In response to a parliamentary question, Matthew Pennycook, the housing minister, confirmed the bill contained no provisions relating to embedded management companies.
Harry Scoffin, of campaign group Free Leaseholders, said: “Leaseholders are in captivity to these agents. It’s shocking.”
It means thousands of leaseholders will be unable to “take back control” of their properties, Mr Scoffin said.
Last year the Competition and Markets Authority’s Housebuilding Market Study found that homeowners have virtually no ability to switch management companies where an embedded management company is specified in property deeds.
The Commonhold and Leasehold Reform Act 2002 introduced the Right to Manage, which allowed leaseholders in a block of flats to form a company to take over the management of the building.
But a Supreme Court ruling in 2022 found that Right to Manage only applies to the building in the estate and not the grounds, such as the gardens or garages.
Since then, the ruling has been used as an excuse by developers to embed management companies, said Shula Rich, a leasehold expert and campaigner.
“Leaseholders are being bullied and extorted because of this misplaced ruling,” she added.
Ms Rich has called on the Government to update the law in its leasehold reforms so that freeholders cannot use the court case “to control the estate’s shared areas”.
In its consultation last year, the Government said embedded management companies were “unwarranted” but it wanted to explore whether there were “any legitimate reasons why such arrangements might still be necessary”.
Recommendations from the Law Commission regarding embedded managers were not possible to include in the already large Commonhold and Leasehold Reform Bill, the Government said.
In a parliamentary question, Labour MP Neil Duncan-Jordan asked if the Bill included “retrospective powers for leaseholders to remove embedded managers”.
Mr Pennycook replied: “The draft Commonhold and Leasehold Reform Bill contains no provisions relating to embedded management companies.
“We await the conclusions of the pre-legislative scrutiny of the draft Bill being undertaken by the Housing, Communities and Local Government Select Committee and will review the feedback received before publishing a substantive Commonhold and Leasehold Reform Bill.”
