Earlier this year, we published our predications of the key legal developments likely to impact investors, occupiers and developers in 2024. With the general election now imminent, no new legislation can be passed so it’s an opportune moment to consider what the main parties are promising for the future.
Update – new law
Following the announcement of the General Election there was uncertainty as to which, if any, of the government’s proposed residential leasehold reforms would become law.
- The Freehold and Leasehold Reform Bill made it onto the “wash up” list and received Royal Assent before Parliament was dissolved but is not yet in force. Much of the detail will be contained in secondary legislation – which may not be published for some time.
The new Act will make significant changes to long residential leases and ban new leasehold houses, subject to certain permitted exceptions (e.g. retirement housing).
The Act has received a mixed reaction from the Real Estate sector as there is concern about the way it was rushed through parliament. There may well be technical difficulties with certain provisions, as we have seen with other legislation introduced at pace such as the Building Safety Act 2022.
- The Renters Reform Bill which proposed the abolition of Assured Shorthold Tenancies (ASTs) and an end to section 21 ‘no fault’ evictions did not make it through the wash up leaving the next government to decide whether or not to bring it before the new Parliament.
What next?
Leasehold Reform
Leasehold reform looks set to remain a hot topic as the main parties have all committed to it in manifestos.
- Ground Rents
Although the Leasehold and Freehold Reform Act does not ban ground rents in existing leases, ground rents for residential leases look set to be reduced or abolished altogether as all parties have committed to reform them.
The Conservatives have set out a very specific policy of introducing an initial cap of £250 per annum, reducing to a peppercorn over time, which the British Property Federation describes as being “fraught with consequences that impact on leaseholders and freeholders”. The impact of any change will depend upon the detailed wording of the relevant legislation and property investors will want to track future developments on this topic.
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No fault evictions
The death of the Renters Reform Bill does not mean a lengthy reprieve for the end to section 21 “no fault” evictions as all the main parties have parties have promised to abolish such evictions for private tenants. This would be a significant change for the private rented sector and, while such reform clearly has cross-party support, uncertainty remains over timing.
- Long residential leases
Labour and the Liberal Democrats have both indicated that they will abolish residential leasehold entirely although neither party explains what it is proposed as a viable alternative nor comments upon the practicalities of delivery. The Conservatives refer to “making it easier to take up commonhold” but this is not a new idea and little progress has been made since the Commonhold Council was set up back in 2021.
Building Safety
Building safety has been a key issue for developers, freeholders, investors and occupiers since the introduction of the Building Safety Act 2022.
The Conservatives refer to the continuation of developer funded remediation programmes while Labour proposes stronger measures to protect leaseholders from costs and to accelerate the pace of remediation. Meanwhile, the Liberal Democrats suggest that certain types of cladding should be removed from all buildings with no charge to any leaseholders. Removing all height limits would be a significant change and seems to be a disproportionate approach that goes against the more nuanced approach set out in the latest industry guidance (PAS 9980).
In addition to any post-election legislative developments, we are expecting some significant decisions from the Court of Appeal later this year on remediation contribution orders and the scope of costs that can be charged to leaseholders – this is a complex area of law and remains one to watch.
Energy Efficiency
The property industry has been faced with uncertainty about the future trajectory of the minimum energy efficient standards (MEES) requirements.
- Commercial Property
The position for commercial property remains unclear as the government has still not published its response to the 2021 consultation on raising MEES for commercial properties and none of the main parties have made any express commitments in their manifestos. The commercial property sector would no doubt welcome clear policy guidance on this from the next government.
- Residential Property
The main parties all refer to improving MEES for residential property in their manifestos. Landlords will hope that any reform requiring higher EPC ratings will include realistic lead-in times.
As we have previously commented, despite the uncertainty of the regulatory backdrop, corporate governance commitments around ESG remain a priority and act as a significant driver of change in legal obligations.
Business Rates
The Conservatives intend to reform business rates by “increasing the multiplier on distribution warehouses that support online shopping over time.” Rather, than shifting the tax burden between sectors, arguably a better reform would be to require more frequent valuations so that rates are more aligned with property values.
Labour and the Liberal Democrats both propose replacing business rates altogether but they provide limited further detail or explanation as to how such reform will be achieved.
The retail property sector has long been calling for business rates to be made simpler and more affordable and it is hoped that this issue will be tackled as a priority by whichever party emerges as the victor on 4 July 2024.
Planning
We have previously reported on the Levelling Up and Regeneration Act 2024 (LURA 2024) which introduced potentially far-reaching changes to the planning regime. Some of its key provisions are still not in force and no further progress can be made until the new government is formed. This means that there is uncertainty over those parts of LURA that have not yet been implemented.
Developers will note that planning reform is highlighted by all main parties with various different proposals to improve and accelerate the planning process. Of course, the success of these ideas will largely depend whether local authorities have the resources to be able to deliver on such promises in the future.
For further Insights from our real estate team see our UK Real Estate Hub.