Leaseholder Karryn Beaumont took Ballymore, a developer and the freeholder, to court after it refused to provide a full annual statement of charges for her building.
Although the fine faced by freeholders in court was just £2,500, it was the risk of a criminal record that forced the company to provide her with the information she was asking for under the 1985 act.
“The minute they received the summons for court they said ‘we can reach some agreement’,” she said.
“That’s what it took for them to release the supporting documents for the accounts.”
Beaumont said the new fines that can be brought against freeholders through a tribunal need to have the power to hurt them and “£5,000 is nothing”.
She added that if they are fined, these costs can be recouped from leaseholders, whereas criminal fines could not have been.
Lord Bailey, Conservative peer and London Assembly member, said: “I raised my deep concern that removing the right for leaseholders to pursue a criminal private prosecution would be a greenlight to crook freeholders and managing agents to serially overcharge by withholding service charge information from the paying leaseholders.
“Without a criminal sanction, landlords will only comply with the law if it is in their financial interests to do so.”
Harry Scoffin, founder of anti-leasehold campaign group Free Leaseholders, said: “The Leasehold and Freehold Reform Act 2024 decriminalises service charge abuse, removing a key backstop right for leaseholders. So the legislation waters down leaseholder protections.
“The Government’s change to end criminal sanctions against landlords who withhold service charge information was not put out to public consultation and sends completely the wrong signal.
“Bad actors obscuring service charge fraud can now be safe in the knowledge they will only ever face a slap on the wrist at tribunal, which cannot enforce its own decisions anyway.
“It makes even less sense considering the Building Safety Act 2022 puts criminal sanctions on landlords and freeholders. With services charges ballooning to £7.6 billion in England’s blocks of flats last year, according to Hamptons, the opportunity for service charge abuse is huge.”