Jayne Bryant, Cabinet Secretary for Housing and Local Government
As part of my commitment to keeping Senedd members updated about progress to reform leasehold, I am pleased to announce the publication of the latest consultation in the programme of work to implement the Leasehold and Freehold Reform Act 2024, which can be accessed here.
Welsh Government is committed to overhauling the operation of leasehold in Wales to make it fairer, clearer and more transparent for leaseholders who have been struggling for too long with an archaic and opaque system. We have achieved important reforms for Wales via the 2024 Act, and I am now delivering a programme of work to implement the Act. At the same time, I am exploring further significant reform for Wales and continuing to engage with the UK Government on their upcoming commonhold and leasehold reform bill.
I am undertaking this consultation jointly with the UK Government. I have been clear that I believe reform of leasehold in Wales will be most effective if we take opportunities to work together with the UK Government where the problems we experience are the same, and we share common aims in addressing them. An important element of the consultation for me is to understand whether there is a case for divergence between England and Wales in this area, or whether commonality in the reformed regime would be more beneficial to Welsh homeowners.
We have all heard time and again from constituents about their burdensome and incomprehensible service charges, and how difficult or even impossible it is for them to get enough information to decide whether to contest these charges. Leaseholders are also often wary of using the limited rights they currently have to take their landlord to the tribunal to challenge service charges. This is exacerbated due to the financial peril of having to cover not only their own legal costs, but those of the landlord too, even if they win.
Part 4 of the Leasehold and Freehold Reform Act 2024 makes important changes to address some of the unfairness associated with service charges, requiring landlords and their managing agents to be more transparent about service charges, and scrapping the presumption that leaseholders will always need to pay their landlord’s legal costs. The operational details of the new service charge regime will be set out in subordinate legislation made by Welsh Ministers. This consultation sets out our proposals about how the regime could work and provides an important opportunity to ensure that the regulations we make effectively address the needs of leaseholders and ensures good practice in future service charge management.
The first half of the consultation deals with implementing Part 4 of the Act, and considers the information that should be required in an annual report and service charge demands, what further information and documents should be readily available to leaseholders on request, how administration charges should be published, and how service charge accounts should be compiled and signed off. It also explores how legal costs changes should be implemented in a way that provides the necessary protection and clarity for resident management structures to effectively function.
The second half of the consultation explores potential further reforms to improve the operation of service charge management, above and beyond the changes already made via the 2024 Act. For instance, whether changes should be made to improve how major works are planned and paid for, how the existing ‘section 20’ consultation process could be improved, and whether there should be controls on how managing agents operate. The problems leaseholders currently experience in these areas will be familiar to many of us.
I would encourage leaseholders and interested stakeholders to consider and respond to the consultation, in order that I have the best evidence on which to base decisions about next steps.
I am also pleased to confirm we will shortly publish the government response to the first joint consultation on implementation of the 2024 Act. This consultation set out proposals to address longstanding concerns that leaseholders are charged excessive commissions by brokers for the arranging and managing of buildings insurance, which are then given to landlords, freeholders or property managing agents. The response will set out evidence gathered from consultation responses, and outline next steps towards the replacement of commissions with a fairer and more transparent fee-based system.
My ambition is to deliver reforms to leasehold at pace, so that Welsh homeowners feel the benefit of the substantial changes they represent as quickly as possible. The programme of work will require further consultation and development of detailed subordinate legislation both by Welsh and UK Ministers over the coming months. I will continue to update Members on this, and I would be grateful for your support in encouraging engagement with the programme as it progresses.