Parliamentary.ai

Overview

This bill aims to make service charges for leaseholders in England and Wales fairer and more transparent. It requires landlords to justify service charges based on their actual costs, preventing excessive or unreasonable charges.

Description

The bill amends the Landlord and Tenant Act 1985 and the Commonhold and Leasehold Reform Act 2002. Key changes include:

• Defining "reasonable" service charges: Landlords must now demonstrate that service charges reflect their actual "out-of-pocket" costs. This means they must provide evidence of their direct expenses for providing services.
• Scrutiny of fixed charges: Even fixed service charges will be subject to reasonableness checks, ensuring they are justified by actual costs.
• Evidence requirements: Landlords are required to provide evidence of their costs and demonstrate that charges are reasonable based on that evidence.
• Definition of "associate": The bill incorporates the definition of "associate" from the Companies Act 2006, to ensure transparency in dealings with related entities.
• Factors considered for administration charges: When determining reasonableness of administration charges, factors such as use of standard documents, time spent, information collation, and the nature of the task must be considered.

Government Spending

The bill is not expected to directly increase or decrease government spending. Its impact will primarily be felt by leaseholders and landlords, affecting the costs and revenues associated with leasehold properties. No specific figures are provided in the bill text.

Groups Affected

• Leaseholders: May see a reduction in service charges if current charges are deemed unreasonable. They will benefit from greater transparency and accountability from landlords.
• Landlords: Will need to provide evidence to justify service charges, potentially leading to increased administrative burden and/or reduced income if charges are found to be unreasonable.
• Freeholders: May be directly or indirectly affected depending on how service charges are structured and managed in their buildings.