53
Are there any other situations when landlords should be able or required to provide the administration charge schedule to leaseholders? [Free text] Provide details

2.7 Better information about insurance

101. For many leaseholders in multi-occupancy buildings, buildings insurance makes up a considerable share of their service charge and is required under the terms of their mortgage. Buildings insurance also protects leaseholders in the event of losses, typically to the structure of the building or in common areas, for example in the event of fire or flooding.

102. Landlords will usually take on the task of insuring the building, often employing a managing agent to arrange the insurance who will in turn employ an insurance broker. Brokers usually work on a commission basis, typically negotiated with insurers. Landlords and managing agents are also typically remunerated by brokers sharing their commission with them for their work arranging and managing insurance placements.

103. This supply chain can incentivise landlords and managing agents to choose insurance brokers who secure a product that is not necessarily the best value option for the leaseholder but offers the highest commission return to them. The Financial Conduct Authority (FCA) published a report in 2023 into broker remuneration in multi-occupancy buildings and found that brokers’ absolute level of remuneration had risen by 40% between 2019 and 2022. It also found that brokers were often unable to articulate what insurance-related services or benefits of value were provided by the parties they were sharing commission with – including landlords and managing agents.

104. In response to these findings, the FCA updated its regulations in January 2024 to strengthen leaseholder protections and transparency. The update ensures that insurance firms must act in leaseholders’ best interests, treat leaseholders as customers when designing products and cannot recommend an insurance policy based on commission or remuneration levels. Firms are required to disclose policy information to their customer and ensure their insurance policies provide fair value.

105. Given these issues with the procurement of buildings insurance products and its significant cost for leaseholders, it is vital that there is greater transparency for leaseholders about the insurance being purchased on their behalf so that leaseholders can challenge the reasonableness of insurance costs if they wish to. Greater transparency should also incentivise landlords and managing agents to act in the best interests of leaseholders and seek the best value options when managing and arranging insurance.

106. Currently, Section 30A of the 1985 Act allows leaseholders to request a summary of their insurance policy from their landlord and to inspect the insurance documents, but landlords have no duty to proactively share this information with leaseholders if it has not been requested. New FCA rules require insurance brokers and insurers to share more information with the contractual customer of the insurance, with the intention that this is passed on to leaseholders. However, as the customer is usually the landlord or managing agent and may not be FCA-regulated, the FCA cannot require that the information is passed on.

107. Section 60 of the 2024 Act amends the Schedule to the 1985 Act. This places a duty on landlords to provide information proactively on the insurance policy to leaseholders within a period which will be specified in secondary legislation. This will ensure that all leaseholders are receiving detailed information about their insurance policy without having to request it from managing agents, landlords or insurance brokers.

108. Improved transparency on insurance also complements a different measure in the 2024 Act which has been consulted on separately. This measure, if enacted, could address the incentive model whereby landlords or property managing agents working on their behalf receive a portion of the building insurance broker’s commission for insurance related activities. This can incentivise them to choose brokers on the basis of remuneration received rather than best value for the leaseholder.

i) Information to be provided to leaseholders

109. The FCA introduced new rules that came into effect on 1 January 2024 which mean that FCA-regulated insurance brokers (intermediaries) and insurers required to provide detailed information to contractual customers on the following areas:

a) features of the policy including: the type of insurance, main risks insured, excluded risks, excesses, significant features, term and duration of the policy and benefits, and the insured sum;

b) total policy premium at the building level and the amount of insurance premium tax and Value Added Tax;

c) remuneration which brokers are receiving, as well as remuneration they pay to third parties, including managing agents and landlords;

d) information about potential conflicts of interest;

e) the number of alternative quotes obtained and explanation of why they recommended a particular policy.

110. Given that leaseholders are not typically the contractual customer buying the building insurance, the FCA rules require the broker or insurer to give a clear instruction to the customer (typically the landlord or managing agent) to pass this information to the leaseholder. The leaseholder can also ask for this information directly from the broker or insurer, if it has not been provided to them by the landlord or managing agent.

111. We consider the new FCA transparency requirements are a significant step forward and at a minimum we think landlords should have to provide leaseholders with the information that brokers and insurers provide them (or the managing agent) under the FCA rules.

112. However, we consider that there is a case to go further. Conflicts of interest between different parties in the chain organising and arranging insurance has been raised as a particular concern by leaseholders and campaign groups. The FCA rules currently require that insurance brokers and insurance firms, as FCA-regulated firms, declare a conflict if:

i) the firm (insurance broker) has a direct or indirect holding representing 10% or more of the voting rights or capital in a given insurance undertaking;

ii) a given insurance undertaking or its parent undertaking has a direct or indirect holding representing 10% or more of the voting rights or capital in the firm;

iii) a firm is representing the customer or is acting for and on behalf of the insurer.

113. If we simply replicate the FCA rules, landlords and managing agents would not need to declare any conflicts of interest they may have with the broker or insurer. We therefore propose that landlords are also required to declare any conflicts of interest between themselves or managing agents they employ and insurers and brokers.

114. Furthermore, we are interested to understand if there is a definition of conflict of interest that may cause concern to leaseholders, which better captures relationships between the different actors involved in choosing, arranging and providing buildings insurance.

Question 54
Do you think that managing agents and landlords should also have to declare conflicts of interests with the insurance broker and insurer? [Yes/No]

Please explain your answer [Free text]

Question 55
Are there any other conflicts in the chain of organising, managing and providing insurance that should be declared to a leaseholder? [Free text] Provide details.

Question 56
Do you think that the FCA definition of a conflict of interest covers conflicts that are relevant to leaseholders?  [Yes/No]

If no, how should conflict of interest be defined? Are there existing definitions of conflict of interest in other industries or countries that could be followed? [Free text]

115. Alongside considerations around conflict of interest, we also propose that the landlord will have to provide to leaseholders information about how they can make a claim on the insurance, whether that be directly to the insurer or by notifying the managing agent or landlord. The FCA rules do not require that the insurer and broker include this in their disclosure to the customer.

116. We would welcome views on whether the disclosure required by the FCA, alongside considerations around conflict of interest and making clear how a leaseholder can make a claim, provides leaseholders with sufficient information to understand their building insurance and challenge costs if they think it is unreasonable.

Question 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? [Yes, this is right amount of information/not enough information/too much information]

If you answered yes, give reasons [Free text]

If you answered not enough information, please give reasons. What additional information should be provided about building insurance? [Free text]

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

117. Our starting point is to have no exemptions for landlords to comply with the duty to provide insurance information, aligning with the proposal of the service charge demand form (see section 2.2). Leaseholders have a clear right to understand the insurance policy being purchased on their behalf. However, we would welcome views on whether there should be any exemptions at this stage from complying with this proposed approach.

Question 58
Do you think there should be any circumstances where the duty to provide information on insurance should not apply? [Yes/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 [Free text]

ii) Form and manner of provision of insurance information to leaseholders

118. The 2024 Act allows the Secretary of State and Welsh Ministers prescribe the form and manner in which information on insurance is provided to leaseholders, for example a set template for landlords to use. We suggest prescribing a template to ensure consistency for leaseholders and help landlords be confident they are complying with the regulations. An example template is provided at Annex E.

Question 59
Should landlords be required to provide information in a set template? [Yes/No] Please explain your answer [Free text]

Question 60
What is your opinion of the proposed template provided at Annex E? Provide details. [Free text]

119. As with other information that leaseholders may request from landlords (see section 2.4), we understand there is a case for landlords to be able to send insurance related documents only by email, as an alternative to post, where it is cost effective, practical and expedient to do so. However, we are aware that sending information by email may give rise to claims that the leaseholder did not receive the information. Given this, we would welcome views on what safeguards or arrangements, if any, should be in place, if landlords were to be able to send such information via email.

Question 61
Should landlords be able to provide leaseholders with insurance information only by email? [Yes/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? [Free text]

iii) Timing of provision of information to leaseholders and landlords

120. We want leaseholders to receive information on their building insurance in a timely manner to ensure they understand the cover that has been purchased on their behalf and can challenge any unreasonable costs. We recommend that landlords should provide the specified information within 30 calendar days of the insurance coming into effect and to new leaseholders within 30 days of purchasing the property, if they have not already received the specified information on the insurance contract.

Question 62
Do you think 30 days is enough time to give landlords to provide building insurance information to leaseholders? [Yes/No]

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 [Free text]

Question 63
Do you think there are any circumstances where this time period should be extended? [Yes/No]

If yes, give reasons and when you think the time period should be extended [Free text]

121. It is important that the landlord receives the information they need from a third party, for example the insurance broker, in a timely manner in order to comply with these requirements. We do not suggest prescribing how landlords should request information from third parties to avoid unnecessarily limited flexibility for landlords or their agents, and do not consider any exemptions to be appropriate.

Question 64
Should landlords be required to request information from a third person in a certain way? [Yes/No] If yes, please give reasons why [Free text]

Question 65
Should there be any circumstances where a person is exempt from the duty to provide information to the landlord? [Yes/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   [Free text]

Question 66
Should there be a set time period within which a request for information from a landlord to a third party be made?  [Yes/No]

If yes, what should that time period be?  [Free text]

iv) Transitional arrangements

122. The cost of this measure will affect landlords and managing agents differently, depending on the systems they currently have in place, noting that they should already be passing on much of this information to leaseholders under the FCA rules. The impacts of these new arrangements were not monetised as part of the Impact Assessment of the 2024 Act for this reason.

123. We are therefore prepared to allow for a transition period between the making of the statutory instrument and the commencement of the insurance transparency measures. We consider that the transition period should be as short as is feasible and that therefore landlords and managing agents should be allowed 3 months to put all the necessary arrangements in place. However, we welcome views on this.

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

Question 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 [Free Text]

Question 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/No]

If not, what would be the right amount of time and why? [Free text]

2.8. New standardised service charge accounts

124. Financial statements of accounts (“Service charge accounts”) are typically prepared and issued annually to leaseholders by landlords or managing agents to show the income and expenditure for maintaining the block(s) over a 12-month period.

125. Timely and accurate service charge accounts help leaseholders hold landlords accountable for how their money is spent. There is currently no standard approach to preparing accounts. Leases can require landlords to provide leaseholders with full audits, summaries or statements of accounts. If the lease does not specify the format of accounts, guidance from The Royal Institution of Chartered Surveyors is to use the Institute of Chartered Accountants for England and Wales’ “Technical release: Residential Service Charge Accounts” (TECH 03/11).

126. Current legislation and most leases also do not specify a timeline for producing and issuing service charge accounts to leaseholders following year end. There may be a date set out in the leases or a statement such as that the information should be produced ‘as soon as practical’. However, landlords and managing agents need to be aware of Section 20B of the 1985 Act which sets limits on the recovery of expenditure on services incurred more than 18 months before the relevant costs are demanded from the lessees.

127. Currently leaseholders can request a summary of costs from their landlord if they have failed to provide the required information or if the leaseholder is not satisfied with it. The summary must be provided within one month of the request or within six months after the accounting year ends (whichever is later). For blocks of four or more units, the summary must be certified by a qualified accountant.

128. The current arrangements do not provide adequate statutory protection for leaseholders since there is very little consequence if landlords fail to provide accounts in a timely manner or provide inadequate accounts.

129. To address this, measures in the 2024 Act imply into leases a requirement for landlords who charge variable service charges and manage blocks of four or more dwellings to provide a written statement of accounts within six months of the end of the accounting period. These provisions do not override requirements, for example, where a lease requires a statutory audit or other more stringent requirements.

130. The Secretary of State and Welsh Ministers have flexibility on how the new measures should be implemented, including:

a) the information that must be included as part of service charge accounts;

b) the standards which must be met when checking the accuracy of the accounts;

c) a standard statement accountants must use to verify their work; and

d) defining who may be classified as a qualified accountant for the purposes of preparing a report.

131. In addition, the Secretary of State and Welsh Ministers are able to apply different provisions in different circumstances, which allows them to take account of different landlords. This gives flexibility to implement a cost-effective but proportionate system that gives leaseholders assurance that their service charge accounts are fit for purpose.

i) Form and contents of a written statement of accounts

132. ICAEW guidance note TECH 3/11 recommends accounts should follow accruals-based accounting and include minimum information to provide a more detailed overview of the service charge accounts for the relevant accounting period. Drawing on this and other good practice guidance, we propose that all service charge accounts should include:

a) a balance sheet showing assets and liabilities of the block. This should set expenditure against the planned service charge budget for the block;

b) income and expenditure reports with explanatory notes using headings consistent with the annual report;

c) statements for sinking/reserve funds statements (where applicable); and

d) a statement of service charge collection deficits to understand the level of loss of revenue caused by non-payment of service charges.

133. The guidance suggests that landlords and managing agents of complex buildings should ensure that service charge accounts reflect multiple service schedules, where applicable, by providing distinct balance sheets for each schedule.

134. We have reflected these principles in a mock-up of the proposed new service charge account financial statement at Annex F.

Question 70
Do you agree that accounts must include the following minimum information:

a. a balance sheet for the service charge fund which sets out the assets and liabilities of the block
b. an income and expenditure account and explanatory notes
c. sinking fund or reserve funds statements (where applicable)
d. a statement of service charge collection deficits

[Yes/No]

If no, what should be different, why and in what circumstances (please be specific)? [Free text]

Question 71
Do you agree that, where there are multiple service schedules, a balance sheet should be provided with each schedule? [Yes/No]

Please explain your answer [Free text]

ii) Financial Reporting Standards

135. It is important that leaseholders have assurance that the accounts they receive are accurate. Measures in the 2024 Act require that landlords prepare a written report on the financial statement of accounts, and gives power to the Secretary of State and Welsh Ministers to set the financial standards that such reports must meet. The following standards are already employed by accountants:

a) “International Standard on Related Services (ISRS) 4400 (Revised), Agreed-Upon Procedures Engagements”, which result in a report of purely factual findings relating to tests carried out. Reporting to third parties, factual procedures (sample tests of particular balances, for example) are agreed on between the business and its chartered accountant. The accountant then carries out those procedures and reports the results, so that the business and its stakeholders can make use of them;

b) “International Standard on Review Engagements (ISRE) 2400 (Revised) Engagements to Review Historical Financial Statements” which requires an accountant to make enquiries of management, and others, and to carry out analytical procedures to gain a degree of assurance that the statements comply with the chosen financial reporting framework and give a true and fair view. Compliance with this standard may require that landlords comply with specific methods of auditing accounts; and

c) Various standards set out by International Standards on Auditing (ISA). ISAs require the auditor to achieve a much higher level of assurance compared to other standards. The most common standard used for service charge accounts is “International Standard on Auditing (ISA) 800 Special Considerations – Audits of Financial Statements Prepared in Accordance with Special Purpose Frameworks”.

136. We propose that adherence to ISRS 4400 would be appropriate for most leasehold blocks. However, we welcome views on whether additional standards might be applicable and under what circumstances they should be considered. In particular, views on whether ISRE 2400 should be applied and, if so, to what size or type of building.

iii) Written statement of declaration

137. It is essential that all financial information is reviewed by a qualified person to ensure that it accurately reflects its intended representation.

138. Under the measures introduced in the 2024 Act, the written report regarding the statement of accounts must include a statement from the accountant, in a prescribed form and manner, confirming that the report faithfully represents its intended representation. The aim is to offer leaseholders a clear and concise summary, demonstrating that the accountant has adhered to the required procedures. We propose a straightforward statement containing the following:

a) Details of the block(s) for which accounts are being prepared and the accounting period covered;

b) Details of the accountant preparing the report; and

c) A series of declarations, for example:
i. Confirmation that work has been carried out using a specified financial standard;
ii. The report is a faithful representation of what it purports to represent; and
iii. There are no serious misgivings.

139. A proposed draft statement of declaration is at Annex G, on which views are sought.

Question 72
Do you agree that ISRS4400 should be the default reporting standard for assuring service charge accounts? [Yes/No]

Question 73
Are there any other reporting standards, such as ISRE 2400, that should be followed?

Please be specific, including what any threshold for use should be. [Free text]

Question 74
Do you agree with the format of the statement of declaration (at Annex G)? [Yes/No]

iv) People eligible to prepare the written report

140. Existing legislation states that, where a summary of costs is required, this summary must be certified by a statutory auditor (as defined in Part 42 of the Companies Act 2006). This requirement does not apply to some types of landlord, including local authorities.

141. In the 2024 Act, provisions allow the Secretary of State and Welsh Ministers to expand the pool of suitably qualified professionals who can prepare the written report to help deliver the likely increase in the number of reports required.

142. We are minded to extend those eligible to prepare a written report to those who belong to a relevant accredited membership body. We propose that the accountants must belong to either: the Association of Chartered Certified Accountants; or the Institute of Chartered Accountants in England and Wales. The benefit of extending eligible practitioners to accredited bodies is that it gives leaseholders a guarantee of professionalism but also another body to whom they can complain if things go wrong. We would welcome views on this approach.

v) Exemptions and modifications: social housing landlords and audited accounts

143. We wish to introduce an effective yet proportionate approach to the new service charge account requirements. Some landlords, and in particular some local authority and Private Registered Provider landlords, and Registered Social Landlords, do not provide written statements for each individual building they manage. This may be in part because most buildings they manage are mixed tenure and contain a mix of leasehold and social rented properties, and the lease places different reporting obligations on them. Furthermore, they tend to manage their properties on a borough or area wide basis, which makes it difficult to prescribe an exact cost for some services for each individual block.

144. As a result, rather than produce a statement of accounts per block, they either provide a statement of accounts for the estate or even just an income and expenditure statement. This will compare the actual costs incurred against the income received.

145. We appreciate the benefits and assurance that leaseholders with a local authority or a Private Registered Provider landlord, or a Registered Social Landlord, might receive with a full statement of accounts. However, we consider that mandating it for these landlords could result in excessive costs and significant administrative burden which would likely be passed down to leaseholders for limited benefit. We would welcome views on current obligations of local authority and Private Registered Provider landlords, and Registered Social Landlords.

146. An alternative could be that, for each block, local authorities and housing associations should set out for their leaseholders:

a) A financial statement – comparing actual costs incurred against the budget for that year using the key budget headings set out in paragraph 49 or 51;

b) A statement of reserves – which sets out the level of reserves at the beginning and end of the accounting period, as well as details of contributions and costs.

147. For such an approach, we would not necessarily consider that the financial statement for each block must be accompanied by a written report or prepared in line with the reporting standards. This might be because the organisation’s own internal systems are sufficiently robust and subject to appropriate oversight. For example, within local authorities, accountability for the sound management of finances rests with the Section 151 officer.

148. We are also aware that some leases require a full audit of accounts. The new requirements introduced in the 2024 Act do not override these requirements and, given the lease obligations are more detailed than those set out in this consultation, it is proposed that audited accounts are exempted.

Question 75
Do you agree with the proposals to expend the number of qualified people who can prepare the written report? [Yes/No]

Explain your answer [Free text]

Question 76
What financial information do local authorities, Private Registered Providers and Registered Social Landlords provide to their leaseholders? [Please highlight all that are relevant]

Balance Sheet
Income and Expenditure report
Sinking/reserve fund statement
Other

If other, please specify [Free text]

Question 77
What procedures are in place within local authorities, Private Registered Providers and Registered Social Landlords to ensure that any accounts or financial statements are accurately reported and who signs off any information?

Provide details [Free text]

Question 78
Do you think that local authority and Private Registered Provider landlords, and Registered Social Landlords, should be exempt from the provisions to prepare written statements of account for each block and signed off by a suitably qualified accountant? [Yes/No]

If yes, what provisions should apply to local authority, private Registered Provider landlords and Registered Social Landlords? Please be specific. [Free text]

Question 79
Are there any other landlords or specific scenarios where you think exemptions or modifications are needed? [Yes/No]

If yes, provide details. [Free text]

vi) Transition arrangements and cost of introducing the new service charge account measures

149. The financial impacts of these new arrangements were not monetised as part of the Impact Assessment to the 2024 Act as the actual impact will depend on the detail of the proposals. We are keen to understand the cost to business of introducing these measures and, critically, where these costs might fall, including whether and how they might be passed on to leaseholders.

150. As with the proposals for annual reports and service charge demands, we are aware that landlords and agents have different systems in place, including different types of software, to enable them to meet existing lease obligations. This means that, in addition to familiarising themselves with the new requirements on service charge accounts, landlords and managing agents may need to include changes to their systems, train staff on the new arrangements, make arrangements for new people to prepare the written statement and make further adjustment to their working practices.

151. We have asked questions below to help us understand the cost implications and to inform our final decision on what obligations should be put in place. We also recognise the importance of a sensible transition period which takes into account the service charge accounts cycle. We consider that the transition period should be as short as feasible and depend on when these measures are introduced. We propose that the following provisions should apply:

a) if the accounting period ended under 6 months after commencement of these provisions, then landlords should be exempt from complying with the provisions for a period of 12 months. This is to allow the preparation of any financial statement of accounts using existing arrangements; and

b) if the accounting period ended more than 6 months after commencement of these provisions then landlords should be exempt from complying with the provisions for 6 months. This means that the new provisions would be introduced for the next cycle of the preparation of financial statements.

Questions for landlords and managing agents

Question 80
Do you already provide your leaseholders with service charge accounts? [Yes/No]

Question 81
What are the differences between these new proposals and the information you currently provide to leaseholders? Provide details [Free text]

Question 82
How long does it take you to prepare accounts now? How long would it take you to prepare accounts if you had to implement the proposals? Provide details [Free text]

Question 83
How much does it cost you to prepare a set of accounts on average? Please give specific examples and a range if possible. [Free text]

Question 84
What additional costs or savings would you face if you had to implement the proposals? Please include where these costs or savings would occur, e.g. number of people to prepare; new people to verify. [Free text]

Question 85
Would you adjust your systems, or would any adjustments be outsourced (for example to an IT software provider)? Provide details [Free text]

Question 86
How much would it cost to adjust systems to collect and provide the information? Please provide details, including the costs of an outsourced provider if relevant. [Free text]

Question 87
Do you agree that 12 months is enough time to allow landlords and managing agents to adjust their systems and train their staff to the new arrangements? [Yes/No]

If no, what should be enough time and why? [Free text]

Question 88
Would set up costs be reduced if we provided a longer transition period? [Yes/No]

And if yes, by how much? [Free text]

2.9 Rebalancing the litigation costs regime

152. Leaseholders and landlords can access the tribunal or courts to enforce lease terms or resolve disputes.

153. Landlords routinely recover their litigation costs from leaseholders, either through the service charge from all leaseholders or as an administration charge from a specific leaseholder, depending on the lease terms.

154. Leaseholders must apply to a court or tribunal to limit their liability for these costs through a “Section 20C” or “paragraph 5A” application.^{[footnote 14]} Leaseholders also face little prospect of recovering their own litigation costs from their landlords as leases usually do not give them that right.^{[footnote 15]}

i) The problem with litigation costs

155. There are circumstances where landlords should be able to recover their litigation costs from leaseholders. For instance, when a leaseholder has breached their lease in ways that negatively impacts other residents in the building, or when non-payment of charges is limiting upkeep or repairs of the building. In such situations, after landlords have exhausted alternative avenues for resolving the dispute, it is important that they have the ability to address these issues in a court or tribunal and, where appropriate, should be able to recover their litigation costs. We understand this is especially important for resident-led buildings, which depend on service charge income to fund litigation.

156. The current regime creates an imbalance however, as the risk of having to pay their landlord’s litigation costs often deters leaseholders from seeking redress in court or relevant tribunals. Leaseholders face the possibility of being charged thousands of pounds for their landlord’s litigation costs, regardless of the outcome of a case, while having limited prospects of recovering their own costs. In few other areas of law do the parties start from such an unequal position.

157. While some protections exist, the responsibility lies with leaseholders to apply to limit their liability for their landlord’s litigation costs. Furthermore, only those leaseholders specifically named in a Section 20C application receive the benefit of an order protecting against such costs. This means landlords’ litigation costs from disputes involving one or more leaseholders can still be passed on to other leaseholders within the block through the service charge, if they were not named in the application.

ii) How the current litigation costs system operates

158. Generally, leaseholders and landlords can bring a case to both the civil court (e.g. the County Court) and the relevant tribunal. Where leaseholders or landlords bring a case will depend on what the dispute is. For example, landlords can bring a case for the non-payment of a service charge to the relevant tribunal or the civil court; we understand the majority of cases to recover service charge debt are brought in the County Court as a civil debt claim. Leaseholders may access the civil court if their landlord is in breach of the terms of the lease, e.g. failing to keep the building in good repair.

159. In the civil court, the Civil Procedure Rules on recovery of litigation costs apply. For most types of claim, the amount of litigation costs that can be recovered will depend on what “track” the claim is on.^{[footnote 16]} Assuming most leasehold claims are on the small claims track (value up to £10,000), this means that the amount of litigation costs that either party can recover are limited to: fixed costs in issuing the claim; loss of earnings and travel costs of the party or witnesses to attend the hearing (capped at £95 per day); expert’s fees; and court fees. Litigation costs incurred in possession claims where the landlord is seeking forfeiture of the lease are also limited by a fixed costs regime under the Civil Procedure Rules.

160. However, if a lease allows a landlord to recover their litigation costs from leaseholders as a contractual term, the Civil Procedure Rules permit the landlord to recover their litigation costs on an indemnity basis (subject to any Section 20C or paragraph 5A application). Under court rules, landlords must include their litigation costs in the “particulars of claim” (part of their court application) if they are relying on a contractual right to costs arising from a term of the lease.

161. Where a landlord issues debt proceedings against a leaseholder (e.g. for an unpaid service charge) in the civil court, if the debt is undefended by the leaseholder, the landlord can apply to the court for a “default judgment”. This is a quick process that does not require a hearing to be held or for a judge to review the facts of the case. As long as the claim is properly pleaded, the judgment in default will include the litigation costs of the landlord, without any judicial intervention. We understand that the majority of claims brought by landlords to the civil court to recover unpaid service charges as a debt are undefended by the leaseholder.

162. Similarly, where a leaseholder admits a debt in the civil court, the County Court will issue an order for the leaseholder to pay the amount admitted. Again, this generally does not require a hearing to be held or a judge to review the facts of the case (for the admitted part of the claim) and will include litigation costs as part of the order, assuming that the landlord has properly pleaded their case.

163. There are cases where the leaseholder admits part of a debt claim and defends the other part of the claim. In these cases, we understand the claim goes to a hearing for a judge to assess the defended part. If a leaseholder defends the whole claim brought against them by a landlord for unpaid service charge in the civil court in relation to the reasonableness or payability of those service charges, we understand the case is typically sent to the relevant tribunal as a service charge dispute. For cases before the relevant tribunal, different rules apply to the recovery of litigation costs.

164. The relevant tribunal can consider cases brought from landlords and leaseholders on a range of issues, including whether a service charge or administration charge is payable or whether it has been reasonably incurred, breach of a lease or variation of a lease, and the appointment of a substitute manager.

165. Usually, each party pays their own litigation costs before the relevant tribunal. However, if a lease allows a landlord to recover their litigation costs from leaseholders, the relevant tribunal does not have power to prevent subsequent contractual costs recovery, meaning landlords can still recover their litigation costs from leaseholders in full (subject to any Section 20C or paragraph 5A application). Rule 13 of the Tribunal Procedure (First-tier Tribunal) (Property Chamber) Rules 2013 allows the tribunal in England to make a costs order where there has been unreasonable conduct. Both leaseholders and landlords can make an application for their litigation costs to be paid by the other party under Rule 13. However, we understand there is a high threshold, and such orders are rarely made. There is no equivalent rule to this in relation to the Leasehold Valuation Tribunal in Wales.

iii) Proposals to implement the 2024 Act litigation cost measures

166. In order to remove the barriers to access to redress for leaseholders, and to rebalance the litigation costs regime to make it fairer, measures in the 2024 Act seek to better protect leaseholders from unjust litigation costs from their landlord, and to enable leaseholders to recover their own litigation costs from their landlord where appropriate.

167. The 2024 Act does this by requiring landlords to apply to the relevant court or tribunal in order to recover their litigation costs from leaseholders – either as a service charge or as an administration charge (Section 62 of the 2024 Act). It also gives leaseholders the right to apply to the relevant court or tribunal to recover their own litigation costs from their landlord (Section 63 of the 2024 Act).

168. There are some costs which are governed by separate rules, and which do not form part of this consultation. This consultation does not include any proposals relating to litigation costs incurred as a result of relevant proceedings relating to enfranchisement, lease extensions, and applications for the Right to Manage. There are also separate rules which apply in certain circumstances to litigation costs incurred in relation to building safety.

169. For both landlord and leaseholder applications for litigation costs, the relevant court or tribunal will make a decision on costs that it considers just and equitable in the circumstances. Regulations will set out “matters” they will take into consideration when making an order on applications. This will give leaseholders and landlords an understanding of what the court or tribunal will consider when making a decision on an application for litigation costs.

170. The 2024 Act includes a power for the Secretary of State and Welsh Ministers to make regulations on how a landlord’s application to recover litigation costs from multiple leaseholders through the service charge is made; and how notice of the application is to be given to those specified and not specified in the application (for example, to non-participant leaseholders). Given the technical nature of this power, we are minded to develop the detail of the secondary legislation working directly with stakeholders.

iv) Proposal to set exemptions to the landlord application requirement in order to recover litigation costs as an administration charge

171. The 2024 Act includes powers to make exemptions to the requirement for landlords to apply to the court or tribunal to recover their litigation costs from leaseholders via secondary legislation. This means the Secretary of State and Welsh Ministers can create and amend exemptions to the application requirement both now and in the future where deemed necessary.

172. We think that the power to set exemptions to the application requirement should only be used where necessary and proportionate. This is to ensure leaseholders are protected from unjust litigation costs from their landlord.

173. Views are sought on a proposal to use the exemption power relating to landlord’s recovering their litigation costs as an administration charge in cases where a landlord seeks to recover a debt (e.g. for unpaid service charges) through the County Court and the leaseholder admits the debt or does not respond to or defend the claim. We understand the majority of such claims in the County Court, in particular to recover service charge debts, are undefended. Under court rules, landlords must include their litigation costs in the “particulars of claim” (part of their court application) if they are relying on a contractual right to costs by relying on a term in the lease. If a claim is undefended, landlords can apply to the County Court for a default judgment. The process to do so is quick and does not require a hearing or for a judge to consider the underlying facts of a case.

174. Similarly, where a leaseholder admits a debt, the County Court will issue an order for the leaseholder to pay the amount admitted. Again, this does not require a hearing to be held, or for a judge to review the facts of the case (for the admitted part of the claim).

175. We anticipate that it would therefore be burdensome for the courts to consider an application for the landlord’s litigation costs where a debt claim has been admitted to or undefended; in these cases the leaseholder would likely be deemed “at fault” for the debt and therefore it is likely a court would allow a landlord to recover their litigation costs as an administration charge (as long as the lease has a relevant term upon which the landlord is able to rely).

176. A possible impact of such an exemption might be that more leaseholders defend debt claims where they may not otherwise have done so, so as to require their landlord to make an application for their litigation costs. However, our preliminary view is that if a leaseholder does owe the debt and they only defend the claim in order to require their landlord to make an application for their litigation costs, it is likely that the relevant court or tribunal will find in favour of the landlord on the debt and will allow the landlord to recover their litigation costs from the leaseholder.

177. For cases where a leaseholder defends a claim brought against them for debts, the landlord would then be required to apply to the relevant court or tribunal to pass on their litigation costs to leaseholders (whether that is from the individual leaseholder as an administration charge; or from multiple leaseholders as a service charge).

178. We are proposing that this exemption to the landlord application requirement only applies to landlords seeking to recover their litigation costs from an individual leaseholder through the administration charge. This will mean the exemption does not extend to landlords in these cases seeking to recover their costs from multiple leaseholders through the service charge. Our initial view is that litigation costs recovered from an individual leaseholder as an administration charge will be from the leaseholder involved in proceedings who, in the proposed case, has admitted or not defended the claim. It may not be fair or appropriate for landlords to be able to recover their litigation costs from such cases from multiple leaseholders (including those not involved in proceedings) via the service charge without applying to the court or tribunal to consider whether this is just and equitable in the circumstances.

Question 89
Should there be an exemption to the requirement for landlords to apply to the court or tribunal in order to recover their litigation costs as an administration charge where a landlord has issued a debt claim in the civil court (e.g. for the debt of an unpaid service charge) where the leaseholder has admitted to the claim or not defended the claim? [Yes/No]

If no, explain your answer. [Free text]

Are there any further considerations or unintended consequences to this proposed exemption? [Free text]

Question 90
We would welcome further evidence on the proportion of cases to recover a debt brought by the landlord which are undefended or admitted to by the leaseholder. [Free text]

Question 91
We would also welcome evidence from leaseholders about whether they have ever had to pay a landlord’s litigation costs as part of a debt claim, and if so, how much were those costs (£)? [Free text]

Question 92
Are there any other cases where you think there needs to be an exemption to the landlord requirement to apply in order to recover their litigation costs as an administration charge? [Free text]

Question 93
We are aware that some landlords may not be able to recover their litigation costs from an individual leaseholder as an administration charge due to the terms of the lease. Are there instances that such an exemption should be made to allow a landlord to recover their litigation costs through the service charge without an application to the court or tribunal? [Free text]

Question 94
These measures will apply to social landlords who are seeking to pass their litigation costs onto leaseholders. We would welcome views from social landlords and their leaseholders on any further considerations in relation to the power to exempt certain situations from the landlord application requirement. [Free text]

v) Further detail on the proposed exemptions regarding debt claims – partially defended claims and appeals

179. There may be debt claims in the civil court where the leaseholder partially admits the debt but defends another part of the debt. In these cases, we understand the claim goes to a hearing for a judge to deal with the defended part, and they will consider any associated litigation costs. We are minded not to extend the exemption to the requirement for landlords to apply to the court/tribunal in order to recover their litigation costs as an administration charge in cases where a debt claim is only part admitted.

180. In addition, there may be some instances where a leaseholder applies to the court to set aside a default judgment, which is how a leaseholder can appeal a default judgment. For example, if the landlord has served papers to the incorrect address (and therefore the leaseholder did not receive notice of the claim).

181. Where a leaseholder has successfully applied to set aside a default judgment (and therefore the claim becomes defended), we are proposing the exemption will cease to apply. This means if a leaseholder has successfully applied to set aside a default judgment, the landlord will need to apply to the relevant court or tribunal to recover their litigation costs from the leaseholder.

182. Where a leaseholder has unsuccessfully applied to set aside a default judgment however, and the landlord has incurred further litigation costs defending the application, we anticipate it would be burdensome for the court to consider any further application for the landlord’s litigation costs. We therefore propose that the exemption to the landlord requirement to apply to recover their litigation costs through an administration charge should extend to cases where the leaseholder has unsuccessfully applied to set aside a default judgment.

Question 95
Where the leaseholder has partially admitted a debt (and so has defended another part of the debt) and therefore the claim will go before a judge who can then assess a landlord’s application for litigation costs, do you think the exemption to the landlord application requirement should not apply? [Yes/No]

If no, please explain your answer. [Free text]

Are there any further considerations or unintended consequences to this approach? [Free text]

Question 96
We would welcome any further evidence of the proportion of cases to recover a debt brought by the landlord which are partially admitted to by the leaseholder. [Free text]

Question 97
Do you think that the proposed exemption to the landlord application requirement should not apply where the leaseholder has successfully applied to set aside a default judgment? [Yes/No]

Are there any further considerations or unintended consequences to this approach? [Free text]

Question 98
Should the proposed exemption extend to cases where the leaseholder has unsuccessfully applied to set aside a default judgment? [Yes/No]

Are there any further considerations or unintended consequences to this approach? [Free text]

vi) Further proposed exemptions in relation to cases that are “automatically” struck out

183. The civil court is able to strike out certain cases “automatically” or without formally reviewing the case.^{[footnote 17]} The court is able to automatically strike out cases where a party has not complied with an order which states that the case shall be struck out or dismissed if the party fails to take a particular step. For example, a court might “automatically” strike out a case for failure to file a defence by a certain date. We propose a limited exemption to the requirement for landlords to apply for their litigation costs as an administration charge where the court has automatically struck out a leaseholder’s case (whether a claim or defence) because of something they have done or failed to do. For clarity, this exemption would apply to any case before the civil court which is brought by either a landlord or a leaseholder, not only debt cases (which has been the focus on the proposed exemptions in this consultation so far).

184. If a case is “automatically” struck out because of something a landlord has done or failed to do, the exemption would not apply, and the landlord would be required to apply to the relevant court or tribunal in order to recover any litigation costs from leaseholders.

Question 99
Should there be an exemption to the landlord application requirement to recover their costs as an administration charge where the civil court has automatically struck out a leaseholder’s case because of something the leaseholder has done or failed to do? [Yes/No]

Are there any further considerations or unintended consequences to this approach? [Free text]

Question 100
We would welcome any further evidence of the proportion of cases where a landlord and a leaseholder is involved which are struck out “automatically”, without a formal reviewing of a case. [Free text]

vii) Proposal to suspend the landlord application requirement in order to recover their litigation costs through the service charge until a specified event occurs

185. The 2024 Act includes powers to “suspend” the requirement for a landlord to apply to recover litigation costs from a leaseholder(s) until a specified time or event via secondary legislation.

186. We are seeking views on a proposal to use this power in the case of resident-led buildings. Resident-led leasehold buildings, such as those with Resident Management Companies and Right to Manage Companies in place, are often reliant solely on income from service charges to fund litigation. If resident-led buildings were required to apply to the relevant court or tribunal in order to recover their litigation costs from leaseholders, there is a risk that they would not be able to make a claim in the court or tribunal where needed; or they would be required to make an application to the courts seeking to recover their litigation costs from leaseholders before commencing a claim, which would make managing the building difficult and hinder timely action where it is needed. This may limit the ability of resident-led buildings to take action for the benefit of the wider leaseholders in the block.

187. If we were to suspend the requirement to apply to the court or tribunal in order to recover litigation costs from leaseholders through the service charge, this would allow resident-led buildings to collect money from the service charge temporarily before litigation (where they have an existing right under the lease to recover such costs). The resident-led building would still need to apply to the relevant court or tribunal at a later point to validate the recovery of litigation costs through the service charge (or demanded as an administration charge). This would ensure that leaseholders are still protected from unjustified litigation costs arising from proceedings, in line with the measures in the 2024 Act.

188. The proposal is that, if the court or tribunal does not allow the resident-led building to recover their costs (e.g. where they have brought a case vexatiously), the money taken from the service charge prior to the litigation would need to be repaid (or a credit balance applied) as part of the next service charge demands. This is the same level of risk that resident-led buildings currently run, where leaseholders are currently able to apply to the court/tribunal to limit their liability to pay their landlord’s litigation costs.

189. The legislation currently provides a power to set “matters” that the court or tribunal must consider when determining an application for costs; we will work with stakeholders to understand what should be included in these “matters”. However, we are proposing to include resident-led buildings. This will mean the court and tribunal will need to give consideration to whether a building is resident-led when making a decision on an application for costs and will also mean that resident-led buildings will be in a better position to understand how their costs application might be decided.

190. We propose that resident-led buildings are defined as those where a recognised Right to Manage Company or Resident Management Company has been established, or where a manager has been appointed under Section 24 of the Landlord and Tenant Act 1987.

191. We propose the “event” by which resident-led buildings are required to apply to the relevant court or tribunal for their litigation costs (so the “suspension” is no longer in place) is upon the substantive claim or application being decided – or if the case is withdrawn, struck out or a consent order is made. However, resident-led buildings will be able to apply for their litigation costs alongside the initial substantive application so as to simplify processes for resident-led buildings and the courts/tribunals.

Question 101
We would welcome further evidence about how resident-led buildings (e.g. those with Resident Management Companies in place or buildings with the Right to Manage) fund litigation when they bring a claim against a leaseholder. [Free text]

Question 102
Should the requirement for landlords to apply to the court/tribunal to recover their litigation costs from leaseholders be “suspended” until a later time for resident-led buildings (enabling them to recover litigation costs from the service charge prior to proceedings)? [Yes/No]

If no, please explain your answer [Free text]

Question 103
Should the proposed use of the suspension power apply to resident-led buildings only? [Yes/No]

If no, please explain your answer. [Free text]

Question 104
Should the definition of “resident-led buildings” (e.g. those who will have the application requirement suspended) be those where a recognised Right to Manage Company or Resident Management Company have been established, or where a manager has been appointed under Section 24 of the Landlord and Tenant Act 1987? [Yes/No]

If no, please explain your answer. [Free text]

Question 105
Should the “event” which will then require resident-led buildings to apply for their litigation costs be upon the substantive claim or application being decided, or, where relevant, upon the case being withdrawn, struck out or a consent order being made? Resident-led buildings will be able to apply for their costs alongside the initial substantive application so as to simplify processes for resident-led buildings and the courts/tribunals. [Yes/No]

If no, please explain your answer. [Free text]

Question 106
Are there any further considerations or unintended consequences to the proposed approach? [Free text]

Question 107
Do you think that any other organisation or person; or any other situation should have the requirement to apply for litigation costs, either for recovery through the service charge or as an administration charge, suspended until a later date in this way? [Yes/No]

If yes, please explain your answer. [Free text]

Question 108
We would welcome views from social landlords and their leaseholders on any further considerations in relation to the power to suspend the landlord application requirement until a time or event specified by regulations. [Free text]

viii) Further detail on the proposal for the suspension power

192. An application for permission to appeal can be made by either party following the main determination – or “substantive case”. If permission is granted, the case can then be appealed.

193. If a resident-led building loses the substantive case before a court or tribunal, as well as an application for costs they may have made for the case, they may wish to appeal that outcome. If they do this, they can also request a “stay” to put on hold the court or tribunal’s order while the case is being appealed.

194. We are suggesting that the requirement for resident-led buildings to apply to recover their litigation costs is re-suspended if the court or tribunal allows a case to go to appeal; and places a “stay” on the determination of an application for costs in a substantive case until the appeal concludes.

Question 109
Should the requirement for resident-led buildings to apply to recover their litigation costs be re-suspended if the court or tribunal agrees for a case to go to appeal and places a “stay” on the determination of an application for costs in a substantive case until the appeal concludes? [Yes/No]

Are there any further considerations or unintended consequences to the proposed approach? [Free text]

ix) Proposal for the types of cases the leaseholder right to apply to the court or tribunal for their litigation costs should apply to

195. The 2024 Act implies a term into all leases which gives leaseholders a new right to apply to the relevant court or tribunal to claim their litigation costs from their landlord. Similar to the landlord application to recover their litigation costs through the service charge or as an administration charge, the relevant court or tribunal will make a decision on costs that it considers just and equitable in the circumstances and regulations will set out matters the court or tribunal must take into consideration when making an order.

196. The legislation sets out that leaseholders will only be able to apply to the court or tribunal to claim their litigation costs from their landlord where there are “relevant proceedings” concerning the lease. Among other things, “relevant proceedings” must be those to which a landlord and leaseholder are both party; concern a lease of a dwelling to which that landlord and that leaseholder are both party; and relates to a matter of a description specified in regulations. These regulations will seek to ensure that the leaseholder right to apply to claim their litigation costs from their landlord broadly aligns with the right to recover litigation costs which we understand many landlords are able to recover under the terms of the lease.

197. Below in Table 2 and Table 3, are lists of cases (split into claims generally made in the civil court and applications generally made in the relevant tribunal – though some cases can be heard before either court/tribunal) that we are proposing to include in the regulations which will set out the types of cases the relevant proceedings must relate to for the leaseholder right for costs to apply.

Table 2. Cases generally made in the civil court

Issue	Type of claim	Leaseholder making or defending a claim, including appeals
Possession and forfeiture	Breach of covenant	Defending a claim made by a landlord
Arrears (this could include arrears of a service charge, administration charge or ground rent)	Breach of covenant	Defending a claim made by a landlord
Other breach of the lease	Breach of covenant	Making a claim or defending a claim made by a landlord
Nuisance claims	Breach of covenant	Making a claim or defending a claim made by the landlord
Landlord unreasonably withholding consent for improvements (Section 19(2) of the Landlord and Tenant Act 1927)	Breach of covenant/statutory duty	Making a claim against the landlord
Service charge monies not held in trust (Section 42 of the Landlord and Tenant Act 1987)	Breach of trust/statutory duty	Making a claim against the landlord

Table 3. Applications generally made in the relevant tribunal

Issue	Type of application	Leaseholder making an application or opposing an application made by a landlord, including appeals
Determination of breach of covenant or condition	Section 168, Commonhold and Leasehold Reform Act 2002	Opposing an application made by a landlord
Service charge reasonableness	Section 19, Landlord and Tenant Act 1985	Making an application
Liability to pay service charge	Section 27A, Landlord and Tenant Act 1985	Making an application
Enforcement of duties relating to service charges (not yet brought into force)	Section 58, the 2024 Act	Making an application
Administration charge reasonableness	Paragraph 2, Schedule 11, Commonhold and Leasehold Reform Act 2002	Making an application
Liability to pay administration charges	Paragraph 5, Schedule 11, Commonhold and Leasehold Reform Act 2002	Making an application
Enforcement of duty to publish administration charge schedules (not yet brought into force)	Section 61, the 2024 Act	Making an application
Challenge to a landlord’s nominated insurer (where a lease requires the leaseholder to insure the property with an insurer nominated by the landlord)	Paragraph 8 of the Schedule, Landlord and Tenant Act 1985	Making an application or opposing an application made by a landlord
Right to claim where excluded insurance costs charged (not yet brought into force)	Section 59, the 2024 Act	Making an application
Enforcement of duty to provide insurance information (not yet brought into force)	Section 60, the 2024 Act	Making an application
Dispensation of consultation requirements for major works	Section 20ZA, Landlord and Tenant Act 1985	Opposing an application made by a landlord
Appointment of a manager	Section 24, Landlord and Tenant Act 1987	Making an application

198. We are minded to provide that the leaseholder right to apply for their costs from their landlord is broadly in line with the right to recover litigation costs that we understand many landlords currently have under the terms of the lease. We would welcome views and further evidence on whether lease terms allowing for the recovery of litigation costs from leaseholders generally give landlords the right to recover their costs for varying a lease (i.e. an application to the relevant tribunal under Section 35 of the Landlord and Tenant Act 1987); and views on whether leaseholders should be given the right to apply to the court or tribunal to claim their litigation costs from varying a lease from their landlord under Section 35 of the Landlord and Tenant Act 1987, either by making an application or opposing an application made by a landlord.

Question 110
Should the leaseholder right to apply to the court or tribunal to claim their litigation costs from their landlord broadly align with the right to litigation costs that landlords have? [Yes/No]

Are there any further considerations or unintended consequences to this approach? [Free text]

Question 111
Do you think the proposed cases (those set out in Table 2 and 3) should be those that relevant proceedings must relate to in order for the leaseholder to have the right to apply to the court or tribunal to claim their litigation costs from their landlord? [Yes/No] If no, please explain your answer. [Free text]

Question 112
Do you have any views and evidence on whether lease terms allowing for the recovery of litigation costs from leaseholders generally give landlords the right to recover their costs for varying a lease (under Section 35 of the Landlord and Tenant Act 1987)? [Free text]

Question 113
Do you think leaseholders should be given the right to apply to the court or tribunal to claim their litigation costs from varying a lease (under Section 35 of the Landlord and Tenant Act 1987) from their landlord – either by bringing a claim or defending a claim? [Yes/No]

Question 114
These measures will apply to leaseholders who have social landlords. We would welcome views from social landlords and their leaseholders on any further considerations in relation to the leaseholder right to apply to the court/tribunal to claim their litigation costs from their landlord. [Free text]

x) Transition to the new litigation costs regime

199. Landlords, leaseholders and the sector more generally will need time to adapt to the new litigation costs provisions. Most notably, we will need to ensure that there is a robust policy for how these measures will come into effect for cases already in the courts, and that there is limited scope for abuse or manipulation.

200. Our initial view is that there should be a date set a certain amount of time after the regulations bringing these measures into effect are made, and any applications made on or after that date should be treated as being made under the new rules introduced in the 2024 Act. Applications made before this date would be treated under the existing rules, and cases run through to completion.

Question 115
What transition period do you envisage being sufficient to provide time for landlords, resident-led buildings and the courts to transition to a new system for litigation costs once the regulations have been made? [1-2 months/3-4 months/5-6 months/More than 6 months]

Are there any further considerations or unintended consequences to the proposed approach? [Free text]

Part 2: New additional service charge reforms

3. New proposed reforms of the major works regime

201. A lease will specify which areas of buildings the landlord and leaseholder are each responsible for maintaining. The landlord is normally responsible for maintaining, repairing and sometimes improving the structure of the building as well as common parts, such as roofs, stairways and structural walls, or assets such as lifts or a communal boiler. Some works to maintain, repair or replace these parts of the building may be planned, but others may be unexpected for example, due to emergency repairs.

202. Works are defined as ‘major works’ for the purpose of existing legislation if they cost more than £250 per leaseholder (known as ‘qualifying works’). Existing rules concerning expenditure on major works are also commonly known as “Section 20”, in reference to that part of the 1985 Act and accompanying regulations. They were introduced to give leaseholders a say on works carried out on their building, who carries that work out, and advance notice on when they might take place (a detailed overview of the existing regime is provided in Annex H). For major works a landlord is required to carry out a two-stage consultation process with leaseholders before carrying out any works. Separately, there are similar processes in place if a landlord enters into a ‘Qualifying Long Term Agreement’, where a contract lasts more than 12 months and costs more than £100 per leaseholder. In some circumstances, only one stage of consultation is required.

203. It is good practice for landlords to as far as possible plan ahead for major works and seek to set monies aside in advance. For example, the lifespan of parts of the fabric of the building or assets may be anticipated. This is because one-off and unexpected bills for major works can be stressful and difficult to finance for many leaseholders, which can be several thousand pounds per leaseholder for a major repair or refurbishment programme. In spite of the existing Section 20 regime, many leaseholders also do not receive sufficient warning over the need for and timing of works. This gives them little opportunity to make arrangements to cover the often substantial sums required. Poor planning and communication about major works expenditure can also lead to an unfair lottery for leaseholders. For example, one leaseholder may live in a building for many years and in effect, not contribute to the replacement of a lift if they sell their flat before work is undertaken and there is no reserve fund setting aside money for this future expenditure. In contrast, the leaseholder that moves in may face a large bill for the works having only just moved in.

204. The current arrangements for major works have come under criticism from both leaseholders and landlords, and for a number of reasons including:

a) Proportionality – the consultation thresholds (£250 for qualifying works and £100 for Qualifying Long Term Agreements) have not changed for over 20 years, and so inflation has pulled relatively minor works and repairs into scope. The process itself takes at least three months which may be excessive for straightforward works;

b) Asymmetry – leaseholders can find it difficult to engage with aspects of the consultation process, to make meaningful observations or actively participate in the process;

c) Transparency – leaseholders do not receive sufficient warning of the works, nor a sense of the full costs of the work sufficiently early in the consultation process, leaving them with a sudden bill of thousands of pounds which they might struggle to pay; and

d) Planned works – the Section 20 process seeks to consult leaseholders in anticipation of forthcoming major works, but in themselves do not require landlords to plan ahead. Leaseholders may only be given a number of months notice of a major bill, whereas the need for major works may well be known many years in advance.

205. The previous UK government asked Lord Best to lead an expert working group and report on regulation of managing agents, as well as make recommendations around the fees and charges that leaseholders face. The Regulation of Property Agents report concluded in 2019 and recommended a number of reforms around major works. These include that the UK government should consider:

a) making use of a reserve fund mandatory in both new and existing leases;

b) if reserve funds are introduced, how to ensure that it is effectively funded, such as being underpinned by a professionally certified asset management plan; and

c) a wider review of the effectiveness of the consultation procedures.

206. We agree with Lord Best’s proposals, and this consultation seeks views on reforming the existing regime, so that it delivers for landlords, managing agents and leaseholders. The measures set out below should be seen as a total package but can be introduced individually.

3.1 Mandating reserve funds and planning for major works

i) Reserve funds

207. Reserve funds are funds collected over time to cover the costs of planned future large items of expenditure, such as the replacement of a lift or roof.

208. Some leases, particularly in newer properties, require reserve funds, with contributions to them forming part of the service charge demand, and monies are held in trust. Other leases permit a voluntary reserve fund, where landlords and leaseholders may agree to set one up. Many existing leases do not require a reserve fund at all.

209. Reserve funds have a number of benefits. They allow costs to be smoothed over time so that individual leaseholders may be asked to contribute a smaller sum each year for a number of years, rather than nothing at all followed by one very large bill. This also means that costs may be fairer as they are contributed to over time by the leaseholders that benefit from having or using the infrastructure or asset, rather than just the leaseholders that happen to be present when the cost is incurred. They also help reduce delays to necessary works caused by the inability of leaseholds to pay large sums at short notice. Reserve funds may also make properties more attractive to buyers, as they are an indication of the good management of a building and prospective buyers could even choose to buy one property over another where a block has a well-funded reserve fund compared to one without. Especially where reserve funds are maintained in tandem with transparent information on planned future maintenance (see ‘asset management plans’ below).

210. We recognise that contributing to a reserve fund will result in increased service charges. This may be difficult, especially for leaseholders struggling to pay for existing regular service charges. But those same leaseholders risk significantly greater financial difficulties when a large major works bill is required to be paid. Inability to pay a large bill could put a leaseholder’s ownership of their property at risk and may also negatively affect other leaseholders by delaying necessary works to take place. There are similarities with putting money aside for a pension. A key difference here though is that failure to financially plan ahead may not only negatively affect an individual leaseholder, but in a shared building, may also negatively affect fellow leaseholders in the building too. We believe that given the longer-term benefits and how it will help minimise risk of large one-off bills, we are minded to propose that use of reserve funds should be mandated. We are seeking views on this proposal as well as how it could be implemented to benefit both new and existing leases.

211. We think all new leases created for flats should have a reserve fund, and would like to encourage and make it easier for existing leaseholders to set up reserve funds too. The UK government wishes to make commonhold the default for new flats and will consult on banning the use of leasehold for new flats later this year. This consultation will consider the case for exemptions where use of leasehold may still be necessary as well as transitional arrangements in advance of a ban so that the pipeline of new much needed supply is not negatively affected. Therefore, either temporarily, in advance of a ban for new builds, or in the longer term for any necessary exemptions as well as for the existing leasehold stock, we believe that leaseholds should be provided on the best possible basis for homeowners. And reserve funds should be a key part of this improved offer for leaseholders.

212. While landlords and leaseholders can today agree to vary their leases, and could do so to create a reserve fund, the current law does not make this easy. Doing nothing will not result in an increase in the number of funds being created and saved into.

213. To increase provision of reserves in existing blocks, we propose to introduce both new primary and secondary legislation to:

a) make it easier to vary a lease to set up a fund, using secondary legislation powers;

b) allow for the establishment of a reserve fund, regardless of the terms in the lease, through primary legislation. Here, a criteria to allow a new reserve fund to be set up could be set out. This might include:

i. Requiring regular landlord consultation of leaseholder appetite to create a reserve fund (e.g. proactively advertising the absence of a reserve funds and seeking views about setting one up as part of the new annual report);
ii. Setting a threshold of 50% support of all leaseholders who live in the block, above which landlords must formally ask leaseholders if they want a reserve fund;
iii. Setting out a time period, by which all existing leaseholds without a reserve fund, save for any specified exemptions, should create one.

214. We think that the following principles should underpin greater use of reserve funds:

a) Reserve funds should be held in trust and not be used for regular service charge expenditure;

b) Reserve funds should be tied principally to long term maintenance plan for works in the building. This would ensure landlords and leaseholders are clear on why funds are needed and what they are expected to cover. We set out further details in paragraphs 216 to 226.

c) Reserve fund contributions should be collected in the same proportions as existing service charges, and as part of the service charge demand.

d) New reserve funds should, in most circumstances, be protected for a period to allow them to build up, recognising that there will still be situations when it is appropriate to draw on these funds sooner than expected; and

e) Landlords should be transparent with leaseholders about the intended use of and contributions held in reserve funds. This could be done through the annual report and service charge accounts.

215. Use of reserve funds may not be feasible nor necessary in all circumstances. We are minded to exclude certain types of properties or landlords from a requirement to set up a reserve fund. These include:

a) Local authorities (where they are the superior landlord or landlord with the repairing obligation on buildings), given challenges around the setting up of reserve funds within a Housing Revenue Account;

b) Retirement homes where they are covered by fixed service charges so there is no need to create a separate reserve fund; and

c) Small, leaseholder-run dwellings (e.g. four units or fewer) on the grounds of proportionality, though equally they should benefit from reforms to make setting up a reserve fund easier should they wish to voluntarily set one up.

Question 116
Do you agree that reserve funds should be mandated for new leases? [Yes/No]

If no, please explain why [Free text]

Question 117
Do you agree that UK and Welsh governments should legislate to mandate or encourage creation of reserve funds for existing leases where leaseholders want it? [Yes/No]

Question 118
Do you have any other comments or observations on how reserve funds should work in practice that need to be taken into account when preparing legislation? Provide details [Free text]

216. Reserve funds should be for a specific purpose. Our preference is that they are used in tandem with an Asset Management Plan (AMP) or similar arrangements (sometimes referred to as Long-term Maintenance Plans, Life Cycle Assessments, Capital Expenditure Plans or, in Commonhold, Reserve Fund Studies).^{[footnote 18]} These plans are used to assess the condition of a property, forecast future repairs and maintenance, and may project the costs of these works. They cover the refurbishment and replacement of specified items and works, seek to anticipate the length of time that passes before each repair or replacement is necessary, and the anticipated costs. There is well established practice where the lifespan or service requirements of infrastructure or assets may be estimated, based upon existing practice or manufacturers recommendations. The building itself will require inspection and periodic review to inform and where necessary update the plans.

ii) Proposals for the use of AMPs and how they could be prepared

217. AMPs should provide landlords and leaseholders with a long-term forward look of the scope and extent of major works required on a building over a specified period. Our view is that AMPs should cover, at the very least:

a) Any works required to meet health and safety and building safety requirements relating to the maintenance of buildings;

b) Any works required for the landlord to meet any other statutory obligation regarding the physical condition of the building; and

c) Any works required for the landlord to meet their maintenance and repair obligations under the terms of the lease.

218. We think that it is important to set a framework around the preparation of AMPs to ensure that they are used effectively, and are proportionate so as to avoid excessive cost. We propose four principles to guide the use of AMPs:

a) AMPs should be developed through a combination of surveys and desktop documents such as general building condition surveys, fire risk assessments or other desktop reports. They could be supplemented by reports on specific issues where appropriate, such as asbestos, lift maintenance, electrical safety, building safety cases, prepared periodically and in line with other statutory obligations. The age of the building also needs to be taken into account: e.g. new builds will need less information initially, and are likely to be covered by the developer’s warranty agreements;

b) AMPs should cover a period of between 5 to 10 years ahead. Once produced, the plan should not require review or amendment for 5 years until the next review unless a significant issue is identified in the interim period;

c) AMPs should also provide indicative costs. This means:

i. Landlords should be clear about what costs cover, such as whether it is solely the costs of the works or other wider relevant costs, such as scaffolding, professional fees, project management fees or Value Added Tax.
ii. The AMP should, if possible, refer to documents that allow leaseholders to make their own assessment of costs increases if works are planned for later in the plan period;
iii. Landlords should be clear about whether they include industry standard contingency of 15% of the total costs, to account for any unexpected works that may arise, and to account for any shortfall in estimates and inflation; and
iv. AMPs should make it clear which works are or might be covered by a building warranty (which is especially relevant for a new building).

d) AMPs should be signed off by a competent person, such as a chartered building surveyor, who is able to make an informed decision on works that may or may not be necessary.

iii) Scope of Asset Management Plans

219. We want as many leaseholders as possible to benefit from greater upfront notice and information about major works to be carried out. For this reason, we propose that AMPs should be prepared and maintained for all new leases in flats, unless specifically exempted.

220. We consider that AMPs should be prepared for existing leasehold blocks. Where a landlord is already required to prepare an AMP our expectation is that they would review their existing arrangements, and refine, if necessary, to ensure the AMP complies with any new obligations.

221. We would welcome views on whether any landlords should be exempt from preparing an AMP. Given the close relationship and proposed link with reserve funds (as discussed at paragraphs 214 and 216 above) there are grounds to align the exemptions. We think AMPs should be prepared for all leasehold blocks, except for the following:

a) Local authorities (where they are the superior landlord or landlord with the repairing obligation on buildings) as they already have separate arrangements in place;

b) Retirement homes covered by fixed service charges, as leaseholder costs will not change; and

c) Small, leaseholder-managed buildings (e.g. four units or fewer) on the grounds of proportionality.

222. We would welcome views on the scope of buildings or circumstances where proposals to require use of an AMP should be excluded, and why.

iv) Communication of AMPs to leaseholders

223. Leaseholders should be informed about the content of the AMP both at the outset and where it is subject to change. We propose that a copy of the AMP is made available on request and referred to in the proposed annual report. We would welcome views on how AMPs should be communicated and presented to leaseholders. We propose that leaseholders could either receive a copy of the AMP in the format and style of the surveyor’s choosing or a summary in a prescribed manner. We also propose that leaseholders should have the right to see the full plan as well as to receive copies of or inspect any document which makes up the AMP.

Question 119
Do you think that AMPs should be mandated for new leases? [Yes/No]

Question 120
Do you think that AMPs should be mandated for existing leases? [Yes/No]

Question 121
Do you have any comments or observations on how the details of AMPs should be communicated to leaseholders? Provide details [Free text]

v) Implementation and cost

224. Given the scale and impact of the proposals (including on industry), we recognise the need for potentially a long lead-in period to enable landlords to transition and develop AMPs required for their buildings. There should also be a distinction between existing and new leases, in respect of implementation.

225. If you agree that reserve funds and AMPs should only apply to blocks of four or more dwellings, we propose the following arrangements for new leases:

a) Landlords must prepare an AMP within two years of the first sale of a unit in the building; and

b) The AMP should account for any New Homes warranty policies, other warranty policies or limited obligations facing Shared Ownership homeowners.

226. For existing leases, we welcome views on what transition arrangements may be necessary and whether there should be any differentiation for types of buildings. For example, should leaseholders in buildings over 11m (the height at which leaseholder protections in the Building Safety Act 2022 apply) expect to receive an AMP more quickly than other buildings?

Question 122
What should be an appropriate transition period for introducing AMPs? Provide details [Free text]

Question 123
If you are a landlord, do you already prepare and provide an AMP to leaseholders? [Yes/No]

If so, how long does it take you? [Free text]

Question 124
What are the differences between these proposals and the information you currently provide to leaseholders? Provide details [Free text]

Question 125
What additional costs or savings would you face if you had to implement the proposals? Be as specific as possible, including how long it would take you to prepare an AMP [Free text]

Question 126
If you are a landlord, would you pass on the costs of preparing AMPs to leaseholders? [Yes/No]

vi) Enforcement 

227. We propose that there be proportionate and effective sanctions if a landlord that was required to and failed to prepare an AMP within the time period required or produced an AMP of a substandard quality. We think that appropriate sanctions should be similar to those set out in the 2024 Act where a landlord fails to provide an annual report. This would allow a leaseholder to apply to the appropriate tribunal to force the landlord to comply and seek any relevant damages for failure to provide information within the specified timescale (and the tribunal could issue damages of up to £5,000).

Question 127
Do you agree with the proposed approach to enforcement of the provision of AMPs? [Yes/No]

If no, what other way do you suggest? [Free text]

3.2 Reforming the major works consultation process

228. With more warning (via information provided in the new annual report, section 2.1) of major works and better means (via proposed greater use of reserve funds, as proposed in section 3.1) to cover the costs of them, leaseholders should face fewer unplanned one-off bills.

229. Leaseholders should still be informed and consulted about major works, so they can influence what works are carried out, when and by whom. Here we set out proposals to streamline and improve the major works consultation process so that it is both proportionate and relevant.

i) Scope and threshold

230. There is a strong case to raise the financial threshold for requiring a major works consultation to take place, which has remained unchanged at £250 per leaseholder since 2003 (or 2004 in Wales). Due to changes in the value of money over time, it is increasingly bringing small repairs and maintenance activities into scope which was not intended. For example, a block of 12 leasehold flats would require a full consultation, which currently may last up to 3 months, on replacing a standard metal communal entrance door costing a total of £3,000 (but only £250 per flat). Raising the threshold would allow relatively minor and straightforward repairs such as these to be undertaken straight away. It would also allow statutory consultations to focus on genuinely ‘major works’, which was its original intention.

231. There is also uncertainty surrounding what counts as ‘qualifying works’ for the purposes of consultation. In particular, whether they include associated costs, such as legal costs, surveyor or engineer fees, as well as the works alone. This has resulted in considerable case law on the issue. For the avoidance of doubt, we propose to clarify the definition of major works so that ‘qualifying works’ do extend to these other associated costs.

232. Uprating the threshold in line with today’s prices would set it from £250 to around £450 to £500. Likewise, uprating Qualifying Long Term Agreements (QLTAs) would mean raising the threshold from £100 to around £175 to £200. Taking account of our preference to include associated fees, we propose to set the threshold even higher. For this reason, we propose uprating the threshold at which Section 20 consultations are required to £600 for major works per leaseholder and £300 for QLTAs per leaseholder.

Question 128
Do you agree that the threshold should change to £600 for major works and £300 for QLTAs? [Yes/No]

If no, please set out an alternative proposal and explain your reasoning? [Free text]

233. The scope of activities caught under the existing major works consultation regime is set out in the 2003 and 2004 regulations. Virtually all contracts and services are included (such as hiring managing agents, buying in contractors to carry out refurbishment works, or the procurement of utilities such as electricity for communal areas). Activities which are exempt include contracts of employment or other very specific contractual arrangements (such as agreements between a local authority and a tenant management organisation).

234. We would like views on whether the existing exemptions from the major works consultation process should remain or be changed. We think there is a case for expanding the exemptions in two circumstances:

a) Energy contracts. Landlords or managing agents are encouraged to shop around to secure the best value for money deal for themselves and their leaseholders. However, the energy market is fast-moving, and many tariffs and contracts are time-limited (sometimes lasting only a day). Longer lasting contracts generally have higher prices. Therefore, to get the best deal, the landlord will either have to seek dispensation well in advance or, alternatively, rely on 12-month contracts which are often set at a higher price.

b) Single utility providers. There may be circumstances where, due to the nature of the industry, the service can only be provided by a single provider. This includes heat networks where there is only one provider.

235. Neither arrangement is compatible with the current major works consultation regime and may add unnecessary cost for leaseholders and landlords alike. We propose that there are grounds to exempt utilities providers that meet the requirements above.

236. Such exemptions, should we think be accompanied by appropriate levels of transparency for the leaseholder about the contracts entered into, so they can understand the arrangements and challenge landlords where they feel that a contract is unreasonable or does not offer value for money. One way to support this is to require, for energy contracts in particular, that leaseholders are notified of:

a) Details of providers approached, and quotes obtained;

b) Details of the chosen contractor, total cost and length of agreement; and

c) Disclosure of any connection between the landlord and any broker or provider

Question 129
Should energy and other utility contracts, as well as single energy providers, be taken out of the Section 20 consultation process if they meet specific criteria set out in paragraph 234? [Yes/No]

Question 130
Are there any other activities which should be removed from the Section 20 process? [Yes/No]

Please explain your answer [Free text]

Question 131
Where existing activities are taken out of the Section 20 process – do you consider there should be a mechanism whereby leaseholders are notified of these costs? [Yes/No]

ii) Qualifying long term agreements (QLTAs)

237. Many landlords, but in particular local authority landlords, have contracts that last longer than 12 months and therefore qualify as QLTAs. These often cover contracts for general repairs and regular planned maintenance of buildings.

238. The value of the QLTA determines the procurement route. For some contracts, local authorities must tender for the work in line with public procurement legislation. In such circumstances, the landlord is required to carry out a competitive contract award process that is based on objective, relevant and proportionate criteria.

239. Schedule 3 to the 2003 Regulations (and 2004 Regulations in Wales) provides for when a QLTA has been agreed under public procurement rules and yet the cost to an individual leaseholder meets the threshold for qualifying works. Here, the obligation is for landlords to provide a notice setting out:

a) What works need to be carried out, and why;

b) The estimated costs; and

c) How leaseholders may make observations and inspect documents. The landlord is required to have regard to any of these observations.

240. Where the public procurement route is used, leaseholders will need to rely on engagement in that process, rather than the QLTA process, if they want to influence who carries out the work. We understand that typically, few leaseholders engage with the public procurement process, and this lack of involvement and challenge has been a cause for concern for leaseholders who feel they cannot participate in the process.

241. Once a QLTA is signed there is no scope to influence the choice of contractor. There are few incentives for the contractor to keep costs to a minimum – this risks costs inflating through, for example, multiple sub-contracting (each with a potential to add project management fees). Equally there is no scope to break the contract and choose a new supplier without compensation or, if there is a framework agreement in place, there are no contractors willing to bid for the work.

242. We would welcome views on how the QLTA process works in practice and how it might be improved. One option is to increase awareness of landlord intention to use the QLTA process, which would enable leaseholders to engage with it. For example:

a) Requiring landlords to provide advance notice of the intent to procure where possible under the proposed annual report that will be required by Section 21E of the 1985 Act; and/or

b) Ensuring that prospective leaseholders wishing to buy a leasehold property are made aware of the presence of any QLTA.

243. Another option could be limiting the term of any QLTA. Currently with QLTAs, landlords are able to get round the 12-month time-limit, which means they can avoid running a QLTA consultation. Case law has clarified that it is the initial period that defines whether or not a contract is a QLTA, and so, by setting the initial contract as just short of a year, landlords are able to issue a fresh new contract to the same provider. This allows the same person or company to be employed for many years without any real or transparent assessment of value for money. To address this, we could limit the maximum term of a QLTA so that landlords must, as a minimum, market test the service on a periodic basis (e.g. every five years). This would not apply to contracts let under public procurement rules since they are subject to more open competition.

Question 132
What are your experiences of QLTAs? Provide details [Free text]

Question 133
What suggestions do you have to improve the consultation arrangements for leaseholders where there is a QLTA in place? Provide details [Free text]

Question 134
Should some contracts be subject to market testing on a regular basis – for example, every 5 years?  [Yes/No]

Provide details [Free text]

iii) New arrangements

244. The majority of major works consultations require two-stages (see Annex H). This process can sometimes take too long, and also fails to empower leaseholders as intended. Rather than abolishing the two-stage process we believe that there is room to make a number of improvements to it as set out below.

a) Mandating use of standardised forms.

245. We propose mandating the use of standardised forms that landlords (or managing agents) must provide to leaseholders. This would seek to aid their understanding of what works are proposed, when they are likely to take place, and whether the costs of the works are likely to be fully or partially covered by any monies held in a reserve fund (and if partially, to what extent). It might also provide space for observations, such as any planned disruption which leaseholders might benefit from knowing (e.g. if certain areas or assets, such as a lift of the building may not be accessible for a period of time). Greater information about how major works will affect leaseholders would seek to foster greater engagement and participation by more leaseholders in the consultation process. For example, the notices could comprise:

Notice of intention

i) Description of the works;
ii) Costs – provide an initial estimate of costs (including add on costs);
iii) Funding – clarity if from reserve funds; relative share of total cost;
iv) Timeline – approximate timescales: start date, duration, when additional funds might be required;
v) Contractor nominations – set out minimum requirement for nominating a contractor (e.g. level of public liability insurance, required accreditations and qualifications, health and safety policy, references etc);
vi) Encouraging participation/engagement – where to request further information and send observations;
vii) Observations – e.g. regarding possible disruption or restricted access to assets or parts of the site.

Notice of Estimates

i) Description – any major changes to the original proposal;
ii) Costs – final costs (including VAT);
iii) Anticipated leaseholder contributions – what share of the costs (minus any reserve fund) they are liable for;
iv) Timelines – Updated timelines.

b) Speeding up the consultation process

246. We could speed up the consultation process. Currently, leaseholders have 30 days at both stages of the consultation to respond to any concerns, during which they may also inspect any documents. Shortening the deadline will speed up the process and, if leaseholders are sufficiently warned of works due to be carried out, may not negatively affect the quantity or quality of responses. However, it is vital that the consultation gives leaseholders sufficient time to properly consider proposals. On balance, we would welcome views on the advantages and disadvantages of shortening the consultation period to 21 days at both stages of the process.

c) Setting a deadline for works to begin

247. Works can sometimes not start for some time after the conclusion of the consultation period. During this time some residents may have either forgotten about the work or moved on, with incoming residents unaware of the current position and who then face a sudden bill for works. A further consequence is that the longer the delay, the higher the risk of increased costs.

248. To encourage timely commencement of major works after they have been consulted on, we would welcome views on the merits of requiring that works starts within a fixed time limit of the final notification of the award of contract. If works do not start until after this time, then the consultation process must be carried out again but could be for a shorter period of time if the same works are to be carried out. We think a sensible time period could be within 12 months, with leaseholders kept informed about progress through the annual report. We would welcome observations.

d) Making it easier and quicker to receive information

249. A further consideration is how the information is provided. There are often many recipients entitled to see relevant documents. Currently, everything must be provided in hard copy and sent by post. This is dependable, but also potentially time-consuming and expensive compared to providing information electronically.

250. To ensure all leaseholders can access information, we believe that receiving documents by post should remain an option for those who do not wish to or are unable to receive electronic communications. However, there are potential efficiencies in sending out documents electronically, and so we are interested in views on allowing the communication of documents by email subject to the agreement of the leaseholder.

Question 135
Which of the following options do you think will speed up the consultation process?[Standardised form/shorter consultation period/setting a deadline for works to begin].

Explain the reasons for your answer [Free text]

Question 136
What further changes to the proposed measures, or otherwise, should we make to improve the process? Provide details [Free text]

iv) Better leaseholder engagement where there is an intermediate landlord

251. Where an intermediate landlord is in place, they are consulted directly by the landlord (the ‘head lessee’) of the building as part of the major works Section 20 process. This means that leaseholders in these situations, and who often remain liable to pay towards the works, have no rights or role in the consultation process.

252. We think the leaseholder who owns the flat should have the right to engage in the Section 20 process. This means that the landlord of the building will need to know the details of the resident leaseholder in order to provide details of the proposed works.

253. To enable this, we think the simplest approach is to place an obligation on the intermediate landlord to inform the landlord of the building at the outset and each time there is a change in ownership of the lease of a flat. This will avoid the landlord having to check each time they need to issue a notice.

Question 137
Do you agree that, where intermediate landlords are in place, both the resident leaseholder and intermediate landlord should be consulted? [Yes/No]

If no, please explain the reason for your answer [Free text]

v) Clarifying rules around dispensation

254. Landlords may apply to the appropriate tribunal to be able to dispense with the requirements to consult. This might be to speed up delivery of works because of an emergency, such as to address a pressing safety or security matter which might affect leaseholders’ ability to live in the building (such as unforeseen structural damage, severe leaks or replacing a roof damaged by the weather). It is for the appropriate tribunal to determine whether or not to grant dispensation on an individual basis.

255. The impact and effect of the current arrangements were heavily influenced by a Supreme Court decision in 2013, Daejan vs Benson Investments Ltd. This case made a number of critical observations about the case for dispensation and the purpose of Section 20 consultations more generally.

256. The Supreme Court determined that when considering dispensation, the main factor is any financial prejudice suffered by the leaseholder due to the landlord’s failure to consult properly. The consultation process is therefore not to be seen as an end in itself, but as part of the overall discussion on whether or not the service charge being requested was reasonable. Consequently, the burden of proof shifted from landlords to leaseholders, who now have to demonstrate that they are prejudiced from the failure to consult. If successful, the landlord still has the power to disprove their claim. If the landlord’s failure to consult did not affect the scope, quality or costs of the work, dispensation can still be granted, despite the seriousness of the breach. The appropriate tribunal also expects leaseholders to indicate what observations they would have made if they had been given all the necessary information, essentially reconstructing what would have happened in the consultation process.

257. As a result, dispensation has frequently been granted, undermining the protections that the Section 20 process was intended to provide. We think that there is merit in retaining the consultation process for major works and are minded to legislate to clarify the legislation to ensure that dispensation is granted only when properly justified.

258. We are seeking views on a number of potential improvements to the dispensation procedure. For example:

a) Change existing legislation to make it clear that the appropriate tribunal must consider the extent to which the landlord tried to formally consult leaseholders, when deciding whether to grant dispensation; and

b) Set clear grounds for when dispensation is justified. This might include emergency works which must be carried out in the interest of health and safety of individuals living in the building, or which risks the structural integrity of the building.

259. We are also minded to propose an exemption from the need to seek dispensation if a sufficient number of leaseholders and the landlord agrees that a consultation is not necessary – a ‘majority dispensation’. For example, in a small block where the landlord and all leaseholders agree with proposed works and plan to undertake them (e.g. a small resident led block, such as a Resident Management Company). It would be important that there was due process and a sufficient audit trail to confirm that this was the will of the majority. This would be required to avoid disputes or people changing their minds after the event and contesting the lack of a consultation. For such an arrangement to work effectively and fairly, we would welcome views on whether the following criteria should be used should before a ‘majority dispensation’ could proceed:

a) Any leaseholder agreement to avoid dispensation should take place in advance of works being carried out;

b) The threshold for foregoing this right should be set high. For example, it would need to be at least 85-90% of all leaseholders who pay towards the major works;

c) In order to create a clear audit trail, landlords would need to prepare a “prescribed consent document” to set out the terms of the agreement and works for which dispensation had been waived.

Question 138
Do you agree with the plans for reforming the existing dispensation arrangements? [Yes/No]

Please explain your answer [Free text]

Question 139
What other proposals would you recommend that we take forward to reform the dispensation arrangements? Provide details [Free text]

vi) Other comments

260. The proposals in this section seek to improve the existing arrangements. However, we are open to alternative ideas to support leaseholders and landlords. We would welcome any general observations about the Section 20 process, any other aspect of the regime not mentioned above, as well as proposals for an alternative regime, or other changes to the existing regime that we should make.

Question 140
Do you have any other comments about the major works process that should be considered? Provide details [Free text]

3.3 Protecting leaseholders’ money

261. Landlords, and managing agents acting on their behalf, manage substantial sums on behalf of leaseholders including service charges to cover day-to-day maintenance activities, and also reserve funds for prospective works. These sums will likely grow as the level of service charge rises and more blocks introduce reserve funds.

262. It is important that leaseholder funds are managed effectively and securely, and that landlords and managing agents are transparent in their dealings with leaseholders money. Existing legislation, set out under Section 42 of the Landlord and Tenant Act 1987 (“the 1987 Act”), requires all landlords (other than those exempt, e.g. a local authority) to hold all client money funds in trust, and at a financial institution authorised under the Financial Services and Markets Act 2000.

263. The current approach seeks to ensure funds held may only be used for paying service charge expenses, and that they are treated separately from the landlord’s other assets. It also provides greater protection for leaseholders in the event of bankruptcy or disputes. It is a breach of trust to use service charge money for purposes other than those stated in the lease, and for example, to use service charge money from one block to pay the bills of another.

264. Nevertheless, parties holding leaseholder money have considerable flexibility on how they manage the sums they receive. For example, they may set up a separate client account for each block of flats they manage, or they may create one universal account for all blocks. Members of professional bodies may also have other restrictions in place for their members.

265. Through the new provisions on service charge demands and annual reports under the 2024 Act, landlords and managing agents will need to provide assurance to leaseholders that all client money funds are held in trust. Furthermore, if asked, landlords will be required to provide evidence that this is the case. This could be, for example, a letter from the financial institution which is holding funds to confirm that the money is being held on trust.

266. We are keen to understand whether the current regulatory framework is sufficiently robust, or if there are areas where enhancements or alternative approaches are required. We are also interested in views in light of the proposals in this consultation for the much greater use of reserve funds, which will mean more leaseholder money being held by landlords.

267. Section 42A of the 1987 Act, which was introduced by Section 156 of the Commonhold and Leasehold Reform Act 2002, is yet to be implemented. This would require landlords and managing agents to hold service charge funds from separate groups of service charge payer in designated separate accounts (subject to some limited exemptions such as local authority landlords). These accounts will be regarded as designated if the relevant UK financial institution has been notified in writing by the landlord that sums standing to the credit of the trust fund are to be held in it, no other funds are held in the account, and the account is of a description specified in regulations by the Secretary of State and Welsh Ministers.

268. There are a number of reasons why these provisions have not yet been enacted, including concerns about the overall administrative cost and obligations facing landlords and managing agents, as well as concerns about their deliverability and impact on the UK financial sector to face in setting up potentially many thousands of new accounts within a short period of time. However, we would welcome views on whether you agree with the purpose of Section 42A is sound and, if we were minded to bring forward these provisions, what changes to the existing regime would be required to make it work effectively.

269. We are also open to new proposals on how to ensure service charge monies are kept safe, especially those that are cost-effective, proportionate and effective to support those tasked with collecting and guarding service charge monies.

Question 141
Leaseholders only: Have you ever had difficulties obtaining proof or ascertaining the amount held in your service charge account? [Yes/No]

Question 142
Leaseholders only: Have you ever had monies missing from your service charge account (or reserve fund account if one exists)? [Yes/No]

Question 143
When taking over management of a property, whether as residents who have bought the freehold or acquired management, or as a landlord or managing agent, have you ever had difficulties with recovering the monies from the previous party? [Yes/No]

Question 144
What evidence do you have that the existing arrangements are or are not working effectively? Provide details [Free text]

Question 145
What extra measures, if any, should we introduce? Explain your reasoning. [Free text]

3.4 Protections for leaseholders paying fixed service charges

270. Some leaseholders and social housing tenants have fixed service charges. Leases and tenancies with fixed service charges specify the exact amount owed in exchange for a specific list of services. There are different types of fixed service charge: fixed forever which do not change year on year, fixed for each accounting period but linked to periodic reviews and/or revised according to a fixed formula (e.g. linked to the Retail Price Index), or fixed for one or more years and then subject to a regular review. In the case of leases, the fixed service charge may include an element for a reserve fund contribution, which is not a ‘service’.

271. There are advantages to fixed service charges. They tend to be lower than variable charges and more predictable over time, which can help those paying them with managing their personal finances. There is also no risk of receiving an unexpected reconciliation demand, as often happens with a variable service charge. This may be attractive to retired leaseholders on a fixed income or with finite savings. The landlord is also better able to budget their estimated spend and set the level of the service charge accordingly.

272. There is a trade-off for fixed service charge payers in that they have fewer rights than those who pay variable charges. They are not able to apply for a determination to the appropriate tribunal on the reasonableness of the fixed service charge or whether the work undertaken is of a reasonable standard. Some fixed service charge payers may, though, be able to access the Housing Ombudsman or a property redress scheme if they have complaints about their landlord’s behaviour and how their service charges are calculated.

273. The limited rights of leaseholders and tenants to challenge fixed service charges risks allowing some landlords to potentially keep costs as low as possible through under-providing services, whilst collecting the full amount of the fixed service charge as set out in the lease. This can include offering a reduced service (e.g. reducing the regularity of cleaning services) to using a very cheap contractor who fails to do the job properly.

274. Although fixed service charges tend to be lower than variable charges, some leaseholders and tenants have experienced significant increases in the level of their fixed service charge in recent years. This is mainly from those where charges are reviewed periodically, and we are keen to explore the case for further protections, and what measures might apply.

275. Through this consultation we are already taking steps to drive up access to information for tenants and leaseholders who pay fixed charges. Furthermore, leaseholders and tenants of local authorities may request information under the Freedom of Information Act 2000, and in England, we are also seeking to increase transparency for social tenants of Private Registered Providers (PRPs) through the introduction of the new Social Tenant Access to Information Requirements (STAIRs). STAIRs will require PRPs to proactively publish specific information about the management of their social homes.

276. One suggestion to go further is to allow those who pay fixed service charges to have the right to challenge their reasonableness at the appropriate tribunal. However, there are risks to this option. For one, leaseholders could be able to challenge the previous 6 (or sometimes 12) years of service charges. This is likely to present practical and operational difficulties if the landlord overcharges for one year but undercharges the next. It may also impact on established business models employed by the retirement sector – which charge a fixed charge to enable retirees to manage their finances, but then recoup costs through an event fee. Applying the test of reasonableness could impact on this business model and may result in a move towards the variable service charge regime, with unintended consequences for those accessing this kind of housing. It could also result in higher operating costs for social landlords, potentially resulting in the diversion of resources away from building new homes, improving the housing stock, and providing services for residents.

277. We would welcome evidence of any significant challenges facing those paying fixed service charges, and what steps we might need to take to protect them.

Question 146
What evidence do you have that those paying fixed service charges are not sufficiently protected? Provide details [Free text]

Question 147
Should tenants and leaseholders be able to challenge the reasonableness of fixed service charges at the appropriate tribunal (or some other body)? [Yes/No]

Question 148
What measures can or should be put in place to better protect leaseholders and tenants who pay fixed service charges? Provide details [Free text]

3.5 Powers to appoint a manager or replace a managing agent

i) Powers to appoint a manager

278. In cases of serious management failure by the landlord, or landlord’s managing agent, leaseholders are able to apply to the tribunal to request it appoints a manager to take over functions of the landlord (or managing agent). Leaseholders need to follow a process and prove substantive fault by the management. The landlord will usually be given time to remedy any concerns before the leaseholder may apply to the appropriate tribunal. The tribunal may make an order if it is satisfied that it is “just and convenient” to do so in all circumstances of the case.

279. Lord Best’s report highlighted concerns with the current process and called for the UK government to review the effectiveness of the existing regime.

280. The existing process has not changed for over 35 years and there are areas where it could potentially be improved, including:

a) Simplifying the preliminary notice. Before an application can be made to the tribunal to have a manager appointed, the leaseholder is usually required to serve a preliminary notice on the landlord setting out the reasons why they intend to make the application. It is common to serve a preliminary notice, and as a result of the landlord complying with that notice, further related breaches are then discovered. A second notice for those new breaches then needs to be served if they are to be taken into account, and if so, the process starts over again. We could explore whether there is a way to ensure that further related breaches can be added to the initial notice through correspondence rather than a new notice served;

b) Expanding the grounds for challenge under Section 24. To ensure it remains up-to-date and consistent with wider leasehold reforms. The 2024 Act already expands the grounds for challenge in England to include failure to belong to a redress scheme. However, there may be additional grounds for challenge, such as persistent non-compliance with new obligations proposed in this consultation (e.g. non-provision of reserve funds, and ongoing failure to provide information on service charges, administration and permission fees);

c) Expanding tribunal powers to deal with less egregious matters. The threshold for the appointment of a manager is rightly high. However, there may be benefits in giving the appropriate tribunal powers to issue a new, separate order whereby the tribunal sets expectations for improvement that the landlord must report back after a period of time to show the tribunal what action they have under taken. Failure to improve could then allow the tribunal to give a formal order to appoint a manager. This would mean redefining the threshold before the tribunal can act; or

d) Allowing an automatic renewal of an order in certain circumstances. For example, if the landlord has not completed their obligations to any reclaim their responsibilities, or if the appointed manager needs additional time to discharge their prescribed responsibilities. This could make the process simpler for leaseholders if they do not need to go through a full hearing to extend the order and would transfer the burden to the landlord to prove to the appropriate tribunal that they will manage the property effectively if the order ends.

281. We welcome observations on the existing arrangements and where improvements may be made.

Question 149
If you have tried to use the Section 24 process in the past, please describe your experiences with the existing process? Provide details [Free text]

Question 150
How could the existing process for appointing a manager under Sections 21 to 24 of the Landlord and Tenant Act 1987 be improved? Provide details [Free text]

ii) Powers to replace a managing agent

282. Where their landlord is not a Resident Management Company or Right to Manage Company, leaseholders have very limited rights in determining who should be the managing agent looking after their building, if their landlord opts to appoint one.

283. Under existing Section 30B of the 1985 Act, Recognised Tenants’ Associations (RTAs) are able to serve a notice on the landlord to require the landlord to consult them before engaging a managing agent. If the landlord wishes to hire a managing agent, the landlord has to serve notice on the RTA informing them of the name of the proposed agent, which obligations the agent will discharge, and allow a month for the RTA to make observations before the agent is hired. However, this right only applies where there is an RTA, is not open to a majority of qualifying tenants, and the landlord is not obliged to take full account of the RTA’s views.

284. As set out in paragraph 278 above, when there is significant failure by the managing agent, Section 24 of the 1987 Act allows for a manager to be appointed by the appropriate tribunal. However, the threshold for the tribunal to act is very high, the remedy is also fully discretionary and so not guaranteed. We want to expand the opportunities available to leaseholders to have a say on who their agent will be. Lord Best’s report suggested two further means to consider to achieve this:

a) Right to veto – a majority of qualifying leaseholders having the right to veto a landlord’s choice of managing agent; and

b) Right to switch – a right permitting a majority of qualifying leaseholders to serve notice on the party responsible for performing management functions, ordering that party to change managing agents within a specified time period.

285. Neither option is the same as Right to Manage, where leaseholders take over management (via a Right to Manage Company) or where leaseholders make an application to the tribunal to request an Order to appoint a manager to carry out landlord functions ). In both scenarios, the party responsible for management loses control of their management functions. Right to Manage in particular can only be applied for if the leaseholder satisfies various qualifying criteria, and so the remedy is not available to all. These new options would allow the party responsible for performing management functions to retain their rights to manage, but require them to switch to a different agent, if so required. We also propose that the qualifying criteria would be less strict, allowing more leaseholders to exercise such new rights. We would welcome views on whether we should look to bring forward these measures, and if so, how they should function so that they work effectively for landlords, leaseholders and managing agents.

a) Right to veto a managing agent

286. Giving leaseholders the right to veto a managing agent would require a landlord to notify qualifying leaseholders of their intention to appoint a new agent. A suggested process for vetoing a managing agent is as follows:

a) The landlord must serve a notice when it intends to appoint an agent, with:

i. the name of the proposed managing agent;
ii. the landlord’s obligations to the tenants which it is proposing the agent discharges on their behalf; and
iii. disclosure of whether there is any formal connection between the landlord and the proposed agent (for example, do they belong to the same group of companies).

b) The landlord must give at least 28 days from the serving of the notice for leaseholders to make observations on the proposed appointment;

c) If a certain percentage (say 50%) of leaseholders object to the agent, then the landlord must propose a new agent; and

d) The landlord may not pass on costs to leaseholders for carrying out this process.

287. We recognise that there are practical issues to work through, including:

a) Impact on the process for appointing agents. Landlords would need to commence negotiations earlier than currently;

b) Landlord right to contest the challenge. In particular we are interested in views on who would be the right body to resolve any challenge;

c) Scope to exercise these powers. It may not be practical to apply this to all leaseholders (such as leaseholders in mixed tenure blocks with a social housing landlord).

288. We welcome thoughts on this proposal, whether and if so, how to bring it forwards effectively.

b) Right to switch managing agents

289. Like the right to veto a managing agent, we recognise that leaseholders wishing to exercise a new right to request switching of agents would need to follow a set process. Our thinking is that this should largely mirror the right to veto:

a) Over 50% of qualifying leaseholders in the block could serve notice that they were unhappy with their managing agent, requiring the landlord to act. Leaseholders would also be able to propose their preferred agent, if applicable;

b) The landlord must serve a notice within a specified period when it intends to appoint an agent, setting out:

i. the name of a new managing agent;
ii. whether it accepts the leaseholders’ nominated agent, if provided;
iii. the landlord’s obligations it proposes the agent discharge on their behalf; and
iv. whether there is any formal connection between the landlord and the proposed agent (for example, do they belong to the same group of companies).

c) The landlord must give at least 28 days from serving the notice to allow leaseholders to make observations on the proposed appointment;

d) If over 75% of all leaseholders in the block object to the managing agent, the landlord must propose a new agent; and

e) the landlord cannot pass on costs to leaseholders for this process.

290. As with the proposed right to veto a managing agent, there are some practical issues to work through with such a measure. These may include:

a) Landlord right to challenge. In particular, we are interested in views on which body should determine any challenge;

b) When the power could be used. Managing agent contracts normally last just under a year and early termination may entitle the agent to compensation. We welcome views on whether the landlord should only be required to switch agent at the end of the existing contract, or earlier in the process;

c) Scope of these powers. It may not be practical to apply this to all leaseholders. For example, there would be challenges in getting this process to work in mixed tenure blocks; and

d) Enforcing this approach. We would welcome views on how this measure can be practically enforced. Options here might include: relying on local authorities to enforce (with the power to award penalties); an application to the tribunal to issue an Order requiring a change in agent; and isolating leaseholders from any landlord costs in both taking the landlord to court and the process for appointing a new managing agent.

291. Should these measures be brought forward, we recognise a need for limits to how frequently these rights may be exercised (e.g. annually) to avoid creating endless uncertainty for leaseholders and landlords as well as avoiding unnecessary disruption to the effective management of buildings.

292. We would welcome thoughts on the merits of this proposal and should you support them, how to bring it forward effectively.

Question 151
Do you think that leaseholders should have rights to veto or force a change in managing agent, without the party responsible losing full control? [Yes/No]

Question 152
What are your thoughts about the proposed process and challenges in developing these measures? Provide details [Free text]

Question 153
Who is best placed to enforce the measures and resolve any disagreement between landlords and leaseholders? Provide details [Free text]

Question 154
Are there any unintended consequences that the UK and Welsh governments should be aware of in considering these measures? Provide details [Free text]

3.6 Providing information and services digitally

293. Most leases require that information is provided to leaseholders on paper by post. Increased digitalisation offers significant efficiencies, and can potentially save considerable time and cost for both landlords and leaseholders alike (for example the cost of printing and posting hard copies of documents). For this reason, we are keen that more documents should be provided by electronic means if possible, and our proposals for implementing the 2024 Act seek to increase flexibility where possible. We note, however, that electronic service is not necessarily appropriate in all circumstances and there are those leaseholders who need or prefer hard copy documents. There must, therefore, be a careful balance when considering an effective method of service.

294. Our preferred approach is to retain existing lease obligations as the default position. This will often require correspondence by post. However, we recognise that many leaseholders may well be content to accept demands (and other documents) in an electronic format. We would therefore, welcome views on what further steps we can take to facilitate greater digitalisation of services, the potential savings it can offer and what safeguards could be put in place to avoid disputes, for example that documents were never received. One option is that leaseholders should have the right to request communication by electronic means and formally ask the landlord to do so by way of a formal notice asking for communication by electronic means. In the event that a leaseholder serves notice, the landlord must then serve that leaseholder electronically, until otherwise notified by the leaseholder.

295. We could also seek to give landlords the option to approach leaseholders to ask if they would prefer or be willing to receive correspondence and documents by email instead of by post.

Question 155
Do you think that more documents or exchange of correspondence between landlords and leaseholders should be done via electronic means? [Yes/No]

Question 156
What steps can the UK and Welsh governments take to encourage greater digitalisation of service? Provide details [Free text]

Question 157
What safeguards should be in place to protect leaseholders? Provide details [Free text]

4. Qualifications of managing agents

4.1 Introduction

296. Managing agents play a vital role in the housing market. They are appointed by the landlord in leasehold properties, or estate management companies in the case of freehold estates, to manage and maintain multi-occupancy buildings (or estates) on their behalf. They provide a variety of services and deliver a number of functions on behalf of their client, including significant financial responsibilities, resident liaison, managing disputes, arranging and managing contracts and ensuring compliance with statutory obligations. This section of the consultation specifically relates to managing agents of commonhold, leasehold and share of freehold properties and estate managers of freehold estates. It does not relate to estate or letting agents.

297. Agents’ services are paid for through a fee agreed with the landlord or estate manager, which is then passed on to leaseholders through the service charge and to homeowners on freehold estates through a management fee that forms part of the estate management charge.

298. However, under existing law, anyone can become a managing agent. There is limited existing regulation and no legal requirement for agents to demonstrate that they possess the required knowledge and skills to carry out the required functions. This is important given the increasing complexity in managing buildings (particularly buildings over 18m tall), the complex financial responsibilities, the vital role managing agents will play when measures are brought forward to make commonhold the default tenure for new flats, as well as known challenges in managing common areas on freehold estates.

299. As set out in our Written Ministerial Statement of 21 November 2024, the UK government is committed to protecting leaseholders in England from abuse and poor service at the hands of unscrupulous managing agents. We are determined that leaseholders and those living on freehold estates must be better protected from those agents who provide a poor service. Too often, leaseholders are left to endure unacceptable living conditions due to poor building maintenance, are not treated with courtesy or respect and have valid concerns ignored. Alongside this, the UK government is committed to supporting the many managing agents who provide a fair and competent service to leaseholders and to help the industry professionalise, attract talent and provide a pathway to a career in property management.

300. In 2018 the previous UK government committed to regulate the whole property agent sector (covering estate, letting and managing agents) and commissioned a working group chaired by Lord Best to advise how to do it, yet over multiple years it failed to take any action. The UK government is looking again at Lord Best’s Report of July 2019, which made a range of recommendations, including codes of practice, qualifications, and a licensing scheme overseen by a new regulator for all property agents.

301. Ahead of any decisions on wider elements of the report, the UK government believes that there is an overwhelming case to introduce mandatory professional qualifications for managing agents in England now. This will fulfil one of the key proposals of Lord Best’s Report. Accordingly, the proposals in this section of the consultation rely on the existing institutional framework to deliver mandatory qualifications, rather than any future changes we may consider. However, we are clear that this consultation is not the final step in the regulation of managing agents.

302. Qualifications will ensure that managing agents have the skills they need to deliver their role to a high standard. They will provide reassurance to residents that agents are competent to manage their properties or estate, are able to pre-empt issues that arise as a result of poor maintenance and repair and can implement building safety measures in a timely manner. Leaseholders will benefit from improved value for money delivered by qualified managing agents through increased competence in procurement and financial issues. Qualifications will require commitment from agents, discouraging people from entering the profession for short-term reasons. Instead, qualifications will professionalise the important work of the sector, support the industry to attract and retain talent and provide an attractive pathway to careers in property management.

303. Many agents in the sector have already gained professional qualifications from the range of accredited professional bodies in the sector who offer these. This is welcome, but we believe that given the importance of the role that agents play, a voluntary approach is not enough. The proposals set out in this consultation will equip all managing agents with the skills, knowledge and experience needed to provide leaseholders and freehold estate homeowners with a high-quality service.

304. The Welsh Government are also interested to understand views on whether minimum qualifications for managing agents should be similarly mandated in Wales.

4.2 Existing Regulatory Requirements for Managing Agents in England

305. Under the Enterprise and Regulatory Reform Act 2013, property agent firms whose activities include managing properties in England must belong to a government-approved redress scheme. There are two schemes currently approved by government – The Property Ombudsman (TPO) and Property Redress (PR). TPO and PR have a number of levers to encourage compliance with their regulations and requirements, including the ability to expel members. Non-compliance is overseen at a local authority level and also in some cases by the lead enforcement authority, the National Trading Standards Estates and Letting Agents Team (NTSELAT). If an agent continues to trade whilst not being a member of a scheme, the local authority can issue fines of up to £5,000. To rejoin either redress scheme, the agent must pay any outstanding fines and comply with the redress decision.

306. Separately, the Secretary of State has powers under Section 87 of the Leasehold Reform Housing and Urban Development Act 1993 to approve, via Statutory Instrument, Codes of Practice in relation to managing agents in England. Failure to comply with the Code can be taken into account by the First-tier Tribunal and County Court in any decisions. To date, the UK government has approved two Codes:

a) the Royal Institution of Chartered Surveyors residential management Service Charge Code (3rd edition); and

b) the Association of Retirement Housing Managers Code of Practice.

307. Leaseholders may also apply to the First-tier Tribunal under Sections 21 to 24 of the 1987 Act to ask them to make an Order to appoint a manager to provide services to their block.

308. Managing agents who work solely on behalf of estate management companies on freehold estates are not required to join a redress scheme. However, Part 5 of the 2024 Act seeks to put in place a regulatory framework for homeowners on freehold estates that broadly mirrors those protections that are in place for leaseholders. These measures will be subject to a future consultation this year and, once implemented, will enable these homeowners to better hold their managing agent to account.

4.3 Existing Regulatory Requirements for Managing Agents in Wales

309. There are similarities and differences between England and Wales in this area. The Enterprise and Regulatory Reform Act 2013 requirement that managing agents belong to a redress scheme does not apply in Wales. Similarly, the extension of the requirement to join a redress scheme to estate management companies on freehold estates by means of Part 5 of the 2024 Act also does not apply in Wales.

310. Welsh Ministers are able to exercise the same powers under Section 87 of the Leasehold Reform, Housing and Urban Development Act 1993 to approve codes of practice.

311. In Wales, leaseholders may apply to the Leasehold Valuation Tribunal to seek appointment of a manager under Sections 21 to 24 of the Landlord and Tenant Act 1987.

312. Recognising these differences, Welsh Ministers are interested in exploring the potential for introducing minimum qualifications for managing agents in Wales. As such, we would welcome responses to the questions below from leaseholders and stakeholders who operate in Wales, and for input to specific questions included about whether there is a need to adapt proposals so that they function appropriately in Wales.

4.4 New qualification requirements

i) Scope of qualification requirements

313. The qualifications element of Lord Best’s report focused principally on the qualifications of individual agents, since in practice only individuals may hold qualifications. The report recognised that there is a principle across regulated professions that recognises individual responsibility. We agree that it is right that individuals are accountable for achieving qualifications.

314. However, as Lord Best’s report recognises, there are also important firm level responsibilities. The performance of companies that provide managing agent services is as important as that of the individuals who work for them. Companies create the culture in which individual agents operate – through the corporate structure that is in place, the internal policies by which their staff must adhere, and their approach to training and development. We think that is therefore a strong case for including the regulation of firms – as well as individuals - within the scope of future legislation through making managing agent firms responsible for ensuring that their staff are trained to the required level. This could be implemented in addition to individual level accountability. We are keen to hear from the industry and from interested stakeholders how this might be achieved without putting significant burdens on the firms concerned and whilst ensuring a sustainable sector.

315. We believe that in general estate managers on freehold estates should be subject to the same requirements as those managing leasehold blocks. In coming to this view, we have taken account of the similarity of the work and the fact in many cases the same firms undertake both activities. We welcome views about whether this is appropriate or if there are any other considerations of which we should take account of.

Question 158
Do you agree that individual managing agents should be accountable for gaining qualifications? [Yes/No]

Question 159
Do you think that managing agent firms should be responsible for ensuring their employees hold the required qualifications? [Yes/No]

Question 160
Do you think that the requirements in this consultation should apply to estate managers of freehold estates in the same way as managing agents of leasehold properties? [Yes/No]

If no, provide further information. [Free text]

ii) Level of qualification

316. The scope of work that managing agents carry out is extensive, ranging from procuring minor maintenance and repairs to ensuring the building safety of high-rise residential blocks. It is also subject to change over time as new technologies are developed and new regulations introduced. In addition, managing agents can be responsible for substantial budgets including sinking funds and the management of major works contracts. We consider that the level of a qualification should be appropriate to the work which an individual managing agent undertakes.

317. We consider that the functions of a managing agent may be broken down into a number of core functions. These include:

a) Day-to-day liaison with clients, including voluntary and Recognised Tenants Associations;

b) Managing property disputes and terminations - managing disputes between occupiers, dealing with complaints of noise or other anti-social behaviour in breach of leases, dealing with terminations of contracts;

c) Handling statutory requests – for example, dealing with lease extensions or variations, dealing with any breach of covenant.

d) Financial obligations – a wide range of functions including opening bank accounts on trust; preparing service charge estimates and budgets; managing service charge monies and reserve funds; collecting service charge and ground rent contributions; collecting arrears; providing copies of relevant financial documents; processing payments.

e) Insurance – advising, arranging and/or administering buildings insurance policies and renewals and/or handling associated claims; Instructing the preparation of reinstatement cost protection for insurance valuation purposes;

f) Building Management – dealing with repairs, maintenance, renewals and improvements; entering into and managing contracts on behalf of the landlord; complying with statutory requirements (e.g. on major works process); inspections of the common parts and other parts of the building; Engagement with the landlord on management issues;

g) Managing fire and health and safety issues – engaging with people qualified to carry out mandatory health and safety and fire safety inspections, and fire risk assessments;

h) Providing sales and purchase information – including offering vacant properties for let and dealing with pre-contract sales enquiries.

i) Carrying out company secretarial services – including preparing papers for and attending board meetings and Annual General Meetings, maintaining company registers;

j) Complying with obligations under the Building Safety Act 2022 (or equivalent future Building Safety legislation in Wales) – engaging with the Accountable Person and other relevant qualified person(s) to ensure relevant documents and procedures are prepared on time (e.g. Building Safety Case, Residents Engagement Strategy, complaints procedure), ensure appropriate surveys are carried out, manage or advise on applications for building assessment certificates, ensure compliance with other relevant obligations.

318. Lord Best’s 2019 Report developed a consensus that all property agents (a term which covers estate, letting, and managing agents) must be qualified to a minimum of level 3, but that managing agents of leasehold blocks should be qualified to a minimum of level 4, equivalent to the 1st year of a bachelor’s degree, using the Office of Qualifications and Examinations Regulation (Ofqual) Regulated Qualification Framework. The requirement for a level 4 qualification for managing agents recognised the complex aspects of their role in leasehold block management.

319. Many managing agents undertake functions that the UK government believes require a level 4 qualification. These functions (non-exhaustive) include: agreeing contracts and charges for property management services; advising landlords on matters such as lease assignments, extensions and variations; working with local and statutory authorities regarding operation or amendment or improvements to communal services; arranging buildings insurance; organising consents for the operation or amendment of common services; preparing or procuring the preparation of schedules of dilapidations of individual dwellings; ensuring compliance with fire regulation and health and safety requirements including arranging periodic inspections of fire prevention facilities; ensuring that landlords of higher risk buildings are in compliance with their responsibilities under the Building Safety Act 2022 (or equivalent future responsibilities in Wales).

320. However, we recognise that there may be some managing agent roles with lesser levels of responsibility or complexity that require people to undertake a lower level of qualification, e.g. Level 3 (equivalent to A-Level), in particular where staff are not performing the types of complex functions set out in the preceding paragraph.

321. We also recognise that there may be some roles within managing agent firms that require significantly higher levels of responsibility, such as a Company Director, and which might require a high level of qualification, e.g. Level 5 (equivalent to the second year of a bachelor’s degree).

322. We agree with the conclusions of Lord Best’s report and propose that as standard all managing agents should be qualified to level 4, with exceptions where the role has more or less responsibility. The UK government plans to work collaboratively with stakeholders to develop a comprehensive list of managing agent functions that require qualifications at different levels. We welcome views through this consultation about the level of qualification required for key managing agent functions.

323. In creating this proposed level of qualification, we are keen to ensure consistency with work to drive up standards of professionalism in the social housing sector in England. We are aware that in some blocks, including those primarily managed by social landlords, managing agents may provide services for both leaseholders and social housing tenants. It is important to ensure that any measures we bring forward on managing agent regulation take full account of other legal or regulatory requirements, including competence and conduct requirements proposed for the social housing sector in England under the Social Housing (Regulation) Act 2023.

Question 161
Do you agree that level 4 should be the proposed minimum level of qualifications for managing agents in most cases? [Yes/No]

Question 162
Do you agree that where agents only undertake more basic functions, a lower level of qualification could be required? [Yes/No]

Question 163
Do you agree that there are some areas where agents could require a higher level of qualification than Level 4, e.g. a Company Director, or a Managing Agent with significant building safety responsibilities? [Yes/No]

Question 164
What types of role and functions performed do you think require a) a lower or b) higher level of qualification than Level 4? Provide details [Free Text]

iii) Course content and qualification providers

324. There are already a number of qualification and training providers in the property management agent industry. We recognise that many of these courses are delivered to a high standard and that some of these courses offer all or some of the skills that managing agents require to operate effectively.

325. We agree with the conclusion of Lord Best’s report that it is important to maintain a diverse range of qualification providers to ensure competition over cost and quality. There are existing providers which offer courses in leasehold property management which provide the requisite skills that managing agents require to perform effectively. We would work with existing providers and other key stakeholders to develop the key topics and areas that courses should cover. In our preferred option (as set out in the enforcement section below), UK government would ask designated professional bodies to lead the enforcement of mandatory professional qualifications. As part of this role, UK government could also ask the designated professional bodies to agree course content requirements that courses must meet to provide managing agents and estate managers of freehold estates with the required skills and knowledge to perform effectively. As a minimum, and as recommended by Lord Best’s Report, we expect that the syllabus should cover technical skill, consumer relations, safety and ethical behaviour.

326. It is important that qualifications offered are of a sufficient quality. We agree with Lord Best’s recommendation that the Office of Qualifications and Examinations Regulation (Ofqual) can play a role in ensuring the quality of qualifications. We suggest that we require that qualifications are Ofqual-regulated, regulated through the Scottish Qualifications Authority, Qualifications Wales or the CCEA, or regulated through an equivalent regulatory system.

327. Any provider who wishes to do so should be able to deliver the qualification if they do so to the required standard, the course content covers the right topics, and they have appropriate accreditation.

328. We welcome views on how best to ensure high quality qualifications and consistency across providers.

Question 165
Which qualifications already offered by providers provide managing agents with the requisite skills and knowledge to perform effectively? Provide details [Free text]

Question 166
Do you agree that qualifications should be Ofqual-regulated or equivalent? [Yes/No]

Question 167
What do you consider to be the best way of ensuring that any syllabus prepared is robust and kept up to date? Provide details [Free text]

iv) Continuing professional development

329. Continuing Professional Development (CPD) is a feature of many professions. CPD is critical to ensuring managing agents continue to learn and retain relevant skills, and it is important that individuals, and firms that employ them, ensure that skills remain up to date.

330. We are interested in views about whether a requirement for managing agents to undertake a certain level of CPD should be set, in addition to requirements for agents to achieve a minimum qualification, or whether the promotion of CPD should be left for firms and individuals to determine. We are mindful of the risk that setting an arbitrarily high number of hours of CPD could lead to agents having less time to focus on their role.

331. We also recognise that the ease of enforcing any CPD requirement would vary depending on the approach to enforcement taken. Enforcement issues are discussed in the section below.

Question 168
Do you think that the UK government should mandate that managing agents must complete CPD? [Yes/No]

If so, how many hours of CPD should agents be required to complete and over what period? [Free text]

Question 169
Do you have any other views about requirements for managing agents to undertake CPD? Provide details [Free Text]

4.5 Implementation and Enforcement

332. We have identified three options to implement and enforce the qualification requirements. These options rely on the existing institutional framework. As set out above, the UK government is considering the wider recommendations of Lord Best’s Report and should these be taken forward, we would revisit the models of implementation and enforcement proposed below in light of this.

Option 1: Implementation led by designated professional bodies, supported by local authority enforcement (preferred option)

333. There are professional bodies in the managing agent sector who play a vital role in driving professionalisation, ethics and standards across the sector. Utilising the depth of expertise of these bodies could deliver a regulatory regime to introduce qualifications quickly and effectively. This option could also have wider regulatory benefits through the systems and requirements that professional bodies place on their members.

334. We could therefore legislate to take advantage of the existing structures that professional bodies have in place. This could involve mandating that: (a) all managing agents must be members of a designated professional body, and (b) in order to be a member of a designated professional body, agents must hold, or be working towards, an appropriate professional qualification. This approach could also involve mandating that (c) firms employing managing agents must become a member of a designated professional body; and; (d) that firms have a statutory responsibility to ensure their employees working as managing agents are qualified or are working towards an appropriate professional qualification.

335. This approach would allow the designated bodies to regulate their members to ensure that they had attained qualifications appropriate to the work that they do. The designated bodies could require members to provide confirmation that they had undertaken qualifications upon registration. Our view is that this is the strongest available option to encourage a high rate of compliance with the requirement to undertake mandatory qualifications. As such, this is our preferred option.

336. Additionally, under this option, a requirement for agents to undertake an amount of CPD could be required. If this was taken forward, the designated bodies would work with their members to ensure that they had undertaken the required level of CPD.

337. Under this option we would create a list of approved designated bodies. Professional bodies like the Royal Institution of Chartered Surveyors (RICS) and The Property Institute (TPI) already run professional membership schemes and hold the relevant expertise to undertake this role. There may also be other existing bodies who wish to apply to be designated.

338. We would set out the requirements for an organisation to become an approved designated body which would include responsibility to ensure that its members hold the appropriate level of qualifications required for work which they do. We would also set out the expectations for designated professional bodies in the approach that they take to setting the course content requirements for the qualification, the approach that they take to the implementation of the requirements and sanctions where managing agents do not comply, as well as any other issues about the way that the designated bodies implement the requirements. We could remove the body from the approved list if they do not implement the requirements accordingly.

339. We would expect that managing agents and firms that did not uphold specific professional standards could be expelled from the designated body if they do not comply, which means that they could in effect be prevented from practising if they do not take steps to remedy breaches and rejoin a scheme within a reasonable timeframe. We would also expect that if a member was expelled from one designated body, they would not be able to join an alternative body without showing that they had achieved compliance with the regulations.

340. We expect that this approach would mean that the majority of managing agents would attain appropriate qualifications where they did not hold them already. However, we acknowledge that we cannot expect the designated bodies to regulate managing agents and firms who are not members of their body. In these cases, we think that local authorities should be responsible for undertaking enforcement action against managing agents who continue to operate outside of membership schemes. We propose that there be proportionate and effective sanctions in place that local authorities could issue where individual managing agents and firms operate without membership of a designated professional body and/or operate without the required qualifications. We consider that financial penalties are likely to be an appropriate sanction.

341. We recognise that this approach would create additional cost for managing agents and firms who are not already members of a professional body, through the registration fee they would be required to pay to the professional body. We also recognise that designated professional bodies may also have further requirements that they expect agents and firms to undertake as a condition of membership. Managing agents would also face costs in undertaking qualifications.

Question 170
[Option 1] Do you think that UK government should require that all individual managing agents become members of a designated professional body, and that to do so, agents must achieve a professional qualification? [Yes/No]

Provide details [Free text]

Question 171
[Option 1] Do you think that UK government should require that all managing agent firms become members of a designated professional body, and that those firms must ensure that their members achieve a professional qualification? [Yes/No]

Provide details [Free text]

Question 172
[Option 1] What conditions should designated professional bodies have to meet to be appointed to undertake a role in the implementation of mandatory professional qualifications?

Provide details [Free text]

Question 173
[Option 1] Which existing bodies could perform the role of a designated professional body?

Provide details [Free text]

Question 174
[Option 1] Do you think that designated professional bodies would need any additional support to fulfil this role? [Yes/No]

Provide details [Free text]

Question 175
[Option 1] Do you agree with the proposed role for local authorities to undertake enforcement under this option? [Yes/No]

Explain your answer [Free text]

Question 176
[Option 1] Do you have any views about the level of cost this approach would create for managing agents?

Provide details [Free text]

Option 2: Give government-approved redress schemes a role in the implementation of mandatory qualifications, supported by local authority enforcement

342. It is already a mandatory requirement under the Enterprise and Regulatory Reform Act 2013 and Estate Agents Act 1979, that property agents whose activities include selling, letting and/or managing properties in England must belong to a government-approved redress scheme. There are two schemes currently approved by UK government – The Property Ombudsman (TPO) and Property Redress (PR). This requirement does not apply to individuals who engage in such activity as employees.

343. Under this option we would legislate to give redress scheme providers a further statutory role in the implementation of qualifications. We could require each managing agent firm to provide a list of employees to their redress scheme provider and confirm that those employees are qualified or working towards a qualification. The UK government could further legislate to require that agents undertake a set level of CPD and again this information could be provided to the redress scheme providers.

344. Under this model we would ask redress scheme providers to notify local authorities where firms do not comply with the requirements. In these cases, we think that local authorities should be responsible for undertaking enforcement action against managing agent firms who continue to operate without undertaking the required qualifications, using the information provided by redress schemes. Similar enforcement action could also be considered against individual employees who do not gain qualifications. We propose that there be proportionate and effective sanctions in place that local authorities could issue. We consider that financial penalties are likely to be an appropriate sanction.

345. This model would utilise the existing database of members that the agent redress scheme providers hold and draw upon their sector expertise and resource. However, we recognise that this role would be a significant additional responsibility for the redress scheme providers and would require changes to processes, organisational structures and that there could be funding implications.

346. We recognise that that there is currently no requirement for property managing agents of freehold estates to be a member of a redress scheme and further consideration would need to be given to this if this policy option is taken forward.

Question 177
[Option 2] Do you have any views about asking government-approved redress schemes to take a role in the implementation of the proposals? [Yes/No]

Please explain your answer. [Free text]

Question 178
[Option 2] Do you agree with the proposed role for local authority enforcement under this option? [Yes/No]

Please explain your answer [Free text]

Question 179
[Option 2] Do you have any views about the level of cost this approach would create for managing agents? Provide details [Free text]

Option 3 – Enforcement by local authorities with no statutory role for designated professional bodies or redress providers

347. Under Option 1 and 2 there is a role for local authorities in enforcement in support of either designated professional bodies or government-approved redress scheme providers. An alternative option is that there is no formal statutory role for designated professional bodies or redress providers, and instead enforcement is the sole responsibility of local authorities.

348. We would legislate to make local authorities responsible for investigating managing agents to check that they had undertaken or are working towards qualifications. We propose that there be proportionate and effective sanctions in place that local authorities could issue where managing agents operate without the required qualifications. We consider that financial penalties are likely to be an appropriate sanction. There would be no requirement for managing agents to join a professional body under this option, but professional bodies and the government-approved redress schemes could work with local authorities on a voluntary basis to provide information about managing agents who are operating in the sector and may be doing so without qualifications.

Question 180
[Option 3] Do you think that local authorities should be responsible for enforcement, with no statutory role in implementation for designated professional bodies or redress providers? [Yes/No]

Please provide any further detail for this answer. [Free text]

Implementation and Enforcement: Approach in Wales

349. As set out above, there are some different legal requirements placed on managing agents currently in Wales. Furthermore, since there is no requirement for membership of a redress scheme in Wales, one of the options for implementation and enforcement outlined above would not be applicable in Wales.

350. We are interested to understand views on whether minimum qualifications for managing agents should be similarly mandated in Wales, and what, if any, adaptations would be required to the approach outlined above in order for it to respond to the different context in Wales.

Question 181
In your view, should minimum qualifications be required of managing agents and estate managers of freehold estates in Wales, in the same way has been outlined in relation to England? [Yes/No]

Please explain your response. [Free text]

Question 182
Do you have any comments about how proposals would need to be adapted to function appropriately in Wales? Provide details [Free text]

4.6 Transition Arrangements

351. Many managing agents, especially if they belong to a professional body, already have some form of qualifications and are already meeting the proposed standards. However, many are not, and we recognise that we need to implement a transition period to allow existing managing agents time to gain relevant qualifications. In doing so, we would seek to ensure that the requirements do not disincentivise new agents from entering the market by preventing them from operating before they have gained qualifications. In particular, the UK government wants to encourage apprentices, students and trainees to develop careers as managing agents.

352. We propose that a 36-month transition period is put in place from the date that legislation is passed within which individual managing agents must ensure that they have, or are working towards, a level 4 qualification. We would define ‘working towards’ in the relevant legislation or policy.

353. Where agents have a role with less responsibility and a level 3 qualification is required, we propose that the transition period for individual managing agents to ensure that they have or are working towards a level 3 qualification is two years.

354. We also recognise that, under the preferred option, a transition period for joining a designated professional body would be appropriate for both individual managing agents and managing agent firms. We consider that this transition period could match the proposed 36-month transition period for qualifications.

Question 183
Do you consider that the proposed transition period for qualifications is appropriate? [Yes/No]

Question 184
What different transition periods for qualifications, if any, should be put in place? Provide details [Free text]

Question 185
Do you consider that, under the preferred option, the transition period for joining a designated professional body is appropriate? [Yes/No]

Provide details [Free Text]

4.7 Grandparenting

355. Many agents have undertaken or are undertaking qualifications that are already provided by the market. We do not want to make agents undertake duplicative or unnecessary training, or to discourage agents from undertaking training that is on offer now, and so we would expect that where agents already hold relevant qualifications to the required level or higher and that cover core requirements, they would not be expected to undertake new training. However, we would not expect that experience could be a substitute for a qualification.

356. We recognise that there may also be some cases where agents have undertaken or are undertaking qualifications that have provided part of the skills or knowledge required. In cases where agents are partially qualified, we would expect that agents could ‘top up’ their existing qualifications through undertaking extra individual modules, rather than undertaking a whole new qualification.

Question 186
Do you agree that where agents have already undertaken relevant qualifications to the required level for their role, that this will count as the required qualification? [Yes/No]

Question 187
Do you think that agents should be able to top up qualifications? [Yes/No]

Question 188
Do you have any other views on grandparenting? Provide details [Free Text]

4.8 Costs and Impacts

357. We recognise that for some agents this proposal will result in higher costs, which will likely be passed on through management fees, though this would be shared between many leasehold customers and are likely to be relatively small. We also think that there can be value for money (VfM) improvements through qualified, competent managing agents, e.g. through gaining better VfM through procurements. We would welcome any further information on the cost incurred by individual agents to become qualified and the extent to which savings can be delivered through the efficiency gains of becoming qualified. We would also welcome further information about the costs and impacts to individuals and firms of the different enforcement approaches proposed.

358. We would also like to understand the likely costs and impacts of this intervention at a sector wide level. To support this, we would like to understand the proportion of managing agents that already hold qualifications and to what level.

Question 189
Do you have any views on the cost of this intervention? Provide details [Free text]

Question 190
What proportion of managing agents and estate managers of freehold estates already hold qualifications and to what level (please provide information for the market as a whole or for your managing agent firm, as applicable)? Provide details [Free text]

Question 191
How would managing agents and estate managers of freehold estates finance their qualifications and to what extent would cost be passed onto leaseholders? Provide details [Free text]

Question 192
What other issues relating to qualifications should we be aware of or take into account? Provide details [Free text]

5. Other information

Differences between England and Wales

359. Many of the subordinate legislation making powers which must be used before the 2024 Act can be implemented are exercisable by the Secretary of State in relation to England and by the Welsh Ministers in relation to Wales. Our governments are interested in understanding whether there are differences between England and Wales which could merit a different approach across these policy proposals in each country.

360. The answers to these questions will assist us in understanding what practices may be different in each country, and therefore whether a different approach is required.

361. Additionally, there is an opportunity for divergence between England and Wales in the approach to further future reforms, outlined in the second part of this document. We are interested to understand views on the case for change and the particular benefits or otherwise for Wales of undertaking reforms in relation to the major works regime, other service charge matters and minimum qualifications of property managing agents set out in this consultation. Responses to these questions will be taken into account by Welsh Ministers in decisions about future legislative reforms for Wales.

Question 193
If you are a leaseholder, where is your property? [England / Wales / I own properties in both]

Question 194
If you are a managing agent, landlord, or other interested party, where are the properties that you deal with? [England / Wales / both]

Question 195
Are you aware of any differences in the operation of service charges or service charge accounts between England and Wales? [Yes/No]

If yes, please give details. [Free text]

Question 196
Are you aware of any differences in the operation of the transparency of insurance policies between England and Wales? [Yes/No]

If yes, please give details. [Free text]

Question 197
Are you aware of any differences in the operation of the litigation costs regime between England and Wales? [Yes/No]

If yes, please give details. [Free text]

Question 198
In your opinion, are there reasons why an alternative approach should be taken in Wales than that for England, in relation to the potential for future reforms explored in the second half of this consultation (the major works regime, other service charge matters and minimum qualifications of property management agents)? [Yes/No]

If yes, please give details. [Free text]

Question 199
What, in your opinion, would be the likely effects of these proposals on the Welsh language? We are particularly interested in any likely effects on opportunities to use the Welsh language as well as making sure the Welsh language is treated equally to English. Please provide details. [Free text]

Do you think that there are opportunities to promote any positive effects? Please provide details. [Free text]

Do you think that there are opportunities to reduce any negative effects? Please provide details. [Free text]

Question 200
In your opinion, could these proposals be formulated or changed so as to have positive effects or more positive effects on using the Welsh language and on not treating the Welsh language less favourably than English? [Yes/No]

If yes, please elaborate. [Free text]

Question 201
In your opinion, could these proposals be formulated or changed so as to mitigate any negative effects on using the Welsh language and on not treating the Welsh language less favourably than English?

If yes, please elaborate. [Free text]

Impact on environment and protected characteristics

362. In addition to the more specific policy design questions, we are keen to understand perceived impact in a range of areas.

363. The Public Sector Equality Duty, set out in the Equality Act 2010, requires we have due regard to the need to eliminate discrimination, advance equality of opportunity and foster good relationship between different groups. We are seeking views on potential impacts on those groups.

Question 202
Do you believe any of the proposals put forward could negatively or positively impact individuals who have a protected characteristic?

[Yes/No] Age
[Yes/No] Disability
[Yes/No] Sex
[Yes/No] Gender Reassignment
[Yes/No] Marriage or civil partnership
[Yes/No] Pregnancy and maternity
[Yes/No] Race (colour, nationality, ethnic or national origins)
[Yes/No] Religion or Belief
[Yes/No] Sexual orientation

[If you have answered yes to any of the above]
Please explain your rationale and evidence your thinking where possible. [Free text]

364. The Environment Act 2021 established a legal duty in England to also have due regard to five Environmental Principles. Their purpose is to prevent environmental damage and enhance the environment. The impact of policies on the environment, biodiversity and climate change are also an important consideration in Wales. We are keen to hear views on any perceived environmental impacts of this policy.

Question 203
Do you anticipate any environmental impacts from this policy, either positive or negative? [Yes/No]

If yes, please elaborate. How could positive impacts be maximised or negative impacts be mitigated or minimised? [Free text]

365. We are keen to understand any anticipated impacts on the justice system as a result of this policy. Consideration of these impacts is important in ensuring that service provision within the justice system is not negatively affected.

Question 204
Do you anticipate that this policy would be likely to impact the judicial system? Examples could be an increase or decrease in applications to court or tribunals, increasing the length or complexity of cases, and new requirements on judicial recruitment or training. [Yes/No]

If yes, please elaborate. [Free text]

Question 205
Do you anticipate that this policy would disproportionately impact local authorities? [Yes/No]

If yes, please elaborate. [Free text]

About this consultation

This consultation document and consultation process have been planned to adhere to the Consultation Principles issued by the Cabinet Office.

Representative groups are asked to give a summary of the people and organisations they represent, and where relevant who else they have consulted in reaching their conclusions when they respond.

Information provided in response to this consultation may be published or disclosed in accordance with the access to information regimes (these are primarily the Freedom of Information Act 2000 (FOIA), the Environmental Information Regulations 2004 and UK data protection legislation).  In certain circumstances this may therefore include personal data when required by law.

If you want the information that you provide to be treated as confidential, please be aware that, as a public authority, the Department is bound by the information access regimes and may therefore be obliged to disclose all or some of the information you provide. In view of this it would be helpful if you could explain to us why you regard the information you have provided as confidential. If we receive a request for disclosure of the information we will take full account of your explanation, but we cannot give an assurance that confidentiality can be maintained in all circumstances. An automatic confidentiality disclaimer generated by your IT system will not, of itself, be regarded as binding on the Department.

The Ministry of Housing, Communities and Local Government will at all times process your personal data in accordance with UK data protection legislation and in the majority of circumstances this will mean that your personal data will not be disclosed to third parties. A full privacy notice is included below.

Individual responses will not be acknowledged unless specifically requested.

Your opinions are valuable to us. Thank you for taking the time to read this document and respond.

Are you satisfied that this consultation has followed the Consultation Principles?  If not or you have any other observations about how we can improve the process please contact us via the complaints procedure.

Personal data

The following is to explain your rights and give you the information you are entitled to under UK data protection legislation. Note that this section only refers to personal data (your name, contact details and any other information that relates to you or another identified or identifiable individual personally) not the content otherwise of your response to the consultation.

1. The identity of the data controller and contact details of our Data Protection Officer    

The Ministry of Housing, Communities and Local Government is the data controller. The Data Protection Officer can be contacted at dataprotection@communities.gov.uk or by writing to the following address:

Data Protection Officer
Ministry of Housing, Communities and Local Government
Fry Building
2 Marsham Street
London
SW1P 4DF

2. Why we are collecting your personal data

Your personal data is being collected as an essential part of the consultation process, so that we can contact you regarding your response and for statistical purposes. We may also use it to contact you about related matters.

We will collect your IP address if you complete a consultation online. We may use this to ensure that each person only completes a survey once. We will not use this data for any other purpose.

Sensitive types of personal data

Please do not share special category personal data or criminal offence data if we have not asked for this unless absolutely necessary for the purposes of your consultation response. By ‘special category personal data’, we mean information about a living individual’s:

• race
• ethnic origin
• political opinions
• religious or philosophical beliefs
• trade union membership
• genetics
• biometrics 
• health (including disability-related information)
• sex life; or
• sexual orientation.

By ‘criminal offence data’, we mean information relating to a living individual’s criminal convictions or offences or related security measures.

3. Our legal basis for processing your personal data

The collection of your personal data is lawful under article 6(1)(e) of the UK General Data Protection Regulation as it is necessary for the performance by MHCLG of a task in the public interest/in the exercise of official authority vested in the data controller.  Section 8(d) of the Data Protection Act 2018 states that this will include processing of personal data that is necessary for the exercise of a function of the Crown, a Minister of the Crown or a government department i.e. in this case a consultation.

Where necessary for the purposes of this consultation, our lawful basis for the processing of any special category personal data or ‘criminal offence’ data (terms explained under ‘Sensitive Types of Data’) which you submit in response to this consultation is as follows. The relevant lawful basis for the processing of special category personal data is Article 9(2)(g) UK GDPR (‘substantial public interest’), and Schedule 1 paragraph 6 of the Data Protection Act 2018 (‘statutory etc and government purposes’). The relevant lawful basis in relation to personal data relating to criminal convictions and offences data is likewise provided by Schedule 1 paragraph 6 of the Data Protection Act 2018.

4. With whom we will be sharing your personal data

MHCLG may appoint a ‘data processor’, acting on behalf of the Department and under our instruction, to help analyse the responses to this consultation. We may also make use of Artificial Intelligence in the analysis of responses. Where we do, we will ensure that the processing of your personal data remains in strict accordance with the requirements of the data protection legislation.

5. For how long we will keep your personal data, or criteria used to determine the retention period.

Your personal data will be held for two years from the closure of the consultation, unless we identify that its continued retention is unnecessary before that point.

6. Your rights, e.g. access, rectification, restriction, objection

The data we are collecting is your personal data, and you have considerable say over what happens to it. You have the right:

• to see what data we have about you
• to ask us to stop using your data, but keep it on record
• to ask to have your data corrected if it is incorrect or incomplete
• to object to our use of your personal data in certain circumstances
• to lodge a complaint with the independent Information Commissioner (ICO) if you think we are not handling your data fairly or in accordance with the law. You can contact the ICO at https://ico.org.uk/, or telephone 0303 123 1113.

Please contact us at the following address if you wish to exercise the rights listed above, except the right to lodge a complaint with the ICO: dataprotection@communities.gov.uk or

Knowledge and Information Access Team
Ministry of Housing, Communities and Local Government
Fry Building
2 Marsham Street
London
SW1P 4DF

7. Your personal data will not be sent overseas.

8. Your personal data will not be used for any automated decision making.

9. Your personal data will be stored in a secure government IT system.

We use a third-party system, Citizen Space, to collect consultation responses. In the first instance your personal data will be stored on their secure UK-based server. Your personal data will be transferred to our secure government IT system as soon as possible, and it will be stored there for two years before it is deleted.

Glossary of key terms

Accounting period	A period of 12 months specific in the lease as an accounting period or, if no such period is specified in the lease, a period of 12 months beginning with 1 April.
Administration charge	An amount payable by a leaseholder as part of or in addition to the rent which is payable, directly or indirectly (a) for or in connection with the grant of approvals under the lease, or applications for such approvals, (b) for or in connection with the provision of information or documents by or on behalf of the landlord or a person who is party to the lease other than the landlord or leaseholder, (c) in respect of a failure by the tenant to make a payment by the due date to the landlord or a person who is a party to the lease other than the landlord or leaseholder, or (d) in connection with a breach (or alleged breach) of a covenant or condition of his lease.
Annual report	An annual report is a report, covering a range of financial and other information, that will be provided to leaseholders by their landlord before or within one month of a new 12-month accounting period.
Appropriate Tribunal or Relevant Tribunal	Appropriate tribunal or relevant tribunal refers to the First-tier Tribunal (Property Chamber), or where determined by or under Tribunal Procedure Rules, the Upper Tribunal, in England and the Leasehold Valuation Tribunal in Wales, which deal with settling disputes in relation to leasehold property, including service charge disputes and failure to provide information to leaseholders.
Asset management plan (AMP)	A written plan prepared and provided by the landlord to the leaseholder which assesses the condition of a property, forecasting future repairs and maintenance, and may project the costs of these works.
Building Insurance	It is common for the lease to require the whole building or a part of the building to be insured against risks such as fire, lightning, subsidence and even terrorism. Building insurance is usually but not always the responsibility of the landlord although the lease will usually require the leaseholder to pay a share of the cost.
Common parts	Any areas of the building which do not form part of a unit (or flat). Generally, this includes communal areas shared between unit owners (such as gardens, halls and staircases), structural parts of the building, such as the external walls and the roof, and any pipes, cables and other installations not situated within a unit, nor which serve only that unit. The exact definition depends on the wording of the lease.
Default judgment	A judgment by a court as an administrative act rather than a trial or hearing. A default judgment is the early determination of a claim where a defendant has failed to acknowledge a claim or file a defence within set time limits.
Dispensation	A landlord may apply to a court or a tribunal to avoid serving a notice under the major works procedure set out in at s.20 of the Landlord and Tenant Act 1985. If they succeed, the court or tribunal issues a dispensation from serving that notice.
Event fee	A fee payable under a term of or relating to a residential lease of a retirement property on certain events such as resale or sub-letting. Event fees may be referred to by a variety of names including exit fees, transfer fees, deferred management fees, contingency fees and selling service fees.
First Tier Tribunal (FTT)	The First-tier Tribunal (Property Chamber) deals with settling disputes in relation to leasehold property in England, including service charge disputes and failure to provide information to leaseholders.
Fixed service charge	A fixed service charge specifies the exact amount of service charge that leaseholders pay for the accounting period, for a specific list of services.
Head lessor	A landlord of an intermediate lease.
Indemnity basis	The basis upon which a court assesses a party’s litigation costs, which must have been reasonably incurred and are reasonable in amount in order to be payable.
Initial service charge demand	An initial service charge demand is the first demand after the end of the previous accounting year issued to a leaseholder, on account or in arrears, demanding payment of the service charge contribution for a period specified in the lease.
Intermediate landlord	A person who holds an “intermediate lease”. They hold a leasehold interest in, and in turn is a landlord under another lease of, all or part of the same property.
Landlord	Any person who has a right to enforce payment of a service charge. A landlord may be either the freeholder of the property or hold a leasehold interest in the property themselves.
Lease	The legal document that allows the holder to occupy a property for a specific period of time. It contains the terms of the contractual arrangement, such as what landlord costs can be recharged to leaseholders via a service charge, any restrictions on the leaseholder’s ability to sublet or make alterations.
Leasehold	A form of property ownership which is time-limited, where control of the property is shared with, and limited by, the landlord.
Leasehold Valuation Tribunal (LVT)	The Leasehold Valuation Tribunal deals with settling disputes in relation to leasehold property in Wales, including service charge disputes, lease variations and the determination of premiums for freehold purchase and lease extensions.
Leaseholder	A leaseholder is a person or company who owns a property subject to the terms of a written lease agreement, typically for 99, 125 or 999 years. The lease creates obligations which a leaseholder must comply with, including the obligation to pay the service charge.
Litigation costs	Costs incurred by either a landlord or a leaseholder during legal proceedings. In Sections 62 and 63 of the 2024 Act, “litigation costs” means any costs incurred, or to be incurred, by a person in connection with relevant proceedings to which they are party.
Major works	“Qualifying works”[footnote 19] carried out to a building or other premises, such as decoration, repairs, improvements, or refurbishments, which are necessary to keep a block or estate in a satisfactory state of repair, which would cost each leaseholder either over £250 or, if a ”qualifying long term agreement”[footnote 20] was entered into, over £100.
Managing agent	An individual or company appointed to run and manage the building and services on behalf of a landlord or residents management company.
Reconciliation demand	A demand for payment following publication of service charge accounts. It seeks additional funds from leaseholders where there was an overspend for the previous accounting period against actual costs incurred.
Relevant costs[footnote 21]	Relevant costs are the costs or estimated costs incurred or to be incurred by or on behalf of the landlord, or a superior landlord, in connection with services, repairs, maintenance, improvements, or insurance or the landlord’s costs of management.
Reserve fund/sinking fund	A pool of money which is collected to cover the costs of future, one-off or major works needed, such as replacement of a lift or roof.
Resident Management Company	A Resident Management Company is a company that is owned and run by leaseholders of a building containing flats who undertake the management and maintenance of the building. A Resident Management Company is usually a party to the lease and their duties to leaseholders are set out in the lease. A Resident Management Company may or may not own the freehold.
Right to Manage Company	A company created by leaseholders of a building containing flats to take over the management of the building from the freeholder, without buying or owning the freehold.
Section 20	Section 20 of the Landlord and Tenant Act 1985 sets out the consultation requirements that a landlord must follow for any qualifying works or qualifying long term agreements (major works).
Section 20B notice	A Section 20B notice is sent out by a landlord when they are unable to send a demand for payment to the leaseholder within 18 months of the cost being incurred. It informs the leaseholder that costs have been incurred during the service charge period that will be payable through the service charge.
Service charge[footnote 22]	A financial contribution payable by a leaseholder typically to a landlord, for a share of the cost of insuring, maintaining, repairing, cleaning, etc. the building. Details of what can (and cannot) be charged by the landlord and the proportion of the charge to be paid by the individual leaseholder will all be set out in the lease.
Service charge accounts	A statement or statements issued to leaseholders by the landlord to account for actual service charge income and expenditure in the 12-month accounting period.
Service charge demand	A service charge demand is an invoice issued by the landlord or managing agent setting out the service charge contribution that a leaseholder is required to pay for a specified period as set out in the lease, to contribute to managing and maintaining the building.
Social landlord	An organisation such as an organisation such as a local authority, a Private Registered Provider in England, or registered social landlord in Wales, who provided housing. Most do not make a profit. Social landlords can rent their properties to social tenants. Leaseholders may have a social landlord if they have a shared ownership property or their property was previously owned by a social landlord.
Social housing tenant	For the purposes of this consultation, a tenant means someone who rents from a social landlord and is asked to pay a service charge.
Sub-lessee	A person who holds a “sub-lease” (a lease that has a leasehold interest above it). The individual holds a leasehold interest, and their immediate landlord is also a leaseholder.
Superior landlord	Where there are multiple leases or interests in a property, creating a chain of landlords and tenants, the superior landlord is usually the one who holds the highest interest in the chain.

1. Under Section 27A of the Landlord and Tenant Act 1985 (“the 1985 Act”) ↩

2. Section 47 and 48 of the Landlord and Tenant Act 1987 (“the 1987 Act”) ↩

3. Data protection is governed by the UK general data protection regulation (UK GDPR) and the Data Protection Act 2018. It controls how personal information is used by organisations, including businesses. ↩

4. Event fees are fees used in some retirement leasehold properties which may be triggered by a particular event, such as when an owner sells or sub-lets a property. They are also sometimes described as “transfer”, “contingency”, “deferred-management” and “selling-service” fees.  ↩

5. Sections 47 and 48 of the Landlord and Tenant Act 1987 ↩

6. Section 21B of the Landlord and Tenant Act 1985 and see Summaries of rights and obligations - Service Charges - England - The Leasehold Advisory Service ↩

7. Introducing new Section 47A to the Landlord and Tenant Act 1987 (“the 1987 Act”) ↩

8. Powers in the 2024 Act introducing new Section 21C(4) of the 1985 Act ↩

9. Sections 21 and 22 of the 1985 Act ↩

10. The 2024 Act introduces new Sections 21F and 21G to the 1985 Act ↩

11. For the purposes of this consultation, a social housing tenant means someone who rents from a local authority or housing association landlord and is asked to pay a service charge. ↩

12. The 2024 Act introduces new Sections 21C to 21G to the 1985 Act ↩

13.   Administration charges are regulated by Section 158 and Schedule 11 of the Commonhold and Leasehold Reform Act 2002 (“the 2002 Act”). ↩

14. An application under Section 20C of the Landlord and Tenant Act 1985 (a “Section 20C application”) may be made by leaseholders to limit their liability for their landlord’s litigation costs through the service charge; or in England by making an application under paragraph 5A of Schedule 11 to the Commonhold and Leasehold Reform Act 2002 (a “paragraph 5A application”) to limit liability for their landlord’s litigation costs as an administration charge. ↩

15. Note: In only very limited circumstances can leaseholders seek to recover their litigation costs. In both the First-tier Tribunal (Property Chamber), and the County Court if the claim is a “small claim” or under the “fixed recovery costs” regime, leaseholders can only recover their litigation costs from their landlord where there has been “unreasonable conduct”. There is a high bar in evidencing unreasonable conduct and such costs orders are rarely made. ↩

16. Claim “tracks” in the civil court are: the small claims track (value up to £10,000); the fast-track (for claims between £10,000 and £25,000); the intermediate track (for cases between £25,000 and £100,000); or the multi-track (for complicated claims above the value of £100,000). ↩

17. The Civil Procedure Rules define “automatic” as: Where a rule, practice direction or order states ‘shall be struck out or dismissed’ or ‘will be struck out or dismissed’ this means that the striking out or dismissal will be automatic and that no further order of the court is required. ↩

18. In England, asset management type plans are encouraged by the RICS residential management service charge code of practice. Furthermore, buildings over 18m in height must prepare a safety case report on how it will manage the safe risks in the building, which can also indicate what works need to be carried out, and by when ↩

19. As defined by s.20ZA(2) of the Landlord and Tenant Act 1985 and regulation 6 of the Service Charge (Consultation Requirements)(England) Regulations 2003 and regulation 6 of the Service Charge (Consultation Requirements)(Wales) Regulations 2004. ↩

20. As defined by s.20ZA(2) of the Landlord and Tenant Act 1985 regulation 6 of the Service Charge (Consultation Requirements)(England) Regulations 2003 and regulation 6 of the Service Charge (Consultation Requirements)(Wales) Regulations 2004. ↩

21. As defined by s.18(2) of the Landlord and Tenant Act 1985, as amended by the 2024 Act. ↩

22. As defined by s.18(1) of the Landlord and Tenant Act 1985 (as amended by the 2024 Act). ↩