Currently, it’s common for agents or building owners to be paid a commission for arranging and managing building insurance through a broker. However, secondary legislation under the Leasehold and Freehold Reform Act 2024 will outlaw this arrangement.
Instead, there will be a Permitted Insurance Fee, separate from the insurance premium, that can be charged to leaseholders. This fee must be fair, transparent, and reflective of the work done to arrange or administer the insurance policy, in line with the reasonableness test set out in the Landlord and Tenant Act 1985.
Why change is needed
Leaseholders are often unaware of the commissions and other payments included in their insurance premiums, making it difficult to scrutinise and challenge costs and the current system incentivises landlords and property managers to select insurance brokers offering the highest commission rather than the best value for leaseholders.
Significant increases in building insurance premiums, especially after the Grenfell Tower tragedy, have exacerbated these issues, leading to calls for reform.
Deciding what the permitted fee should cover
The consultation asks for detailed information about the work that agents do on behalf of leaseholders in finding, arranging, and administering building insurance, and seeks opinions on whether they should be allowed to continue to do all these activities.
It’s important that agents are well represented to make sure that they can recoup the costs of the legitimate work they do on behalf of residents. Propertymark will respond on behalf of agents, and we also encourage individuals to add their views directly. The consultation is open until 24 February 2025.
Email the Policy and Campaigns Team with your views to help us formulate our response →
View the consultation documents →
Propertymark leasehold campaigning
In 2018 we published a report titled Leasehold: A Life Sentence? Based on the findings, Propertymark helped to drive legislative change that has so far culminated in the Leasehold Reform (Ground Rent) Act 2022.
Property agents play a key role in supporting home buyers and sellers, and we welcome any moves to ensure adequate protection for consumers. The Leasehold and Freehold Reform Act 2024 made a number of positive changes, although many have yet to be enforced.
There remain many issues with leaseholds which must be addressed, and Propertymark remains steadfast in supporting our members and advocating for reforms that promote transparency, fairness, and affordability within the housing market.
