Service charges have come under increased scrutiny in recent years, with many leaseholders questioning both the cost and the transparency of these fees.
This article looks at the issues associated with service charges, what reforms the Welsh and UK governments have proposed, and how the new Building Safety (Wales) Bill might affect service charges in Wales.
The article focuses on service charges paid by leaseholders. Social housing tenants may also pay service charges, but some of their rights and obligations may be different to those of leaseholders. Social landlords must also meet specific standards when levying service charges.
What’s the problem with service charges?
Leaseholders in blocks of flats or mixed-use buildings are required to pay service charges to the landlord of the property. The charges cover the cost of things like repairs, improvements, building insurance and management fees. Service charges can go up or down without any limit, although the law says that they must be reasonable.
A Welsh Government review published in 2021 found there was “considerable dissatisfaction” with service charges amongst leaseholders. Many research participants felt their service charge did not represent value for money, with some complaining about poor quality of service. Other research has highlighted concerns over a lack of transparency and responsiveness from building owners or their representatives.
Some leaseholders in Wales have reported significant increases in their service charge or have accused management agents of increasing fees without warning or full explanation. The estate agent Hamptons estimated that average annual service charges in Wales have risen by 20.8% over the last 5 years, though this is a much lower rate of increase than in the North East of England (60.9%) or London (39%).
Why have service charges been increasing?
The Property Institute has suggested that rising service charges are a result of real increases in costs associated with property management. They point to factors like the rising costs of utility bills and building materials, increases in building insurance premiums, and the additional costs of complying with new building safety legislation (in England).
However, the Leasehold Knowledge Partnership has argued that rising costs are a sign leaseholders are being exploited by private companies who are seeking to maximise their profits. The Competition and Markets Authority (CMA) has previously raised concerns about the leasehold model, warning that a misalignment of incentives could mean that building owners have weak incentives to ensure value for money within service charges, and may not always act in the best interests of leaseholders.
Who is responsible for reforming leasehold laws?
The Welsh Government is working jointly with the UK Government on legislation which will reform leasehold in England and Wales.
The reform programme stems from a series of reports published by the Law Commission, which the UK Government tasked in 2017 with exploring options to improve residential leasehold law and make commonhold a viable alternative. The Welsh Government announced in 2018 that it had formally joined the Law Commission project.
In 2021, the then Minister for Climate Change, Julie James MS, stated that she believed it would be “more expedient” to work with the UK Government to implement the Law Commission’s recommendations, given the complexity of existing leasehold legislation. She also highlighted that the Law Commission had not identified a need for different provision in Wales.
In its reports, the Law Commission noted that the extent of Welsh devolution in relation leasehold and commonhold laws is “unclear”.
How will the proposed reforms affect service charges?
In July 2025, the UK and Welsh governments launched a joint consultation on a package of measures aimed at strengthening leaseholder protections over charges and services.
Some measures discussed in the consultation have already been introduced through the Leasehold and Freehold Reform Act 2024, although most of these provisions are not yet in force. The measures in the 2024 Act include:
- a new right for leaseholders to request information about service charges and the management of their building;
- measures to provide leaseholders with more and timelier information about service charges; and
- the removal of the presumption that leaseholders pay their landlord’s legal costs when challenging poor practice through the courts.
The UK Government’s intention is that these measures be brought into force “as quickly as possible” following the consultation. The Welsh Government has also set an intention to “deliver reforms to leasehold at pace” so leaseholders feel the benefit as soon as possible.
The joint consultation also proposes further reforms to service charges, including measures which would mandate the creation of reserve funds to fund major works and protections for leaseholders paying fixed service charges. These would likely require further legislation.
However, the UK Government has so far ruled out introducing a cap on service charges, arguing that this would “prevent necessary funds being raised for legitimate purposes”.
Will the new Building Safety Bill affect service charges?
The Building Safety (Wales) Bill was introduced into the Senedd on 7 July 2025. If it is passed, the Bill will introduce a new building safety regime for multi-occupied residential buildings.
The Bill proposes that the costs of complying with new building safety duties can be passed on to leaseholders through their service charges. This would only apply to leases granted for 7 years or more, and under which the leaseholder is liable to pay a variable service charge.
During scrutiny of the Bill, the Cabinet Secretary for Housing and Local Government, Jayne Bryant MS, told the Local Government and Housing Committee she was committed to ensuring residents are protected from “excessive costs” under the new regime. However, a number of witnesses told the Committee that tenants and leaseholders would likely end up paying more through higher service charges or rents.
In its report on the Bill, the Committee recommended the Welsh Government considers the adequacy and effectiveness of existing legal protections to prevent unreasonable costs being passed on to tenants and leaseholders. The Committee also recommended the Welsh Government explore whether further legal protections might be needed.
An end to leasehold?
Looking further ahead, the UK Government has committed to taking steps to “bring the feudal leasehold system to an end” and has published a White Paper setting out its intention to make commonhold the default tenure for blocks of flats.
The Cabinet Secretary for Housing and Local Government said in July 2025 that she is “continuing to engage” with the UK Government on its proposed Commonhold and Leasehold Reform Bill.
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Help and support: You can find information and advice about leasehold on the Leasehold Advisory Service website. Leaseholders in Wales may be able to get free legal support with their specific claim. |
Article by Gwennan Hardy, Senedd Research, Welsh Parliament
