Twenty-one bills were included in the King’s Speech covering everything from prisoners to high speed rail. Of those 21 bills, two stand out and will directly impact the property market:
- Leasehold and Freehold Bill: – this intends to reform the housing market and make it cheaper and easier for leaseholders to purchase their freehold
- Renters (Reform) Bill: – perhaps the most transformative legislation to impact the residential and Buy-to-Let market in the last 30 years. The bill aims to strengthen the security of tenure and offer better value for tenants as well as a certainty to landlords that they can “regain their properties when needed”
Leasehold & Freehold (Reform) Bill
A reform of the leasehold system should be welcomed. The current mechanism is burdensome and penalises the leaseholder. However, it is too early to say if the proposed is fit for purpose.
The proposed changes to lease extension, from 90 years to 990 years, undoubtedly will help vendors, and reduce delays where leases are “short”. This will likely reduce the number of chains that fall through as a result.
There are concerns around capping ground rents and how these could impact service charges. The Residential Freehold Association has already commented that “the Government must ensure any legislation does not impose unwanted obligations on residents, undermine property rights or delay the remediation of buildings.”
The proposal to allow flat owners to take over management of buildings where they are up to 50% non-residential will worry commercial investors. This will particularly impact large multi use developments, such as shopping centres, and will likely deter investors.
Renters (Reform) Bill
The Government is committed to passing the Renters Reform Bill before the next general election. Thankfully, the Government confirmed that it does not intend to proceed with the abolition of Section 21 until Court reforms have taken place. This will give buy-to-let landlords some breathing space, but little security going forward.
For student landlords there is some good news. The Government has had regard to the Levelling Up, Housing and Communities Committee’s fifth report and will include a new ground for possession to facilitate the yearly cycle of student lets. How this will operate is not yet clear.
Overall, legislating for the few will impact the many. The premise of the bill, to target rogue landlords, is commendable, however, the impact on landlords as a whole will be felt far and wide. This, along with other market factors, will likely result in less demand for investments in to the buy-to-let market and, consequently, further upward pressure on rents.