Leasehold and Freehold Reform Bill 2023 Service Charge Proposals

This guidance note sets out an overview of the Government’s proposals on changes to service charge legislation in light of the incoming Leasehold and Freehold Reform Bill.

Overview of the Leasehold and Freehold Reform Bill

The Leasehold and Freehold Reform Bill is a Government Bill with the intention to:

amend the rights of tenants under long residential leases to acquire the freeholds of their houses;
extend the leases of their houses or flats and to collectively enfranchise or manage the buildings containing their flats;
give such tenants the right to reduce the rent payable under their leases to a peppercorn;
regulate changes and costs payable by residential tenants including service charges;
regulate residential estate management; and
regulate rent changes.

The Bill is currently at the Committee stage in the House of Commons. A number of changes and amendments to the Bill have been proposed by the Committee and the draft Bill is far from being in its final form. The next steps are the report stage and a 3rd Reading in the House of Commons, following which the Bill will be passed to the House of Lords for consideration.

Service Charge Proposals

In general terms, the draft Bill contains new and/or amended provisions in relation to service charge accounts and the service of demands on tenants. The proposals have not been fully drafted however the Bill in its current form (as at January 2024) confirms the following:

Service charge accounts will need to be standard format (which will be set out in separate regulations and are not currently covered in the draft Bill).
Annual service charge reports will need to be provided.
Tenants will be entitled to require the Landlord to provide information relating to service charges (the information which a tenant can request is not set out in the Bill and will be specified in subsequent regulations).
It will be an implied term of the lease that a tenant must pay towards specified permitted insurance costs (again, these will be defined in separate regulations).
Insurance commissions will be banned from inclusion within the service charge.
Landlords will not be entitled to pass on costs of Court or Tribunal proceedings via service charge, unless just and equitable to do so.

We will prepare a further briefing note when there is more clarity on the proposals to be included in the Bill.