Leasehold and Freehold Reform Bill and Service Charges

The Leasehold and Freehold Reform Bill (LFRB) has been grabbing headlines recently for its laudable ambitions of making it easier for owners of residential leasehold properties to be able to extend the term of their leases.  

The Government has hailed its proposed measures as being “an important step to reform the antiquated & unfair leasehold system out of existence.”  

Real Estate Partner, Yasar Kaushal comments: 

“Although this declaration grabs headlines, there are some “minor” provisions within the LFRB which are likely to have a far greater impact on owners of leasehold houses and apartments

“The LFRB includes provisions which make it easier for all residential leasehold property owners (LPOs) to hold landlords and managing agents to account. The LFRB includes new protections for LPOs which promote greater transparency and accountability. The measures include: 

• Service Charge demands must be issued in a standard form, contain specific information, and be provided to LPOs in a specific manner. Failure to comply will affect the Landlord’s ability to recover those service charges. 

• LPOs will be given a specific right to demand information about service charges and the costs that have been incurred. Landlords will be unable to hide behind their agents and contractors as they will be required to obtain information from such persons and forward them to LPOs. 

• Landlords must issue finalised service charge accounts to LPOs within 6 months of the end of the service charge period, thereby reducing the financial hardship that some LPOs suffer when receiving unexpected additional demands for historic service charge periods. 

• Landlords will be limited in their ability to charge additional fees for arranging insurance and will have to publish full details of the administration charges they propose to levy. This will enable LPOs to compare those charges to similar developments and estates to see whether Landlords (and their managing agents) are acting fairly and consistently. Landlords will be unable to charge additional costs beyond those published.   

• LPOs will have the ability to challenge Landlords through the Leasehold Valuation Tribunal and First Tier Tribunal (Property Chamber) with regards to any insurance charges and administration charges that go beyond those permissible. 

“Given the number of residential leasehold properties in England and Wales, these measures are likely to have a much more profound impact on the leasehold sector.  

“Whilst this is all very good news for LPOs, some Landlords will inevitably view this as another regulatory burden with which they will need to comply, in what is already quickly becoming a challenging environment for Landlords.” 

If you need support or have questions related to the Leasehold and Freehold Reform Bill, contact our experienced real estate team today.