Two of the 21 Bills in the King’s Speech address housing directly, the leasehold system and the rental market, with the government saying its aim is the same in both cases — to boost “fairness in the housing market”.
But many property professionals say key details in both Bills remain to be ironed out in little over a year before the next election – which will determine the impact of the reforms.
Prime Minister Rishi Sunak’s administration says its Leasehold and Freehold Reform Bill will help the 752,000 leasehold households in England and Wales “make it cheaper and easier for more leaseholders to extend their lease, buy their freehold, and take over management of their building”.
Its proposals include:
- Banning leaseholds for new houses, but not new flats
- Increasing the standard lease extension term from 90 years to 990 years for both houses and flats, with ground rent reduced to zero
- Increasing the 25” ‘non-residential’ limit preventing leaseholders in buildings with a mixture of homes and other uses such as shops and offices, from buying their freehold or taking over management of their buildings
- Boosting transparency over leaseholders’ service charges
- Scrapping the presumption for leaseholders to pay their freeholders’ legal costs when challenging poor practice
- Granting freehold homeowners on private and mixed tenure estates the same rights of redress as leaseholders
- Removing the requirement for a new leaseholder to have owned their house or flat for two years before they can benefit from these changes
The government adds: “We will also consult on capping existing ground rents, to ensure that all leaseholders are protected from making payments that require no service or benefit in return, have no requirement to be reasonable, and can cause issues when people want to sell their properties.
“Subject to that consultation, we will look to introduce a cap through this Bill.”
Around 22 per cent of residential property transactions in 2019 were leasehold – around 238,000 transactions in total, according to Land Registry data.
Almost all flats are sold on a leasehold basis compared to 6% of houses.
Jeremy Leaf, north London estate agent and a former RICS residential chairman, says: “While we welcome a ban on new leasehold houses, it is disappointing that flats are not included in the legislation, as we wanted to see new and existing flats and houses included.
“Indeed, flat owners and those considering buying flats are looking for change as much as those purchasing houses, particularly given that flat owners often also have cladding issues to contend with.”
Mortgage Advice Bureau national new homes account director Mobeen Akram says: “Sky-high service charge payments only benefit those with the leaseholder title, and the proposed reforms to this dated approach would be regarded as a step in the right direction by future homeowners and mortgage professionals alike.
“However, for those holding leaseholds on new build flats, the struggle continues.”
The government’s Renters Reform Bill is a continuation of legislation that is already making its way through Parliament.
The Bill says: “It will provide greater security and certainty of quality accommodation for renters, while helping landlords get their property back swiftly when needed, such as evicting anti-social tenants or those repeatedly in rent arrears.”
Its proposals include:
- Abolishing ‘no fault evictions’ to increase tenants’ security – but this will not happen until landlords have stronger possession grounds and a new court process is in place
- Strengthening landlord grounds for possession — if a tenant breaches their tenancy agreement or damages the property, landlords will be able to evict them in as little as two weeks
- Ending blanket bans on renting to tenants in receipt of benefits, or with children, or those with pets
- Supporting quicker, cheaper resolution between renters and landlords when there are disputes – preventing them from escalating to costly court proceedings – through the creation Private Rented Sector Ombudsman
The Bill also says: “Most landlords and properties let are sensitive to shifts in interest rates – almost 60% of landlords (and almost 70% of properties let) are financed through a Buy to Let mortgage.
“We must protect their rights to increase rents to the market level.”
Hargreaves Lansdown head of personal finance Sarah Coles points out that the government is placing a lot of hope on digital solutions to clear court backlogs between renters and landlords, that have held up the banning of no-fault evictions.
Coles says: “It [no fault evictions] was introduced into parliament earlier this year, but paused until court delays were solved. This was expected to be a prolonged process, but the bill proposes making these digital, and the government expects the clear the backlog quickly.”
BDB Pitmans partner Tristan Ward adds: “The Bill includes proposals other than the abolition of no-fault eviction” such as the Private Rented Sector Ombudsman.
Ward says: “However, many landlords will see these requirements as a burden, and will wait to see whether the fees required of them to maintain these services are ‘proportionate and good value’ as the government promises.
“It remains to be seen whether any of these proposals will be implemented before the next election, or left, along with the abolition of “no-fault eviction” for the next government to deal with.”
But Irwin Mitchell head of residential property Jeremy Raj argues that both of these Bills fail to address key issues in the housing market.
Raj says: “None of today’s proposals deal with the fundamental issues troubling the housing market, such as lack of supply, uncertainty regarding future regulation, unsuitable stock for our environmental ambitions and our population profile, and of course the affordability crisis.”
