The new Labour Government was elected and formed on 5^th July 2024. Its new manifesto heralding significant changes in planning law, energy law, and leasehold law, big changes are expected for the property industry which will have significant impacts on commercial landowners and developers.

The UK Parliament has introduced the Leasehold and Freehold Reform Act 2024 which attempts to bolster the bargaining power of long-term leaseholders via the grant of special, statutory-backed rights. Additionally, the Planning and Infrastructure Bill is expected to shake up the national planning framework to a more developer-friendly stance.

Leasehold reforms

The changes to be introduced by the Leasehold and Freehold Reform Act 2024 are expected to have a large impact on landlords with small to substantial residential property portfolios since they introduce new individual and collective rights for leaseholders, as well as new procedures and processes to be complied with, which impact key matters such as service charges and homeownership.

A summary of the key changes:

• An outright ban on long residential leases for houses, save for a few exceptions labelled “permitted leases” under Part 1 and Part 2 of Schedule 1 of the 2024 Act. This seems to be an attempt at restricting long-term rental income streams for landlords and shifting equity in favour of tenants.
• A large relaxation on the qualifying thresholds for tenant enfranchisement (meaning the right to acquire the freehold) from a prevention of enfranchisement at a maximum of 25% of total non-residential internal floor space to 50%. This means certain tenants will be able to exercise collective rights over the building where up to 50% of the internal floor space is used for non-residential purposes. Paradoxically, this may have the effect of encouraging landlords to increase development space on mixed-use buildings to dilute internal residential floor space, thereby increasing expenses for landlords as well as tenants.
• A limitation of the landlord’s right to object, in certain circumstances, to lease extensions or enfranchisement requests for residential houses on the basis of redevelopment or reoccupation of the building.
• An immediate right to claim a lease extension or buy the freehold of the house for tenants in occupation. Previously, tenants had to be in occupation for at least two years to qualify.
• A tighter control over valuation methods for enfranchisement and lease extensions. Rates used for valuations are to be published under secondary legislation.
• Changes to service charges, including new protections for tenants against excessive fixed service charges, as well as the right to request certain information regarding service charges and time limits to comply.
• Extra controls over estate management charges, such as expiry dates for billing incurred costs, producing annual expense reports, and a narrowing of situations where estate management charges can be demanded.

Though some absolute rights exist, some of the changes under the Act operate on a sliding scale and specialist advice is therefore recommended on whether the provisions apply and what qualifications or exemptions a landlord may rely on. Further, new procedures and processes have been prescribed by the Act, which will be introduced by additional secondary regulations, and specialist support might be required for compliance with statutory deadlines.

Do note, however, whilst the Act received Royal Assent in May 2024, the advent of the new Labour Government in July 2024 means most of the provisions will need to be passed through secondary legislation.

Planning reforms

Additionally, through the Planning and Infrastructure Bill announced during the King’s Speech on 17 July 2024, there have been some general outlines for major reform in relation to planning touted by the Government, namely: –

• For major infrastructure projects, new National Policy Statements from the Government will be produced to streamline the consent process for planning applications. Compulsory purchase compensation rules will be revised to give landowners better incentive to give up land for major works.
• On a local level, planning committees will be modernised and 300 additional planning officers will be recruited to ease backlogs.
• Boundaries for Green Belt land is to be reviewed to increase the amount of development opportunities under Brownfield and Grey Belt land.

The changes proposed by the Labour Government are amongst some of the most drastic in recent years in an attempt to revitalise the British property sector. Get in touch with Berwins today for specialist legal property advice.

DISCLAIMER: The information and opinions expressed in this article does not address individual requirements and is for informational purposes only. It does not constitute any form of legal advice and should not be relied on or treated as a substitute for specific advice relevant to your particular circumstances.