The UK government has announced a series of leasehold reforms aimed at increasing transparency around service charges and protecting leaseholders from excessive legal costs imposed by landlords. These measures, which could take effect as early as next year, are part of a broader initiative to overhaul the leasehold system, a method of homeownership affecting approximately 20% of properties in England and Wales.

Under the proposed changes, landlords will be required to provide leaseholders with an annual report detailing the condition of their building and outlining plans for any major works. Service charge demands must include a standardized form featuring a budget for maintenance costs and a comparison with the previous year’s expenses. Additionally, leaseholders will gain the right to request information about service charges, building upkeep, and insurance going back six years.

One significant reform seeks to close a loophole that previously allowed flat owners to be responsible for landlords’ legal fees, sometimes amounting to £60,000, even after successfully contesting unfair service charges in court. The government’s proposals would cap these costs in many cases, particularly where leaseholders act collectively to purchase their building’s freehold.

The reforms also aim to make it more affordable and straightforward to extend leases or acquire freeholds, processes that can currently be prohibitively expensive. For example, a group of ten flat owners collectively buying their building’s freehold would face landlord legal fees capped at £375 per person. The government intends to introduce standardized valuation rates for calculating lease extension and freehold purchase costs, addressing the complexity and inconsistency that often lead to inflated expenses and legal disputes.

Leasehold ownership, which typically grants residents rights to live in a property for 99 to 999 years without owning the land itself, has faced criticism due to high service charges, ground rents, and fees for property changes. When a lease expires or is breached, ownership reverts to the freeholder. The government’s long-term objective is to transition to a “commonhold” system, under which residents have outright ownership of their flats and co-own the building with neighbors without a third-party landlord or term limits.

Housing Minister Matthew Pennycook described the reforms as part of ending the "feudal leasehold system," emphasizing that existing leaseholders will be supported throughout the transition and empowered with greater control over their homes. He said the government is working to improve transparency and rebalance legal costs so leaseholders can more effectively challenge unreasonable charges.

However, criticism remains from campaign groups such as the National Leasehold Campaign, which called the reforms “highly technical” and noted the ongoing frustration among leaseholders over the slow pace of change. The group urged the government to move beyond consultations and implement substantial improvements without further delay.

A recent survey by the estate agent body Propertymark reported that 93% of leaseholders would avoid purchasing leasehold properties if given the choice again. Of those surveyed, 86% said their service charges had increased in the past two years, and 74% of estate agents identified onerous service charges as the main obstacle to selling leasehold flats.

The government’s leasehold reforms are intended to address longstanding concerns, but some stakeholders maintain that more decisive action is needed to fully resolve the systemic issues within the current framework.