No6 – How managing agents/freeholders game the leasehold system – The Leasehold legal framework and the FTT

Many leaseholders (and this managing agent) tell us they feel the leasehold system is stacked against them. While there are responsible freeholders and managing agents, the legal framework itself can create situations where leaseholders feel disadvantaged — particularly when trying to challenge service charges, building management decisions, or poor practices.

This article explains the main reasons why the system can feel one‑sided, and what this means for those living in leasehold homes.

1. Freeholders Have Structural Power in the Legal System

The law treats the freeholder as the ultimate owner of the property, even though leaseholders pay almost all the costs of running the building. This gives the freeholder control over major works, service charge budgets, insurance arrangements and the appointment of managing agents.

Leaseholders often only get the right to challenge decisions after they have already been made. This reactive position can feel inherently unfair.

2. Leaseholders Often End Up Paying the Freeholder’s Legal Costs

Many leases allow the freeholder to recover their legal and professional costs from leaseholders. This can happen through the service charge, or a separate “administration charge”

Although the First‑tier Tribunal (FTT) can sometimes prevent these costs being passed on, this is not guaranteed. Because of this, freeholders can pursue or defend disputes with minimal financial risk, while leaseholders may hesitate to challenge issues because the cost exposure feels too high.

3. The Tribunal System Is Accessible in Theory, Complex in Practice

The FTT was designed as a simple, lay‑friendly forum. In reality, cases often involve specialist solicitors and barristers, complex legislation and expert reports (engineers, surveyors, valuers)

Many leaseholders find the process challenging because they are navigating the system for the first time, while professional landlords are familiar with it.

4. The Tribunal Has Limited Powers

Even when leaseholders succeed at the FTT, the tribunal cannot:

• Fine the freeholder
• Award compensation
• Compel future improvements in behaviour

The tribunal can only decide on the issue directly in front of it (e.g., whether a service charge was reasonable). This means problems may repeat year after year, requiring fresh applications each time.

5. Freeholders Control the Key Information

To challenge a service charge or management decision, leaseholders need documents such as invoices, accounts, tender documents, insurance information all which usually sit with the freeholder or managing agent. Leaseholders often need to request them — and sometimes pay for them — before they can even begin to assess whether charges are fair. This creates an uneven starting position.

6. “Reasonableness” Gives Freeholders a Wide Margin

Many disputes depend on whether costs are “reasonable” under the law. In practice, this means:

• A cost does not have to be the cheapest
• It only needs to fall within a broad range of acceptable outcomes
• Higher‑than‑expected fees can still be approved

Reasonableness in the context of the FTT is not what you and I may regards as inherently reasonable.  Take Bradley & Rhodes v Abacus Land 4 Ltd [2025] EWCA Civ 1308

The Court of Appeal confirmed that—when leases require the landlord to act “reasonably” in apportioning service-charge costs—the standard is not merely rationality, but whether no reasonable landlord could have acted as they did. In this case, the landlord’s allocation of 100% of gym maintenance costs to residents was upheld, even after letting the gym to a private tenant, because residents retained access……..So, the test for reasonableness is met at the FTT so long as the landlord’s actions were not irrational, negligent or wildly excessive……. That’s an horrifically low bar.

7. Collective Action Is Hard for Leaseholders

Challenging management decisions often requires several leaseholders to act together. This can be difficult because:

• People have different priorities
• Not everyone wants to get involved in disputes
• Coordinating multiple households takes time
• There is concern about legal costs

Meanwhile, the freeholder is a single, unified entity with consistent representation.

Conclusion:

Leaseholders often feel the system is unfair not because of individual bad actors but because of the structure of the leasehold framework itself. The combination of:

• Power imbalance
• Cost exposure
• Limited tribunal powers
• Difficult access to information
• Complex and sometimes outdated legislation
• Can make it challenging for leaseholders to assert their rights confidently.

At Common Ground, we believe that transparency, communication, and fair management practices go a long way toward reducing these frustrations. Our Leasehold Library aims to help leaseholders understand their rights and feel empowered to take informed action.