Buildings Insurance Commission Ban for Leaseholders: What UK Homeowners Need to Know

If you’ve ever looked at your service charge bill and wondered why the building’s insurance line seems so much higher than a policy for a similar-sized building would normally cost, you’re not alone.

For years, buildings insurance placed on leasehold blocks has quietly included commission payments to freeholders and managing agents, payments that leaseholders funded through their service charge, often without knowing they existed. That’s now changing.

This guide explains what the buildings insurance commission ban means, why it’s happening, and what UK leaseholders should expect as the reforms take effect.

Why Buildings Insurance Became a Problem for Leaseholders

In a typical leasehold block, the freeholder or their managing agent arranges buildings insurance on behalf of everyone living there, and the cost is passed on to leaseholders through the service charge.

On the surface, this is a sensible arrangement; someone needs to organise cover for the whole building. The trouble is who was treated as the actual customer of the policy.

For a long time, insurers and brokers considered the freeholder or managing agent — not the leaseholder — to be the customer.

That mattered because it meant leaseholders had no automatic right to see the policy, question the price, or find out how it had been arranged.

Into that gap crept a widespread practice of brokers sharing a slice of the premium with freeholders and managing agents as a commission, in exchange for placing business with them. Because leaseholders weren’t treated as customers, they had no visibility of this at all.

Regulatory reviews found that this commission had grown substantially over time, with little evidence that leaseholders were getting better cover or service in return.

In many cases, the party choosing the insurer had a financial incentive to pick the policy paying the highest commission, rather than the one offering the best value for the people actually footing the bill.

What’s Actually Changing

Reform has come through two separate but connected routes: regulatory changes from the Financial Conduct Authority and legislative changes under the Leasehold and Freehold Reform Act 2024.

Leaseholders are now recognised as customers. Financial Conduct Authority rules require insurers and brokers to treat leaseholders as customers of the buildings insurance policy that covers their home, not merely as a source of funding for someone else’s contract.

This shifts the underlying relationship in leaseholders’ favour and brings a duty on insurers to act in their interests.

Fair value and transparency requirements. Insurers are required to ensure their policies represent fair value to leaseholders and to provide clear information about the policy and its pricing, including any commission arrangements attached to it.

A move away from commission-based remuneration. The broader direction of reform is to replace hidden commissions with transparent, itemised fees for specific work actually carried out — such as handling claims, administering premiums, or coordinating fire risk assessments — rather than payments simply tied to the size of the premium.

Disclosure documents. Firms arranging the insurance are required to provide a disclosure document setting out policy and cost details, which must be passed on to leaseholders rather than kept between the freeholder, managing agent, and broker.

Together, these changes are intended to close the gap between how leasehold insurance has traditionally worked and the level of transparency leaseholders would expect from any other insurance product they were paying for.

Why This Reform Took So Long

The scale of the issue is a large part of why reform has taken time to work through.

Regulatory reviews identified that broker income from this type of business had increased considerably over a short period, without a corresponding case being made for what additional value leaseholders were receiving.

That evidence built a strong case for change, but implementing it properly has meant coordinating between the financial regulator, the insurance industry, and separate housing legislation — which is why the reforms have rolled out in stages rather than all at once.

Some elements, such as the requirement to treat leaseholders as customers and to disclose commission information, are already in force.

Other elements — particularly a fuller ban on commission-based remuneration being recovered through the service charge, replaced instead by clearly defined and justified fees — are being phased in as secondary legislation is finalised.

Because timing can shift, leaseholders should check the current position rather than assume every element of reform is already live.

What This Means for You as a Leaseholder

You’re entitled to see the details. As a recognised customer of the policy, you should be able to obtain clear information about your building’s insurance, including who arranged it, what it covers, and details of any commission or fee involved.

You can ask questions before simply paying. If your service charge insurance line seems unusually high, or you don’t recognise the breakdown you’ve been given, you now have a stronger footing to ask your freeholder or managing agent to explain it, rather than being expected to accept the figure without question.

Fees should be justified by actual work. Rather than a commission tied to the premium amount, any charge connected to arranging or managing your buildings insurance should reflect a specific, identifiable service — and should be disclosed clearly rather than folded invisibly into the premium.

This sits alongside wider service charge reform. The insurance commission changes are part of a broader push under the Leasehold and Freehold Reform Act 2024 to standardise service charge information and make costs easier for leaseholders to scrutinise generally, so it’s worth reading any updated insurance information alongside your wider service charge documents.

What Leaseholders Can Do Now

Ask for a breakdown. Request the insurance disclosure document and a clear explanation of how the policy was arranged, including whether any commission or fee is included and what it relates to.

Compare against what similar buildings pay. While every building is different, it’s reasonable to ask your managing agent how your premium compares to similar-sized blocks, particularly if the cost has risen sharply without an obvious cause such as a claim or a change in rebuild value.

Raise concerns formally if something doesn’t add up. If the information you’re given doesn’t seem to justify the cost, put your questions in writing to the freeholder or managing agent. A written paper trail is useful if the matter needs to be escalated later.

Keep an eye on further changes. As secondary legislation under the 2024 Act is finalised, further detail on permitted fees and the mechanics of the commission ban will be published. It’s worth checking for updates if your building’s insurance renewal is approaching.

A More Transparent Relationship, Gradually Arriving

The buildings insurance commission ban reflects a broader shift in how leasehold property is regulated in the UK — moving away from arrangements where leaseholders fund decisions made entirely by someone else, toward a model where they’re recognised as the people actually paying for, and entitled to understand, the cover on their home.

It won’t undo years of past charges overnight, and the full rollout is still working its way through regulation, but the direction is clear: buildings insurance for leasehold properties is being pulled out of the shadows.

Frequently Asked Questions

1. Why did leaseholders pay hidden commissions on buildings insurance?

Because leaseholders weren’t traditionally recognised as customers of the buildings insurance policy, even though they funded it through their service charge. This meant they had no automatic right to see the policy or know whether commission was being paid to the freeholder or managing agent for arranging it.

2. Has the Buildings Insurance Commission ban come into force yet?

Some elements are already in force, including requirements to treat leaseholders as customers and to provide clearer information about policies and pricing. A fuller ban on commission being recovered through the service charge is being phased in through secondary legislation, so it’s worth checking the current status before assuming every change already applies.

3. Can I ask to see my building’s insurance policy?

Yes. As a recognised customer of the policy, you’re entitled to request details of your buildings insurance, including cost information and disclosure documents, from your freeholder or managing agent.

4. What replaces commission once the ban is fully in force?

Instead of a commission tied to the size of the premium, freeholders and managing agents are expected to charge transparent, itemised fees for specific work, such as handling claims or coordinating risk assessments, which must be clearly disclosed rather than built invisibly into the premium.

5. Does this reform apply to all leasehold buildings?

The reforms are aimed at multi-occupancy leasehold buildings where a freeholder or managing agent arranges buildings insurance on behalf of leaseholders through the service charge.

Individual circumstances can vary, so it’s worth checking how the rules apply to your specific building and lease.

6. What should I do if I think I’ve been overcharged in the past?

Start by requesting a full breakdown of your insurance costs and any commission history from your freeholder or managing agent. If you remain concerned, it’s worth seeking advice on what options may be available to you, since approaches can vary depending on your individual lease and circumstances.