Leasehold reform: service charges, major works, qualifications for managing agents

The government published a new consultation called Strengthening leaseholder protections over charges and services on 4 July 2025 with proposals to give leaseholders in both England and Wales more transparency and control over service charges and major works, change how legal costs are handled in leasehold disputes and introduce minimum qualifications for managing agents.

This blog post explains the government’s proposals and sets out the likely implications for leaseholders in England and Wales.

The consultation runs until 26 September 2025 and this is the link to submit a response.

>> Related Post: What we know about the upcoming Leasehold and Commonhold Reform Bill

>> Related Post: Leasehold and Freehold Reform Act 2024 timeline for implementation

Where are we with leasehold reform in England and Wales?

In the briefing notes to the 2024 King’s Speech published shortly after Labour was elected in July 2024, the government promised to “act quickly to provide homeowners with greater rights, powers and protections over their homes by implementing the provisions of the Leasehold and Freehold Reform Act 2024”.

The government has already implemented two of the provisions in the Leasehold and Freehold Reform Act, namely the abolition of the ‘two year rule’ (which previously required leaseholders to wait for two years after they purchase a property before they can extend their lease or buy their freehold) and implementing some tweaks to the Right to Manage rules.

The government published its White Paper into Commonhold Reform in March 2025, and is due to consult on enfranchisement premiums in “summer 2025”.

The consultation into service charges, major works, litigation costs and the minimum qualifications for managing agents is another step towards the government delivering leasehold reform.

When I use the word “freeholder”, I use this as shorthand for “freeholders, landlords of intermediate leases, Resident Management Companies, and Right to Manage Companies”, ie the people who are able to demand a service charge from a leaseholder, a person who holds a lease. The consultation uses the word “landlord”, but I find this confusing as I use the word landlord to mean a “private landlord” who rents a property under a tenancy agreement to private tenants.

Consultation: Strengthening leaseholder protections over charges and services

In the July 2025 consultation document, the government asks for feedback on detailed reforms aimed at giving leaseholders more transparency and control over service charges and major works, rebalancing how legal costs are handled in leasehold disputes and improving the standards of managing agents by introducing minimum qualifications.

Here is a summary of the proposed reforms in the July 2025 consultation document:

1. Proposals to reform service charges

The consultation sets out a package of measures to make service charges more transparent, easier to understand, and delivered in a standard format. Freeholders and their managing agents will have to follow a yearly cycle of providing information to leaseholders in a consistent way.

Documentation for leaseholders about service charges

Under the proposals, leaseholders would receive the following documentation:

• A standardised service charge demand.
  • This will be an invoice issued by a freeholder or managing agent outlining how much an individual leaseholder must pay for the management, maintenance and insurance of their building. It will be in a standard form and show what the leaseholder must pay for the year ahead, including a budget breakdown of expected costs for the following 12 months.
• An annual report on the building.
  • A new report which will be required to provide leaseholders with a clear overview of their building’s condition, upcoming expenses, and who is responsible for what.
  • To be provided at the same time as the service charge demand or within the first month of a new accounting year.
  • Must be “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”.
  • Will need to state whether a reserve fund would cover these costs, and provide information on how leaseholders can raise queries or complaints.
• Mid-year update
  • 6 months into the year, leaseholders will receive an interim service charge demand in a standard form for the remaining estimated service charge costs for that year.
• Following the end of the year
  • 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.
  • A reconciliation statement would the difference between the budgeted costs they’ve paid and the actual expenditure. If the freeholder spent more than originally budgeted, the reconciliation will include a demand for the shortfall; if they spent less, the leaseholder would get a credit or refund for the surplus.
  • The consultation proposes a standard format for this reconciliation as well, including a clear table comparing the estimated budget to the actual costs in each category to make it very clear where any overspend or underspend occurred and why any additional payment is needed in a way that is easy for a non-accountant to follow.
  • Freeholders would have flexibility in how they explain any differences, but the form must plainly state the reason for any extra charge or credit, and they should encourage leaseholders to ask for more detail on any item.

The consultation asks for 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”.

Right to ask for more information

Leaseholders will have enhanced rights to ask for more information – the consultation includes a long list of items that leaseholders can ask for.

Insurance

The consultation includes questions on how to avoid conflicts of interest between different parties in the chain organising and arranging insurance, and potentially going beyond the FCA rules updated in January 2024.

Rebalancing litigation costs

The consultation asks for feedback on how to implement Sections 62 and 63 of the Leasehold and Freehold Reform Act 2024 regarding the on rights of freeholders to claim litigation costs from leaseholders, and when leaseholders can claim the costs from the freeholders.

A freeholder will no longer be able to automatically recover their litigation costs from a leaseholder just because the lease says so. Instead, they would have to apply to the court or tribunal for permission to recover those costs.

Conversely, leaseholders will gain a new right to apply to recover their litigation costs from the landlord. This is likely to be reserved for cases where the landlord behaved very unreasonably or the leaseholder had no choice but to incur those costs. However, this new right for leaseholders will reset the balance of power between freeholders and leaseholders.

2. Reform of the Section 20 major works regime

The Section 20 process, named after Section 20 of the Landlord and Tenant Act 1985, is the current consultation process a freeholder must follow for “major works” on a building that leaseholders will have to pay for under the service charge. For instance, roof repairs, repainting the block, and installing new windows that are over £250 per leaseholder. This involves at least two notices: the first describing the proposed works and inviting observations and nominations of contractors, and another notice with estimates, again inviting comments, before any contract is awarded.

Here is an overview of the proposals:

• Increased thresholds.
  • Increasing the Section 20 trigger from £250 to £600 per leaseholder for major works, and raising the threshold for long-term contracts from £100 to £300 per leaseholder per year.
• Mandatory reserve funds.
  • The government is “minded to mandate” reserve funds for leasehold buildings . A reserve fund or “sinking fund” is like a savings account where contributions from service charges are set aside over time to pay for big-ticket maintenance in the future such as replacing a roof, lift, or windows.
  • Many newer leases already require a reserve fund, but a great number of older leases do not provide for one at all, which creates unfairness between the different leaseholders who buy and sell their flats. (Some may get off without a bill and others may be saddled with a huge bill when it happens to land when they own the flat).
  • The government is asking for “new proposals on how to ensure service charge monies are kept safe”.
  • This would require new primary and secondary legislation.

3. Introduction of minimum qualifications for managing agents

At long last, it looks as if minimum qualifications will be introduced for managing agents. (And hopefully for letting agents as well). It’s the first stage in the promised implementation of Lord Best’s report on the Regulation of Property Agents.

The consultation states: “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”.

Depending on the responsibilities of the managing agent, it will usually be either a Level 4 (equivalent to first year of a bachelor’s degree) or a Level 3 qualification (equivalent to A level).

However, some roles within managing agent firms which require significantly higher levels of responsibility, such as a Company Director, “might require a high level of qualification, e.g. Level 5 (equivalent to the second year of a bachelor’s degree)”.

There would be a 36-month transition period 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, and two years for those who only need a Level 3 qualification.

The consultation also asks for views on giving leaseholders the right to veto and the right to switch managing agents.

Other resources

Here is a list of my other content on leasehold reform:

• Practical Guide to the Leasehold and Freehold Reform Act 2024
• Leasehold and Freehold Reform Act 2024 timeline for implementation
• What we know about the upcoming Leasehold and Commonhold Reform Bill
• YouTube video – Commonhold: What banning leasehold means for new flats