Today, Thursday 12 November, five sets of regulations implementing the service charge reforms in Part 4 of the Leasehold and Freehold Reform Act 2024 were laid in Parliament. Subject to Parliamentary approval, they will come into force in England in three stages between April 2027 and November 2028.
The Property Institute (TPI) welcomes these long-awaited reforms, which will give leaseholders clearer information about how their buildings are managed and what they are paying for. TPI has consistently called for standardised service charge reporting and greater transparency on insurance costs.
The reforms place new requirements on property managers and managing agents. TPI will support members throughout, including dedicated training ahead of each implementation date.
What YOU Need to Know
Existing leases are included - Each change applies to all leases, old and new, from the day it takes effect.
One exception - The changes to litigation costs won't apply to proceedings issued before 1 April 2027.
Why is it phased? - The dates give landlords, managing agents and freeholders time to update their billing, accounting and service charge systems. Councils and housing associations get an extra 12 months for the new demands, accounts and annual reports, given the complexity of their systems.
The Five Sets of Regulations
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These prescribe standard forms for service charge demands, annual reports, service charge accounts and expenditure reports, future demand notices and administration charge schedules. In some cases, bespoke forms are required to reflect specific circumstances.
They also specify the information that leaseholders and certain other tenants can request under the new statutory information request regime, together with response periods and limited exceptions. -
These set out the requirements a person must meet to be treated as a "qualified accountant" for the service charge accounts regime in new section 21D of the Landlord and Tenant Act 1985.
There is an alternative route for members of specified professional accountancy bodies who hold a practising certificate or are otherwise authorised by their professional body to undertake public practice. -
These prohibit landlord and managing agent insurance commissions from being charged to leaseholders through their service charges, replacing them with a transparent permitted insurance payment for legitimate work done by landlords and managing agents to arrange and manage insurance.
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These introduce a Building Insurance Disclosure Document and set out what insurance information landlords must provide to leaseholders in it. They also set deadlines for providing the information, including for landlords to obtain information from third parties, and requirements that third parties must comply with.
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These provide for an exception to, and suspensions of, the requirement for landlords to apply to a court or tribunal for approval to recover their litigation costs through service or administration charges.
A further set on other aspects of the new litigation costs regime will be laid later this year and will come into force on the same date.
The Timetable
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Right to information - Leaseholders and certain other tenants will have a new right to ask for information about their service charges, including from previous years, within set response periods. Landlords will need a good reason to refuse.
Legal costs - Landlords will no longer be able to recover their legal costs through service or administration charges unless a court or tribunal approves it, subject to a limited exception and suspensions. Leaseholders will also be able to ask for an order that the landlord pays some or all of their legal costs, in types of proceedings to be set out in the further regulations.
Fixed service charges - For the first time, fixed service charges will count as service charges in law, so the new rules on information, demands and annual reports will apply to them as each comes in. The reasonableness test and consultation requirements will still only apply to variable service charges.
Costs more than 18 months old - To demand costs more than 18 months after they were incurred, landlords must first have sent leaseholders a prescribed "future demand notice", replacing the current 18-month notice. Regulations may cap the amount that can be charged at the figures given in the notice.
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From this date, the insurance and administration charge rules apply to all landlords, including councils and housing associations. The rules on standard demands, accounts and annual reports apply to private landlords only.
Standard demands - Service charge demands must use the prescribed standard form. If a demand doesn't, the lease terms on non-payment and late payment won't apply to that charge.
Annual accounts and reports - Where costs are shared between four or more homes, landlords must provide an annual statement of account, with a qualified accountant's report, within six months of the end of each accounting period, and an annual service charge report within one month. All must follow the prescribed forms.
Insurance commissions and fees - Landlord and managing agent insurance commissions can no longer be passed on. Only "permitted insurance payments" for legitimate work arranging and managing insurance can be recovered, through variable service charges. Leaseholders can apply to the tribunal to get back anything charged in breach, and for damages.
Insurance information - Landlords must give leaseholders a Building Insurance Disclosure Document, within set deadlines, every time a policy is bought or renewed.
Administration charges - Landlords must publish a schedule of administration charges in the prescribed form. A charge can only be made once it has been on the schedule for at least 28 days.
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The rules on demands, accounts and annual reports, and how they are enforced, will extend to social landlords and certain joint venture arrangements involving them.
Getting Ready
Members can start preparing now:
Check that service charge, invoice and insurance records from previous years are complete and easy to find
Plan to send future demand notices where costs may be billed more than 18 months after they are incurred
Stop charging legal costs through service charges from 1 April 2027 unless a court or tribunal approves it
Review insurance commissions and fees, and how they are explained to leaseholders
Prepare a schedule of administration charges to publish before 1 November 2027
Plan for the new demand forms, annual reports and accounts from 1 November 2027 (private landlords) or 1 November 2028 (councils and housing associations).
Wider Leasehold Reform
The Government plans to introduce the Commonhold and Leasehold Reform Bill in Parliament before Christmas. It would make commonhold the default for most new flats, make it easier for existing leaseholders to move to commonhold, cap existing ground rents at £250, and replace forfeiture with a fairer way of enforcing leases.
