If you live in a leasehold flat in England or Wales, the service charge you pay each year probably covers building insurance. What you might not know is that a portion of that premium has often gone straight to your freeholder or managing agent as commission — sometimes exceeding 50% of the cost. A 2022 Financial Conduct Authority report found broker remuneration in this area rose by 40% between 2019 and 2022, with no clear benefit to the people actually paying the bill. That means thousands of leaseholders have been subsidising their landlord’s income without realising it.
I’ve been covering property law and leasehold reform for years, and this is one of those topics that comes up again and again — usually from someone who’s just opened their annual service charge statement and spotted a line item they don’t understand. The confusion is understandable. Insurance costs are bundled into a larger bill alongside cleaning, gardening, lift maintenance, and management fees. Most people pay it and move on. But the rules are about to change in a big way, and knowing what’s coming could save you hundreds of pounds.
Here’s what you actually need to know. From April 2026, landlords and managing agents in England and Wales will no longer be able to recover insurance commissions through your service charge. Instead, they can charge “permitted insurance fees” — transparent, itemised costs for specific tasks like handling claims or conducting fire risk assessments. This is a direct result of the Leasehold and Freehold Reform Act 2024, and it’s one of the most significant changes to leaseholder protections in a generation. If you’re trying to make sense of your current service charge or plan ahead for the new rules, knowing your rights as a tenant is the first step toward keeping more money in your pocket.
What tenant service charge insurance actually covers
The most important thing to understand is that building insurance is a legitimate cost — the problem has never been the insurance itself, but how it’s been priced and who’s been taking a cut. Your service charge covers the premium for the building’s block policy, which protects the structure, common areas, and shared facilities. That’s standard. What hasn’t been standard is the commission your landlord or managing agent has been pocketing on top.
Under the new rules, landlords must disclose any commission or payment they receive in connection with building insurance policies. If they fail to do so, they cannot recover the insurance premium through the service charge at all. That’s a powerful enforcement mechanism. My first move if I were a leaseholder right now would be to request a full breakdown of my current service charge — specifically the insurance line item — and ask in writing whether any commission is included. You’re entitled to that information under the new rules, and getting it now gives you a baseline to compare against once the ban takes effect.
Why the insurance commission ban matters for your wallet
The scale of the problem is hard to ignore. The FCA’s 2022 report found that broker remuneration in the leasehold insurance market rose by 40% between 2019 and 2022, with no corresponding improvement in service or coverage for leaseholders. In some cases, commissions exceeded 50% of the premium. That means if your building’s insurance premium was £10,000, up to £5,000 of that could have gone straight to the freeholder or managing agent — and you paid it through your service charge without ever knowing.
Consider this scenario. You live in a building over 18 metres tall, where the average service charge is £4,447. Insurance is a significant part of that cost. If your landlord has been taking a 30% commission on the insurance premium, you’ve been overpaying by hundreds of pounds every year. The new rules don’t just ban that commission — they also give tribunals the power to order repayment of prohibited charges and award compensation of up to three times the amount wrongly charged.
There’s a catch worth noting. Permitted insurance fees will be subject to VAT at 20%, compared to the 12% Insurance Premium Tax applied to insurance premiums. So while the commission itself disappears, the replacement fees could end up costing more in tax. It’s a trade-off that the government is still finalising through secondary legislation, and the exact definitions of “permitted insurance fees” haven’t been confirmed yet. If you’re a leaseholder, this is worth watching closely.
Where leaseholders and landlords get the new rules wrong
The most common mistake I see is assuming the changes don’t apply until April 2026, so there’s nothing to do now. That’s not quite right. The new rules for service charge accounting under LAFRA 2024 are already reshaping how demands must be formatted, what information must be provided, and how quickly accounts must be delivered. Landlords who wait until the last minute risk issuing unenforceable demands.
Assuming all insurance costs in your service charge are legitimate
This is the biggest trap. Just because a cost appears on your annual statement doesn’t mean it’s recoverable. Under the current rules, landlords can only recover costs that are reasonably incurred. If your landlord has been taking a commission without disclosing it, that cost may not be reasonable — and under the new rules, it’s outright banned. If you suspect you’ve been overcharged, you can request a full breakdown of the insurance premium and any commissions paid. If the landlord refuses, that’s a red flag.
Thinking the 18-month rule doesn’t apply to insurance costs
The 18-month rule under the Landlord and Tenant Act 1985 is often overlooked. Landlords cannot recover costs incurred more than 18 months before the demand is issued, unless they served a prescribed notice within that window. Insurance premiums are typically paid annually, so the 18-month clock starts from when the premium was due — not when the policy was taken out. If your landlord tries to charge you for an insurance cost from two years ago, you can challenge it.
Ignoring the new format requirements for service charge demands
Under LAFRA 2024, service charge demands must follow a prescribed format. They must include the names and addresses of both landlord and leaseholder, the total amount demanded based on the annual budget, the period covered, payment deadlines, and a summary of your rights. If the demand doesn’t meet these requirements, it may be unenforceable. That means you don’t have to pay it until a compliant demand is issued. Landlords who ignore this risk losing the ability to recover costs altogether.
Overlooking the tribunal’s new enforcement powers
The Leasehold and Freehold Reform Act 2024 gives tribunals the power to order repayment of prohibited charges and award compensation of up to three times the amount wrongly charged. This is a significant deterrent. If your landlord has been taking undisclosed commissions, you can take them to tribunal — and if you win, you could receive substantially more than what you were overcharged. The key is keeping records and requesting information in writing.
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| Building height | Average service charge (2026 budget) | Key cost driver |
|---|---|---|
| Under 11 metres | £2,418 | General maintenance |
| 11–18 metres | £3,507 | Building safety compliance |
| Over 18 metres | £4,447 | Insurance + fire safety |
What I tend to notice is that leaseholders in older buildings get hit hardest. The same TPI report shows buildings over 50 years old average £5,208 in service charges, compared to £2,508 for buildings under 25 years. Older buildings often have higher insurance premiums due to fire risk and structural concerns, which means the commission — and now the potential savings from the ban — are larger. If you live in a building built before 2000, this is especially relevant to you.
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How to check your service charge and prepare for the 2026 changes
The new rules don’t take full effect until April 2026, but there are practical steps you can take right now to protect yourself and potentially recover money you’ve already overpaid. Here’s what I’d do if I were in your position.
Request a full insurance breakdown from your landlord or managing agent
Under the new rules, you’re entitled to see the full policy details, a breakdown of any permitted fees, and disclosure of any commissions paid to brokers or insurers — even if those commissions aren’t charged to you. Write to your landlord or managing agent and ask for: the current insurance premium, any commission or broker fees included, and a copy of the policy document. Keep a record of your request. If they refuse, that’s evidence you can use in a tribunal later. If you’re unsure about the legal language in their response, a tenant landlord lawyer can review it for you and advise on next steps.
Check whether your service charge demand meets the new format rules
Even though the full LAFRA 2024 requirements are still rolling out, you can already check whether your current demand includes the key elements: landlord and leaseholder names and addresses, the total amount based on an annual budget, the period covered, payment deadlines, and a summary of your rights. If it doesn’t, the demand may be unenforceable. Don’t ignore it — but do challenge it in writing. Ask for a compliant demand before you pay.
Review your annual accounts for certification and timeliness
For buildings with four or more dwellings, the landlord must provide a written statement of accounts within six months of the end of each service charge accounting year. That statement must include an income and expenditure account, a balance sheet, details of the reserve fund balance, and a summary of major works. A qualified accountant must certify these accounts. If your accounts are late or uncertified, that’s a breach of the new rules. Request the certified accounts and compare them to what you’ve been charged.
Prepare for the VAT impact on permitted insurance fees
This is the nuance most people miss. Permitted insurance fees will be subject to VAT at 20%, compared to the 12% Insurance Premium Tax on premiums. So while the commission disappears, the replacement fee could cost more in tax. If your building’s insurance premium is £10,000 and the landlord previously took a 20% commission (£2,000), you were paying £12,000 plus IPT at 12% — total £13,440. Under the new rules, if the landlord charges a permitted fee of £2,000 plus VAT at 20%, you’d pay £2,400 in fees plus the £10,000 premium at 12% IPT — total £13,600. That’s actually £160 more. The government is still finalising the definitions, so this could change. But it’s worth factoring into your budget.
- 1Request your insurance breakdown in writingAsk your landlord or managing agent for the full premium, any commissions, and a copy of the policy. Keep a record of the request and their response.
- 2Check your service charge demand against the new formatLook for landlord/leaseholder details, budget-based total, period covered, payment deadlines, and rights summary. If missing, challenge in writing.
- 3Review your annual accounts for certification and timelinessAccounts must be provided within six months of year-end and certified by a qualified accountant for buildings with four or more dwellings.
- 4Factor in the VAT difference when budgetingPermitted fees attract 20% VAT versus 12% IPT on premiums. The net effect could be a small increase, depending on how fees are structured.
What to do if you think you’ve been overcharged
If you have evidence that your landlord or managing agent has been taking undisclosed commissions, you can take them to a tribunal. Under the Leasehold and Freehold Reform Act 2024, tribunals can order repayment of prohibited charges and award compensation of up to three times the amount wrongly charged. Start by gathering your service charge statements for the last six years — you’re entitled to historic records under the new rules. Then write to your landlord requesting a full breakdown of insurance costs and commissions. If they refuse or the response is unsatisfactory, you can apply to the First-tier Tribunal (Property Chamber) in England or the Leasehold Valuation Tribunal in Wales. The process is designed to be accessible without a solicitor, but if the sums are significant, a tenant landlord lawyer can help you prepare your case.
Frequently asked questions about tenant service charge insurance
Can my landlord still charge me for building insurance after April 2026? ▾
What happens if my landlord doesn’t disclose the insurance commission? ▾
Does the insurance commission ban apply in Scotland? ▾
Can I challenge a service charge demand that doesn’t follow the new format? ▾
Will the new rules make my service charge cheaper overall? ▾
What records am I entitled to see under the new rules? ▾
The insurance commission ban is a genuine win for leaseholders, but it’s not a magic bullet. Building safety costs are rising fast, and the VAT on permitted fees could eat into some of the savings. What matters most is knowing what you’re entitled to and asking for it. Start with a written request for your current insurance breakdown. If something looks wrong, challenge it. The new rules give you more power than you’ve ever had — use it.
If this was useful, you might also want to read Understanding Private Sector Lease for Your Business Needs.
Sources and Further Reading
UK Commercial Renting Crisis: How Small Businesses Can Survive and Thrive — Practical guidance for tenants navigating rising costs and changing regulations in the UK property market.
TPI Service Charge Index 2026 Report. The Property Institute, 2026.
New Rules for Service Charge Accounting 2026: Complete Guide to Compliance. Cox Hinkins, 2025.
Insurance Commission Shake-Up. Fuller Gilbert, 2025.
