Housing Reform: A New Landscape for Homeowners and Renters

21 August, 2024 5 minutes reading time

The UK housing market is undergoing a significant transformation, with several key pieces of legislation to create a fairer and more transparent system for homeowners and renters. The recently enacted Leasehold and Freehold Reform Act 2024 (LAFRA), the forthcoming Leasehold and Commonhold Reform Bill (LCR Bill), and the proposed Renters’ Rights Bill (RR Bill) collectively signal a new era of housing reform in the UK.

Leasehold and Freehold Reform Act 2024 (LAFRA)

LAFRA passed on 24th May 2024, introduces crucial reforms that benefit leaseholders:

• Abolishing Ground Rent for New Leases. New leases will no longer be burdened by escalating ground rents, providing financial relief for future homeowners.

• Extending Lease Terms. The standard lease extension is significantly increased from 90 to 990 years, offering greater security and stability to leaseholders.

• Removing ‘Marriage Value’. Leaseholders will no longer have to pay a premium when extending their lease with less than 80 years remaining, making lease extensions more affordable.

Important Note: While LAFRA has been passed, most of its provisions are not yet in force. The new government is responsible for implementing the necessary secondary legislation to bring these changes into effect.

Renters’ Rights Bill (RR Bill)

In addition to leasehold reform, the government underlined its determination to proceed with the Renters (Reform) Bill. Included in the King’s Speech, the Renters’ Rights Bill (RR Bill) aims to improve the treatment of tenants in the private rented sector. Moreover, it also safeguards the rights of responsible landlords. This bill will apply to England and Wales. The proposals include:

• Rent increases. The bill aims to end rent review clauses that allow landlords to automatically increase rent in ways that may not reflect market rates. Instead, landlords can raise rent once a year in line with market rates.

• Section 21 evictions. The bill will abolish Section 21 notices, also known as ‘no-fault’ evictions, which allow landlords to evict tenants without providing a reason. This practice has been criticised for leaving tenants vulnerable to sudden and unjust evictions.

• New property ombudsman. The bill will introduce a new ombudsman for private landlords. This independent body will help resolve disputes between landlords and tenants without costly and time-consuming court proceedings. The ombudsman will also ensure that landlords take action to address complaints from residents, thereby improving the quality of rental accommodation.

• End of fixed-term tenancies. The bill will replace fixed-term tenancies with periodic tenancies, which allow tenants to give notice at any time after the agreement begins. The bill also bans notice periods longer than two months. 

• Property portal. The government will launch a new property portal to help landlords understand their obligations and to give tenants more insight into their landlords’ compliance.

• Decent Homes Standard. The bill will apply the ‘Decent Homes Standard’ to the private rented sector for the first time to provide renters with safer, higher-quality homes.

Leasehold and Commonhold Reform Bill (LCR Bill)

The upcoming LCR Bill builds on the foundation laid by LAFRA and the RR Bill. The proposed reforms aim to empower leaseholders further, increase transparency, and provide more secure and affordable homeownership options. The proposed changes include:

Leasehold Reforms 

• Lease Extensions & Enfranchisement. Streamlining and reducing costs for leaseholders to extend their leases or collectively purchase the freehold of their building, implementing recommendations from the Law Commission. 

• Ground Rent: Abolishing ground rent for new residential leases, effectively setting it at a peppercorn (zero financial value) and exploring options to regulate ground rents for existing leaseholders.

• Right to Manage. Enhancing the Right to Manage, making it easier for leaseholders to take control of their building’s management.

• Forfeiture Abolishment. Removing the threat of forfeiture (losing your home) as a means for landlords to enforce lease terms, protecting leaseholders from disproportionate penalties.

• Freehold homeowners on estates. Implementing new protections for freehold homeowners on private or mixed-tenure estates, ensuring fairness and transparency in shared cost management. 

Commonhold Reforms 

• Commonhold Modernisation. Reinvigorating commonhold by updating the legal framework and making it a more attractive alternative to leasehold.

• New-Build Flats. Consulting on potentially restricting the sale of new-build flats as leasehold, encouraging the adoption of commonhold.

Additional Measures

• Leasehold Ban. Banning the sale of new leasehold property. 

 Key Takeaways

• Future Homebuyers. You can anticipate a fairer and more transparent housing market, with a focus on commonhold ownership for new flats and houses and the elimination of escalating ground rents.

• Existing Leaseholders. The combination of LAFRA and the future LCR Bill brings hope for greater control over your property and more affordable options for extending your lease or buying your freehold.

• Renters. The RR Bill could provide greater security and protection against unfair eviction and ensure better-quality rental accommodation.

The Path Forward

The implementation of this legislation signifies a significant shift towards a more equitable and secure housing market in the UK. While the full impact of the changes is unclear, nonetheless, the proposed reforms demonstrate an intention to tackle the housing crisis head-on.

Our Advice

We’ll continue to monitor developments and provide updates as legislation passes through Parliament. If you have any questions about how these reforms may affect you, please contact our specialist property team. We’re here to help.

Please note that all views, comments or opinions expressed are for information only and do not constitute and should not be interpreted as being comprehensive or as giving legal advice. No one should seek to rely or act upon, or refrain from acting upon, the views, comments or opinions expressed herein without first obtaining specialist, professional or independent advice. While every effort has been made to ensure accuracy, Curtis Parkinson cannot be held liable for any errors, omissions or inaccuracies.

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