Service charges have outpaced inflation every year for five years running — and a hidden insurance commission problem is finally being banned. Here’s what’s actually changing.
The average UK leaseholder paid £2,405 in service charges in 2025 — up 4.6% on the year before, and up 32.6% over five years, according to Hamptons research. Over that same five-year period, inflation (CPI) rose 30.9%. Service charges haven't just kept pace with the cost of living — they've consistently run ahead of it, every single year, and the gap is widening. If your service charge has felt like it climbs faster than everything else in your budget, the data backs that impression up.
Two separate reforms are now converging on this exact pain point: new transparency rules from the government's July 2026 response to service charge consultation, and a ban on hidden insurance commissions specifically. Here's what's actually changing, and what it means for your next demand.
The government confirmed in July 2026 it will introduce standardised service charge demand forms, mandatory annual reports, and better information rights. Separately, a ban on hidden buildings-insurance commissions — some historically exceeding 50% of the premium — is targeted for April 2026, replacing them with clearly defined "permitted insurance fees." Neither reform is fully in force yet, but both change what you're entitled to ask for right now.
Your service charge covers the cost of maintaining and running the building and shared areas — buildings insurance, cleaning, gardening, lift maintenance, communal electricity, a reserve/sinking fund for major future works, and the managing agent's own fee for administering all of it. Under the Landlord and Tenant Act 1985, service charges must be reasonable, and costs must be reasonably incurred — but "reasonable" has historically been a vague, hard-to-challenge standard without clear supporting documentation, which is exactly what the current reforms are trying to fix.
Charges scale predictably with flat size and location: Hamptons' 2025 data shows £2,074 for a one-bed, £2,463 for a two-bed, and £3,146 for a three-bed flat nationally, with London running significantly higher across the board at £2,801 on average. Use our service charge calculator to see how your own charge compares.
On 15 July 2026, the government published its formal response confirming how it intends to implement the service charge transparency provisions in the Leasehold and Freehold Reform Act 2024. The confirmed direction includes:
Commencement dates for these specific measures haven't been confirmed yet — we track this on our reform tracker as dates are set.
Buildings insurance is one of the largest single line items in most service charges — and for years, a significant, often undisclosed portion of what leaseholders pay hasn't gone toward the actual insurance cover at all. Instead, it's been paid out as commission to the freeholder, managing agent, or insurance broker arranging the policy. An FCA review found broker remuneration on leasehold buildings insurance rose 40% between 2019 and 2022, with no corresponding improvement in service to leaseholders — in some cases, these commissions have reportedly exceeded 50% of the total premium.
Since October 2024, managing agents have been required to disclose commissions they receive on buildings insurance. That disclosure requirement is already in force. What's changing next is more significant: a ban on the commissions themselves, replaced with defined, transparent "permitted insurance fees" that must relate to specific, actual chargeable activities — like handling a claim — rather than an undisclosed cut of the premium simply for placing the policy. This is targeted for April 2026, with detailed rules still being finalised in secondary legislation.
You don't need to wait for full commencement to start asking better questions. Given the disclosure requirement already in force:
Consider a two-bedroom flat in a mid-sized city outside London, service charge £3,400 a year — well above the £2,463 national benchmark for a two-bed. Running this through the checks above: the leaseholder asks their managing agent for a full breakdown and discovers £600 of the charge relates to buildings insurance, of which the agent discloses £220 is commission paid to them by the broker for placing the policy. Under the disclosure rules already in force, this should already have been proactively disclosed, not require a direct request to uncover.
Once the insurance commission ban takes effect, that £220 would need to be replaced with a defined, activity-based "permitted insurance fee" rather than an undisclosed cut of the premium — potentially reducing the charge, or at minimum making clear exactly what the leaseholder is paying for and why. This single example illustrates why the benchmark comparison and the direct commission question are worth doing together: a charge that looks simply "high" against the national average often has a specific, addressable component once you look inside it.
Buried in the July 2026 response, the litigation costs reform is easy to skim past, but it addresses a genuinely significant imbalance. Historically, some leases allow a landlord to recover their own legal costs of disputing a service charge through the service charge itself — meaning a leaseholder who successfully challenges an unreasonable charge at Tribunal could still end up indirectly paying for the landlord's side of that very challenge. This has had a real chilling effect on leaseholders bringing otherwise valid challenges, simply because the financial risk of losing (or even partially losing) outweighed the amount in dispute. Reforming this cost allocation is one of the more consequential, if less headline-grabbing, pieces of the current transparency package.
If you genuinely believe a charge is excessive or improperly incurred, the First-tier Tribunal (Property Chamber) can determine whether it's reasonable. This applies to ordinary service charge disputes just as it does to the more specific building safety interim costs covered in our waking watch guide — the same underlying "reasonable and reasonably incurred" test from the Landlord and Tenant Act 1985 runs through both. Keep a clear paper trail of what you've asked for and what you've been told before escalating; a Tribunal application is generally stronger when it shows you tried to resolve things directly first.
Persistently high or poorly explained service charges are one of the most common reasons leaseholders pursue Right to Manage — taking over management of the building directly, rather than continuing to challenge individual charges from the outside. See our guide to Right to Manage for the current qualifying rules and costs, including the 2025 change that raised the non-residential floor area limit and removed most of the freeholder's-cost liability that used to make pursuing RTM riskier.
The average leaseholder in England and Wales paid £2,405 in service charges in 2025, according to Hamptons research, up 4.6% year-on-year and 32.6% over five years - outpacing inflation every year in that period.
A ban on hidden buildings insurance commissions is targeted for April 2026, replacing them with defined, transparent 'permitted insurance fees' tied to specific chargeable activities. Managing agents have already been required to disclose commissions since October 2024, ahead of the ban itself.
The government's response, published 15 July 2026, confirmed plans for standardised service charge demand forms, mandatory annual reports, enhanced rights to request supporting information, and reform of the litigation costs regime protecting leaseholders challenging charges.
Yes. Since October 2024, managing agents have been legally required to disclose any commission they receive on buildings insurance arranged for leaseholders. You can and should ask directly.
Service charges must be reasonable and reasonably incurred under the Landlord and Tenant Act 1985. You can apply to the First-tier Tribunal (Property Chamber) to determine whether a charge is reasonable, ideally after first requesting a breakdown and documentation directly from your managing agent.
See how your service charge compares to the UK and London averages by flat size.
Compare Now →This article is for general information only and does not constitute legal advice. Service charge disputes are fact-specific — a solicitor or the First-tier Tribunal can advise on your specific lease.
We’ll notify you when 2024 Act provisions come into force, new rates are published, and when landmark Tribunal decisions affect your premium.