The government has launched a consultation on proposals to prevent property managing agents, freeholders and landlords from imposing on leaseholders “opaque and excessive charges related to building insurance.”

Instead, according to the government, agents and other would only be able to charge “a fair and transparent permitted insurance fee to leaseholders” with the exact sums being subject to future legislation setting out what is permitted.

The Leasehold and Freehold Reform Act 2024 brought in a range of measures to give more powers and protections for homeowners and leaseholders. 

As part of this, the Act created powers to address longstanding concerns that some leaseholders are being charged for the arranging and managing of buildings insurance by their landlords, freeholders or property managing agents through what the government calls “opaque remuneration methods, not justified on the basis of work contributed.”

Currently, landlords, freeholders and property managing agents are most commonly paid for arranging and managing building insurance through an insurance broker sharing a proportion of their commission.  

The Act instead allows for a new permitted insurance fee that landlords, freeholders and property managing agents would charge leaseholders, separately from the insurance premium. 

The government claims this fee would be “fair, transparent and reflective of the work contributed.”

The consultation is open until late February and responses will be used by government to understand what payments should be permitted within this fee and inform the writing of secondary legislation specifying what and how the charges should be.

You can see the consultation here.