Landlords will lose the automatic right to pass legal costs on to leaseholders who challenge service charges when the Government’s service charge reforms take effect on 1 April 2027.
Leaseholders will gain new powers from the same date to ask landlords for information on service charges, and on how a building is maintained and insured.
What the service charge reforms mean for landlords
Residential property law firm Bishop & Sewell has set out the changes for landlords, including the further requirements due in November 2027.
“Whilst these changes restrict the ability of landlords to automatically pass on the legal costs to leaseholders who challenge service charges, they do not remove them entirely,” said Mark Chick, partner and residential property law expert.
“Landlords must now seek the permission of the First Tier Tribunal (FTT) to add litigation costs to future service charges. Previously, leaseholders would have to make this application to stop landlords automatically adding those costs to future service charges. Both will look to see how the FTT respond to such requests.
“Landlords can expect a bigger raft of changes from 1 November 2027. Then they will need to publish a full schedule of administration and service charges, and leaseholders will have grounds to challenge the recoverability of those charges if they have not been published at least 28 days in advance.
“Landlords will also face restrictions on commissions and charges when arranging for building insurance, with leaseholders able to force landlords to refund those charges if they fall short of the new rules.
“And finally, service charge demands will have to follow a specified format and, where a building contains four or more dwellings, landlords will also be required to provide an annual statement of account within six months of the end of the accounting period. Combined, these changes create considerable additional compliance obligations.
“The announcement confirms the first phase of the Government’s service charge reforms under the Leasehold and Freehold Reform Act 2024, with the most significant operational changes for landlords and managing agents following from November 2027.
“Good landlords have been preparing for these changes for many months, and many already provide this information. They welcome these changes. Those that do not now need to act.”
