Property reforms to watch out for this year

Security of Tenure – Commercial Leases

What:

The current model of security of tenure gives qualifying business tenants the right to continue to occupy premises, and the right to renew their tenancy, at the end of the lease term, subject to the right for landlords to oppose renewals on specified grounds (such as an intention to redevelop). Landlords and tenants must go through an exclusion process if they want to ‘opt-out’ of this protection. Concerned that this model is outdated, the Law Commission launched a consultation in November last year as the first stage in a two-part process assessing potential reforms. The consultation invites anyone affected, including businesses, landlords and their representative bodies and advisors, to offer their views on questions including:

• whether business tenants should still benefit from security of tenure;
• if security of tenure is to continue, should it (i) be mandatory (ii) become an ‘opt-in’ process or (iii) remain an ‘opt-out’ process?
• which type of business tenancy should benefit from security of tenure (considering different use-types, length of term and other possible factors); and
• the potential impact of changes on landlords and tenants of business tenancies.

When:

The deadline for responses is 19th February 2025. Depending on the outcome of the initial consultation, a second consultation is expected to follow on the detail of the potential reforms. The full consultation paper is available here, with a summary available here.

Renters’ Rights

What:

The headline-grabbing promise to abolish Section 21 ‘no-fault’ evictions has caused quite a stir amongst residential landlords. With a focus on shifting security and power to home occupiers (rather than owners) the proposed reforms include:

• ending the right of landlords to use Section 21 notices to terminate tenancies;
• changing the grounds on which an application can be made to the courts for a possession order;
• changing all assured tenancies to periodic tenancies, continuing until terminated (abolishing fixed-term assured tenancies);
• increasing the rights of tenants to challenge ‘unfair’ rent increases;
• increasing the regulation of private rented sector landlords, with the introduction of a new ombudsman and database of landlords; and
• increasing the regulation of the condition of private rented sector properties, applying both the Decent Homes Standard and ‘Awaab’s Law’ to the sector, with specified timescales for remedying serious hazards in homes.

The measures are intended to apply to both existing and new tenancies.

When:

The Renters’ Rights Bill 2024-25 replaces, although in many ways mirrors, the previously proposed Renters (Reform) Bill. The 2024-25 Bill is progressing swiftly through Parliament with the Second Reading in the House of Lords scheduled for 4th February. It is now anticipated that the Bill could become law in the spring. The 2024-2025 Bill can be viewed here.

Leasehold Reform

What:

It is no secret that the current system of leasehold ownership is out-of-favour with the government. The Leasehold and Freehold Reform Act 2024 (‘LFR Act’), introduced by the previous government, aims to give leaseholders increased powers in relation to their homes with reforms including:

• making it easier and cheaper for leaseholders to extend leases, to exercise the right to manage their building and to buy the freehold interest in the building;
• removing the requirement to own a property for two years before acquiring the right to extend the lease;
• banning the sale of new leasehold houses;
• increasing standard lease extensions from 90 to 990 years; and
• providing increased transparency regarding service charges.

Although the LFR Act became law in May 2024, many of the provisions have not yet been brought into force. In a Statement to Parliament at the end of last year the Housing Minister, Matthew Pennycook, indicated that secondary legislation would be enacted to bring in certain provisions of the LFR Act, with further primary legislation to address other reforms and remedy ‘flaws’ in the LFR Act.

When:

The provisions in the LFR Act that remove the two-year ownership prerequisite for lease extensions have been implemented, coming into effect on 31st January.

The Statement to Parliament set out the timescales for other measures including:

• Spring 2025: bring into effect the provisions in the LFR Act that reform the right to manage process.
• Early 2025: publish a white paper on reforms of commonhold (the government’s preferred alternative to leasehold ownership).
• 2025: consult on other reforms, including how to restrict leasehold flats and the regulation of managing agents.
• Second half of 2025: publish the draft Leasehold and Commonhold Reform Bill (intended to introduce the wider reforms).

Energy Performance of Buildings

What:

One of the priorities of the new Labour government is sustainability and combatting climate change. This includes reviewing the rules that apply to buildings, estimated to be responsible for around 20% of UK greenhouse gas emissions. The current Energy Performance of Buildings regime was introduced gradually from 2007, however the increased complexity in building systems, progress with energy metric technology and effects of climate change mean that reform is needed. At the end of last year, the government opened a consultation on amendments to the rules that apply to Energy Performance Certificates (‘EPCs’) and Display Energy Certificates (‘DECs’), including:

• changes to the information to be included in EPCs and DECs;
• how long EPCs and DECs should be valid for;
• whether a property should have a valid EPC before it can be marketed (for sale and rent);
• changes to the types of buildings or length of lettings where an EPC is required; and
• whether the penalties for non-compliance should be increased.

When:

The consultation is open until 26th February 2025 and further information can be found here. Draft legislation is expected later this year.

High Street Rental Auctions

What:

As of 2nd December 2024, the Levelling-Up and Regeneration Act 2023 gives local authorities new powers to run High Street Rental Auctions of vacant units, giving businesses and community groups a ‘right to rent’ empty commercial properties. Aimed at rejuvenating struggling high streets, the legislation:

• enables local authorities to designate high streets and streets in town centres as important to the local economy due to their high concentration of users;
• allows local authorities to auction commercial units (excluding warehouses) within those designated areas that have been vacant for at least one year within the last two years if the local authority believes occupation of the unit would be beneficial to the local society, economy or environment;
• requires the local authority to serve an initial notice on the unit owner of the intention to auction the unit;
• permits local authorities to serve a final notice on the owner if the unit has not been let by the owner within 8 weeks of the initial notice; and
• allows the owner a two-week appeal period after a final notice is served, following which the local authority has 12 weeks to prepare the auction pack, draft an agreement for lease and lease (for a term of between 1 and 5 years) and hold the High Street Rental Auction.

If successfully sold at auction, contracts are exchanged at auction, with the lease to be granted shortly afterwards (once any applicable works have been carried out by the owner). Further information on High Street Rental Auctions can be found here.

When:

The powers are initially being exercised by “Early Adopters”, announced last month as Darlington BC, Bassetlaw DC, Mansfield DC and Bournemouth, Christchurch and Poole (BCP) Council, in varying roles. These local authorities will work with the Ministry of Housing, Communities and Local Government and other councils in relation to the wider implementation of the scheme. With limited government funding allocated to the programme, we will have to wait and see the extent to which other budget-stretched local authorities engage with their new powers.

Final thoughts

The current government, like its predecessors, remains focused on:

• moving control from property owners to property occupiers;
• reviving struggling high streets; and
• minimising the environmental impact of buildings.

This can be seen in the significant programme of reforms that has been announced. Everyone from property occupiers to owners, developers to funders, could be impacted in some way and we will update on further developments over the year.