The Leasehold and Freehold Reform Bill and the Renters (Reform) Bill both promise massive changes to the legislative landscape for the property market in England writes Mark Chick, Senior Partner and Joint Head of our Landlord & Tenant Team.
It is interesting to compare the pace at which both these pieces of legislation have progressed. The Renters (Reform) Bill was introduced to Parliament on 17 May 2023, while the Leasehold and Freehold Reform Bill was received its first reading on 27 November 2023, quickly following on from the King’s Speech on 7 November 2023.
While the Leasehold and Freehold Reform Bill was clearly second out of the blocks, its progress through Parliament to date has been nothing short of ‘light speed’ for a piece of UK legislation. At the time of writing, the Bill has managed to clear Committee stage and has received its three readings in the House of Commons, and recently had its first reading in the Lords on 28 February 2024. It is now scheduled to have its second reading in the Lords on 27th March 2024.
By contrast, the poor old Renters (Reform) Bill is still languishing at Committee stage as, according to the Secretary of State for Levelling Up, Housing and Communities Michael Gove, “significant reforms” are needed to the court service before the Government feels able to press ahead with the abolition of Section 21 (a key component of the Bill, which would scrap Section 21 ‘no fault’ evictions, and deliver a more secure tenancy structure for all short term renters).
Both these Bills propose sweeping changes to property law in England (the Renters (Reform) Bill does not apply in Wales or Scotland, whist the Leasehold and Freehold Reform Bill does not apply to Scotland). The Leasehold and Freehold Reform Bill will deliver a one-off windfall to those with short leases (due to the abolition of marriage value) and lead to a profound shake up to the property management sector.
If and when the Renters (Reform) Bill ever progresses through Parliament and becomes law, it will change the rental landscape forever, ushering in a new situation where those renting will enjoy security of tenure moving forwards. This may lead to a major shift in how lenders view the ‘buy to let’ market and may put many one-off or small-scale landlords into a difficult position, particularly if the Bill also limits landlords’ freedom to increase rents easily.
There is more to be said about how the possession mechanisms in the Renters (Reform) Bill will play out but, in the meantime, and with an election on the horizon, the Government appears to want to tread more carefully before making these changes, particularly as economic growth remains sluggish and the squeeze on household budgets remains.
By comparison, it seems to be full steam ahead for the Leasehold and Freehold Reform Bill and it is quite possible the new legislation will might make it onto the statute books before the impending General Election later on this year.
That said, much of the detail in the Leasehold and Freehold Reform Bill is likely to require secondary legislation (via statutory instruments), which will need to be prepared to give full effect to the Bill’s provisions. We also await news of how and at what level the Secretary of State plans to set the ‘deferment rate’ and the ‘capitalisation rate’ – both of which are key components in the calculation. It is not clear whether these will change from the current position, or whether the Government will wish to be more daring and seek to adjust these to further favour leaseholders.
Without such subordinate legislation in place, the situation might arise where the Government makes a promise to deliver the Bill, but states that its effects (either in whole or in part) are not fully ‘there’ yet.
As lawyers, legislation is of course at the heart of much of what we do, and we will continue to keep a watching brief on these key Bills as they progress through parliament and provide updates.
Contact our Landlord & Tenant team
If you have a query concerning either the Leasehold and Freehold Reform Bill or the Renters (Reform) Bill, please contact our expert Landlord & Tenant team by emailing leasehold@bishopandsewell.co.uk or call Bishop & Sewell’s Landlord & Tenant team on 0207 631 4141.
The above is accurate as at 14 March 2024. The information above may be subject to change.
The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.
