Why the reforms are happening
Freeholders and property managing agents have traditionally received commissions from brokers when arranging buildings insurance, with leaseholders paying these costs through service charges.
However, reports from the Financial Conduct Authority showed a 40% rise in remuneration between 2019 and 2022, often without evidence of benefit to leaseholders. Leaseholders told the UK Government that the system was opaque, unfair, and hard to challenge.
The Leasehold and Freehold Reform Act 2024 gave ministers the power to address the issue. Following a consultation earlier in 2025, the UK and Welsh governments have confirmed they will replace commissions with ‘permitted insurance fees’ — defined, transparent charges for specific insurance-related tasks.
The new rules
Commissions will be phased out, and freeholders and agents will no longer be able to take broker commissions for arranging insurance.
Permitted fees will be introduced. Only defined activities (such as claims handling, collecting premiums, or sharing risk information) will be chargeable.
Transparency is to be strengthened. Landlords and agents will be required to provide insurance information proactively to leaseholders.
The UK Government acknowledged that activities vary between buildings but ruled out leaving the system entirely on a case-by-case basis.
A transition period will be allowed for systems, contracts and billing models to adapt.
Where Propertymark stands
We responded to the consultation, expressing our support and concerns, and agree that increased transparency and assistance, using the Landlord and Tenant Act’s reasonableness test, should replace rigid fees.
Leasehold insurance reforms must tackle root causes
The Ministry of Housing, Communities and Local Government (MCLHG) and the Welsh Government have proposed new regulations overhauling how insurance costs are charged to leaseholders in multi-occupancy buildings, to increase transparency and prevent leaseholders from being overcharged through commissions and hidden fees. While Propertymark supports efforts to ensure fairness for leaseholders, we have warned Ministers that these reforms alone will not bring down insurance premiums; a focus on building safety and insurer confidence is needed to achieve real change.
Key concerns
- Removing commission altogether risks higher costs for leaseholders, particularly if agents must add charges elsewhere.
- Fees should remain flexible and proportionate, reflecting the varied work across estates and portfolios.
- The government has not addressed the VAT vs. Insurance Premium Tax issue — permitted fees will be subject to 20% VAT, compared to 12% IPT currently, which could raise bills.
- The potential for increased tribunal disputes remains, with more leaseholders likely to challenge charges.
The frustrations that leaseholders experience with insurance costs and lack of control were reflected in our Leasehold: A Life Sentence? Report. Leaseholders told us that they felt trapped by unclear charging structures and powerless to challenge poor value for money. These proposals are a step toward addressing those concerns.
Moving on, our guide, Leasehold and Freehold Reform: What Has Changed? outlines how the UK Government’s broader plans are evolving and what agents need to prepare for next.
What this means for property agents
These reforms signal a significant shift, and agents will need to adapt contracts, accounting and billing to replace commission with a fee-based model.
Leaseholders will expect detailed breakdowns of what they are being charged for. The sector will need to monitor closely how permitted activities are defined in secondary legislation, as this will set the boundaries for remuneration.
Looking ahead
While the UK Government recognises that commissions are just one driver of high premiums — alongside fire safety risks and claims history — it sees banning hidden payments as an important step to restore leaseholder trust.
The reforms mark the end of a long-standing model. The challenge now is ensuring that transparent permitted fees fairly reflect the genuine work involved in arranging insurance, without placing disproportionate costs on leaseholders or forcing agents into unsustainable models.
