Real Estate bulletin - July 2024

The new UK government: the first 100 days

Our guide to the new UK government's first 100 days in power charts a course to what is likely to be the flagship event of the new government at the end of the period: its first full budget with full OBR costings (scheduled for 30 October 2024). Before that, actual parliamentary time to enact new legislation will be short given the summer recess starting on 30 July and then the party conference season in September.

The guide highlights some of the key Labour manifesto policies which are likely to impact real estate.

The King’s Speech – next steps for real estate

In the King's Speech on 17 July 2024, the Labour government set out the Bills which will be introduced in this parliamentary session. Those which will have a significant focus on the built environment and real estate include the following:

Renters’ Rights Bill

Although the Bill has not yet been introduced the background briefing notes to the King’s Speech sets out that the Bill will:

• Abolish Section 21 ‘no fault evictions’: The government also notes it will introduce new clear and expanded possession grounds ‘so landlords can reclaim their properties when they need to’.
• Strengthen tenants’ rights and protections: The government states it will ‘empower tenants to challenge rent increases designed to force them out by the backdoor’ and ‘introduce new laws to end the practice of rental bidding wars by landlords and letting agents’.
• Apply both a Decent Homes Standard to the private rented sector and also Awaab’s Law (Awaab’s Law will set clear legal expectations about ‘the timeframes within which landlords in the private rented sector must make homes safe where they contain serious hazards’).
• Create a digital private rented sector database to bring together key information for landlords, tenants, and councils. The notes set out this will assist tenants to make informed choices, landlords to demonstrate compliance and councils with enforcement.
• Introduce a new ombudsman service
• Make it illegal to have blanket bans on renting to tenants in receipt of benefits or with children.
• Strengthen local councils’ enforcement powers
• Give tenants the right to request a pet

Many of the headline measures reflect key elements of the now defunct Renters (Reform) Bill which was largely supported by Labour (with Labour having previously noted the original Renters (Reform) Bill ‘was a good starting point for the reform that is necessary’). However, the proposals set out in the briefing notes to the King’s Speech go further in some cases and align with campaign commitments and amendments tabled by Labour to the Renters (Reform) Bill to strengthen tenants’ rights.

As the Renters (Reform) Bill did not make it through the wash up, Labour will now be in the driving seat with the Renters’ Rights Bill. Timing on abolition of s.21 in particular was a key difference between the parties. The Conservatives proposed significant court reforms before s.21 was abolished, whereas Labour’s position has been abolishing s.21 should not be dependent on this and in its manifesto Labour stated it would look to abolish s.21 ‘immediately’. With parliament now in recess, there is speculation that the Renters’ Rights Bill will be introduced in the Autumn. The detail and how closely the provisions reflect the previous Renters (Reform) Bill will be awaited with interest.

One of the concerns we highlighted previously in relation to the Renters (Reform) Bill was that abolishing s.21 brings into play the existing but relatively rarely used right of tenants to challenge rent increases in the Tribunal. Without significant reform of the judicial process this does mean that landlords could be faced with very material delays in implementing rent increases. For professionally run PRS/multi-family buildings in particular, rent increase challenges from tenants could be a bigger issue than the reduced scope for evicting their tenants.

Draft Leasehold and Commonhold Reform Bill

The briefing notes to the King’s Speech set out that there will be further reform of the leasehold system and that the government ‘will enact remaining Law Commission recommendations to bolster leaseholders’ fundamental rights to extend their lease and buy their freehold (enfranchisement), and take over the freeholders building management functions (Right to Manage)’.

The government sets out that it will ‘reinvigorate commonhold’ by modernising the legal framework and that it will restrict the sale of new leasehold flats. The briefing notes state that the government will consult on the best way to achieve this. The briefing notes refer to the commonhold becoming the “default tenure” – a phrase used by Labour before the election. They also acknowledge that there are fewer than 20 buildings that held under the commonhold tenure. After more than 20 years since the foundational legislation introduced commonhold, clearly it has not been very popular.

The notes also set out that the Bill will also tackle existing ground rents ‘by regulating ground rents for existing leaseholders so they no longer face unregulated and unaffordable costs’. This will be a closely monitored development, with the Conservative proposals for ground rent reforms in this area having failed to make it into the Leasehold and Freehold Reform Act 2024. At this stage, we have no meaningful detail on how, if at all, ground rents might be capped or similar.

The notes also state that the government will bring ‘the injustice of ‘fleecehold’ private estates and unfair costs to an end’. It also states it will also end ‘the injustice of forfeiture’. Does this mean the threat of forfeiture will be removed or neutralised to such an extent that the primacy of rent payments on which landlords have been able to rely to date will be removed? If so, this could increase arrears, costs of collection and delinquency rates in the ground rent sector.

Again the Bill has not yet been introduced.

The government also notes it will implement the Leasehold and Freehold Reform Act 2024.

Planning and Infrastructure Bill

The background briefing notes to the King’s Speech note that the Bill will accelerate housebuilding and infrastructure delivery by:

• streamlining the delivery process for critical infrastructure including:
  • accelerating upgrades to the national grid and boosting renewable energy
  • simplifying the consenting process for major infrastructure projects
  • enabling relevant, new and improved National Policy Statements to come forward and establishing a review process that provides the opportunity for them to be updated every five years, giving ‘increased certainty to developers and communities’.
• further reforming compulsory purchase compensation rules
• modernising planning committees
• increasing local planning authorities capacity
• ‘using development to fund nature recovery where currently both are stalled’

The Bill is set out as central to ‘unlocking more housing and infrastructure across the country and supporting sustained economic growth’ and the detail is likely to be a central element of delivering Labour’s planning and housing manifesto commitments by bringing about structural reforms to the decision making process and compulsory purchase compensation rules relevant to land assembly.

Some other Bills of interest

The National Wealth Fund Bill, Great British Energy Bill and Crown Estate Bill are also positioned as key to Labour’s 'Clean Energy Superpower mission' which will support new infrastructure and net zero ambitions.

Housing targets and planning reform

On 30 July 2024 Angela Rayner the Deputy Prime Minister, and Secretary of State for Housing, Communities and Local Government also announced further policy details in relation to Labour’s planning reforms and housebuilding targets.

This includes a consultation on ‘Proposed reforms to the National Planning Policy Framework and other changes to the planning system’. The government commits to ‘respond to the consultation and publish NPPF revisions before the end of the year, so policy changes can take effect as soon as possible’. The consultation follows through on and adds detail to some of Labour’s key manifesto commitments including in relation to housing targets and the commitment to build 1.5 million new homes, development (including brownfield, ‘grey belt’ and the Green Belt), and renewable energy. It also notes that changes will be followed by further reforms in the Planning and Infrastructure Bill.

A ‘New Towns Taskforce’ has also been announced.

You can read more about this in our ‘First 100 Days’ guide.

EPC – reinstating EPC C target by 2030 for residential property

Ed Miliband the Secretary of State for Energy Security and Net Zero confirmed in parliament on 18 July 2024 that it is the government’s intention to ‘demand that landlords raise the standard of their accommodation to a proper energy performance certificate standard C by 2030.’

This aligns with Labour’s manifesto commitment under its warm homes plan to ‘ensure homes in the private rented sector meet minimum energy efficiency standards by 2030’. Although the minimum rating was not specified in the manifesto.

UK Climate Resilience Roadmap Consultation

The UK Green Building Council (UKGBC) in ‘close collaboration with various organisations across all of the UK’s subsectors of the built environment’ is creating the country’s first UK Climate Resilience Roadmap for the built environment. This is described as ‘a practical, evidence-based guide to help the industry adapt to climate change, protect people, and support ecosystems.’

UKGBC are currently consulting on the roadmap and the documentation notes ‘The objectives of the Roadmap are to enhance awareness, level up knowledge and trigger action within the industry and Government, while offering key actions, recommendations, and policies to significantly increase appropriate knowledge and strengthen climate resilience in the UK. The Roadmap will address key climate-related hazards for the built environment, including overheating, wildfires, flooding, drought, and storms.’

The consultation is open from the 11th July until 5pm on 7th August.

ESG: FCA provides guidance on notifications under SDR regime

The FCA has added to its webpage on the SDR and labelling regime a new section on how to notify it when a fund is using an investment label.

You can read more about this here.