The sudden announcement by Prime Minister Rishi Sunak that a General Election will be held on July 4th has caused significant upheaval in the legislative landscape. Among the casualties is the Renters Reform Bill, which has been abandoned for now due to its failure to progress through Parliament’s ‘wash-up’ process before its dissolution. The bill’s complexity and controversy prevented it from gaining Royal Assent, meaning it will need to be reintroduced by the incoming government, whether Conservative or Labour.
The Renters Reform Bill aimed to address key issues within the rental sector, but for now, tenants and landlords will have to wait for new legislative action. The suspension of this bill means that its proposed changes will not come into effect until a new version is passed, making it a key area to watch as the election unfolds and a new government takes office.
In contrast, the Leasehold & Freehold Reform Act has successfully navigated the legislative process and has received Royal Assent. However, while the Act is now officially law, it will not be implemented until the new government decides on the exact timing post-election. Until then, the current leasehold regulations remain in place.
What the Leasehold & Freehold Reform Act Means
The Leasehold & Freehold Reform Act introduces several important changes designed to benefit leaseholders and streamline the leasehold system:
- Extended Lease Term: The Act standardises lease terms at 990 years. Previously, extending a lease required owning the property for at least two years. The new standard significantly reduces the need for this restriction, as leases will now be much longer from the outset.
- Marriage Value Removal: One of the most impactful changes is the removal of marriage value from lease extensions. Previously, extending a lease with less than 80 years remaining could be costly, with the price almost doubling compared to extending a longer lease. The Act eliminates this extra cost, making lease extensions more affordable.
- Simplified Transactions: The Act aims to speed up the buying and selling process of leasehold properties. Currently, transactions involving leaseholds take about 50% longer than freehold transactions due to the involvement of multiple parties. By streamlining these processes, the Act hopes to make property transactions smoother and more efficient.
- Transparency in Fees: Transparency is a key focus, with the Act addressing concerns about excessive service charges and administration fees. This measure is designed to prevent managing agents from charging unreasonably high fees, ensuring clearer and fairer cost structures for leaseholders.
- Ground Rent Cap: The Act caps ground rents at £250 per year, with a higher limit of £1,000 within London. This change aims to make ground rents more manageable and prevent them from becoming an excessive financial burden.
- Ban on New Leasehold Houses: New leasehold houses will be banned under the new Act, though there are exceptions for shared ownership and properties managed by the National Trust. This measure is intended to prevent the proliferation of leasehold houses and encourage other forms of property ownership.
- Integration with the Building Safety Act: The Act builds on the principles of the Building Safety Act 2022, ensuring that freeholders and developers remain responsible for funding necessary building safety remediation works.
As the UK approaches the General Election, the focus will likely shift to how each party plans to handle property legislation moving forward. The outcome of the election will determine how quickly and effectively these new laws are implemented and how they will shape the future of property ownership and rental regulations in the UK. Whilst the Renters Reform Bill abandoned for now we will likely see a new version appear in the not too distant future.
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