Hello Readers,
I’ve been taking some time over the past couple of days to digest the King’s speech and what it means for property investors. Those who have read my blogs for a while will know that I like to let the dust settle before passing comment.
I must confess, that when it comes to the property market, there was nothing really new in there. Not that I’m terribly surprised for what may be the last year before we have a new Government!
It does seem that certain policies have been hanging over the heads of landlords for quite a while and these were, again, featured in the King’s speech.
So, what were they? There were two key pieces of legislation that will affect property investors and that’s the rental reform bill along with leasehold reform.
Leasehold Reforms
Before delving into the headlines of the rental reform bill, let’s look briefly at the leasehold reforms that have been in the process for quite some time.
- New houses must be sold as freehold, except under “exceptional circumstances,” which is not explicitly defined. The provision’s implication is that it pertains specifically to newly constructed houses, but this is not explicitly stated, and the nature of exceptional circumstances remains unspecified.
- The requirement for a tenant seeking an extended lease or freehold to have owned their property for a minimum of two years is being eliminated.
- Any newly granted extended lease under the legislation should span an additional term of 990 years, a significant increase from the current provision of an additional 90 years.
- Initiatives are being proposed to make it “cheaper and easier” for current leaseholders in houses and flats to extend their lease or acquire their freehold, although the specific implications are not clearly outlined.
- The limit on the proportion of non-residential areas allowed in a collective freehold claim is set to increase from 25% to 50%.
- A consultation is underway to consider capping the ground rent payable under existing leases.
- Provisions are being introduced to expedite and simplify the process of purchasing a leasehold property, with a concurrent focus on enhancing consumer rights.
I first wrote about this policy back in January 2021 and you can read the detailed article here. Come May this year, I wrote about how it looked like the policy had been kicked into the long grass, so for it to pop up again was interesting.
Whether this will ever see the light of day in actually happening I’m not sure, but if it does it will definitely be good news.
Rental Reform Bill
The second point to appear was the rental reform bill, which I think every property investor I speak with is sick of hearing about.
You can read the full details of what this bill includes here, however here’s a summary list for you:
- No fault evictions under section 21 to be abolished with landlords not being able to evict tenants in the first six months.
- Assured shorthold tenancies to be removed and replaced with assured tenancies as the norm; there will be a maximum tenancy period of one month.
- Landlords will be given avenues to recover vacant possession of their properties in limited circumstances. This is when selling, moving in a close family member or where tenants do not wilfully pay rent.
- Increased powers to evict anti-social tenants by broadening the disruptive and harmful activities that can lead to an eviction and making it quicker in instances of anti-social behaviour.
- Double notice periods for statutory rent increases from one to two months, with a rent increase allowed only once per year.
- Tenants given more rights to keep pets with a legal right to request a pet that the landlord must consider and cannot reasonably refuse (unless having a pet would be a breach of a leasehold covenant). Any tenants granted permission to have a pet will be required to take out pet insurance (to cover the landlord for any damage caused by the pet), however there is no comment about HMOs.
- Introduction of a landlord ombudsman.
- Property portal for landlords and properties.
- Applying the ‘decent home standard’ to the private rental sector.
- Bans on renting to children or those on benefits to be outlawed.
- Emphasis on digitisation of court proceedings.
My personal feeling is that whilst this bill featured in the King’s speech, it probably will not be implemented in full this parliamentary term. This is because there has been a lot of talk about reform of the courts system to enable the section 21 reforms to take place.
Other points might be implemented; however we shall see about the full bill. It had the second reading on 23rd October this year and is likely to receive Royal Assent in spring 2024 at the earliest, however that might not happen until autumn 2024 or even later.
What’s your thoughts on these pieces of legislation? Do we sound like a stuck record with no absolute certainty? That’s definitely something I keep hearing in conversation!
Hasan
