2024 has been a year of widespread change for the leasehold sector. These changes have impacted leaseholders, freeholders and managing agents alike. The changes have been made to address longstanding issues around transparency, excessive fees and poor management of leasehold properties.
For managing agents, the new laws have altered their licensing requirements, the way they charge and how they handle complaints from leaseholders. Here we will be explaining these changes and highlighting relevant legal cases heard in 2024.
Managing Agent Redress Schemes
Thanks to the Leasehold and Freehold Reform Act 2024, managing agents in England and Wales must now be registered with a government approved redress scheme. Their membership to these schemes allows leaseholders and freeholders to complain to a formal, independent source about any poor service they believe they have received.
Most agents will display the name of their scheme in their offices and on their website, but the schemes themselves also have publicly searchable lists so you can check your agent’s registration. Two examples are The Property Redress Scheme and The Property Ombudsman.
Stakeholders can complain to the appropriate redress scheme regarding a wide range of issues. Mismanagement, poor customer service, lack of clarity in communications, delayed repairs and legal issues – redress schemes will advise.
The requirement establishes a clear framework for accountability, with fines and penalties for non-compliance. Any agents that fail to register with can be fined £5,000 by their local authority or even be closed down completely if they continue to work in breach of the new requirements.
This change is expected to raise standards of professionalism across the sector. For leaseholders, this change offers reassurance that their property will be managed by a qualified professional.
Transparent Billing
Service charges and especially insurance fees have been in contention for some time. Complicated, unclear service charge demands and a lack of control over insurance policies have angered leaseholders for years. Until now, there has been very little that leaseholders could do to influence the decisions made and the charges received. The 2024 reforms directly address these concerns.
Under the new regulations, excessive commissions on buildings insurance are explicitly prohibited. The reforms introduced a “permitted insurance fee” – a standardised amount that managing agents can charge. The exact thresholds for these fees are set to be clarified in secondary legislation.
Additionally, managing agents must provide detailed breakdowns of all charges to leaseholders. This includes service charges, insurance fees and any other costs related to property maintenance. Transparency in billing is designed to foster trust between leaseholders and managing agents, ensuring that fees are justified and that they reflect the actual cost of the services provided.
Right to Manage (RTM)
The “Right to Manage” is the legal option for leaseholders, allowing them to take over the management of their building without needing to prove fault on the part of their managing agent. However, until now, the process was often criticised for being overly complex, costly and difficult to navigate. Recent reforms have simplified the process making it more accessible to leaseholders.
Under the new rules, leaseholders can exercise the RTM with fewer procedural hurdles. This includes a reduction in the notice periods required and the introduction of streamlined templates for applications. By making the RTM easier to access, the government has empowered leaseholders to take control of their buildings when they feel their interests are not being adequately served.
Tribunal Challenges
For leaseholders who do not want to assume management responsibilities but are dissatisfied with their current managing agent, the option to apply to a tribunal remains. The tribunal can appoint a new manager if evidence of mismanagement is provided.
The 2024 reforms have expanded the tribunal’s powers, allowing it to intervene more decisively in cases of negligence, financial misconduct or failure to comply with the new transparency requirements.
Recent Court Cases
There have been several cases already this year that have highlighted the impact of the new rules. One good example is Portland House Residents v Azure Property Management:
Residents of Portland House in Kent faced demands of nearly £14,000 each for fire safety repairs, with the freeholder allowing only 30 days to pay. They challenged the demands, arguing insufficient notice and financial strain. The First-Tier Tribunal granted them a 20 week period to address the issue, highlighting the tribunal’s role in protecting leaseholders from abrupt and substantial financial demands
Wider Implications for Managing Agents
The reforms introduced in 2024 signal a shift in the balance of power within the leasehold system. By increasing accountability and transparency, the government aims to create a fairer environment for leaseholders. However, these changes also present challenges for managing agents.
Adapting to stricter licensing requirements will require investment in training and compliance systems. Managing agents must ensure they meet the new standards or risk facing penalties. Additionally, the emphasis on transparency may increase administrative burdens, as agents must provide more detailed documentation of their charges.
For those who embrace these changes, there is an opportunity to build stronger relationships with leaseholders. Transparent practices and adherence to high standards could enhance reputations and attract new business. For others, the reforms may prove challenging.
