Industry News


Leasehold reforms become law without ground rent cap


Reforms to the leasehold and freehold system in England and Wales have become law – but without a promised cap on ground rents. Te new law aims to make it cheaper and


easier for more people to extend their lease, buy their freehold and take over management of their building. But plans to remove ground rent altogether for existing leaseholders, or to cap it at £250 were dropped by Ministers. Te Leasehold and Freehold Reform bill was


one of the last pieces of legislation to make it through Parliament before it was shut down ahead of July’s General Election. Te former Levelling Up Secretary Michael


Gove said he originally wanted to cap ground rents at a nominal level. Tat was changed to a planned £250 cap, but the idea was dropped altogether as the legislation was rushed into law at the last minute on an evening of frantic activity.


A ground rent is paid by owners of leasehold properties on top of their mortgage, with some facing high charges and unexpected increases which can make homes difficult to sell.


But the owners of freehold properties


had campaigned hard against the ground rent cap and other measures in the bill arguing it would harm the value of their investments and some companies had threatened to sue the Government for interfering with their property rights. Labour’s shadow housing minister Matthew


Pennycook said his party would “finish the job of finally bringing the archaic and iniquitous leasehold system to an end”. “Having waited so long and had their expectations raised so high, leaseholders across the country will be bitterly disappointed at the Tories’ failure to enact bold leasehold reform,” he added. Speaking as the leasehold bill was


being rushed through the House of Lords, Conservative peer Lord Bailey of Paddington said: “Tis bill is suboptimal, it’s not the revolution that many leaseholders across the country have been desperate for. But it’s the only game in town, a game that has currently taken 22 years to get to this point.”


R


ent rises should be capped for millions of people struggling to afford soaring price increases, according to a report


commissioned by the Labour Party. Te stabilisation model proposed by the


report’s author, Stephen Cowan, suggests a “double lock” for those renewing their tenancies. Tis would guarantee that any rise is capped at either consumer price inflation or local wage growth – whichever is the lower – across England and Wales. But Labour is conscious of warnings that rent


controls could discourage developers from building new houses and make the affordability crisis even worse. Te report warns that rent freezes or limits on rises between tenancies could make it harder to find a rental property, pushing prices up further. Tenants across the country faced the highest


annual increase in rents since records began in 2015 last year, with average monthly rents rising by 9% in the year to February. Te Resolution Foundation thinktank predicts


average rents could increase by as much as 13% over the next three years as the current high growth in the private rental market works its way through existing tenancies. Cowan also recommends that rents can only


increase once a year, with tenants receiving at least four months’ notice of any increase. He also believes rent review clauses – which give landlords the scope to raise rents mid-contract – should be banned. In the report, Cowan said that the measures,


defined as a “third-generation rent stabilisation” system, were essential to protect people from soaring rents within tenancies and also bolster security for landlords. Cowan said: “Renters have a right to know that


12 | HMMJune/July 2024 | www.housingmmonline.co.uk


their home will be safe and of good standard. And good landlords have a right to compete in a market where everyone plays by the same rules. Tese recommendations will enable those things to happen efficiently and quickly.” Te review, also recommends: • An annually updated National Landlords Register which would require landlords to demonstrate compliance with the decent homes standard or face fines and even be subject to a criminal offence;


• Te abolition of no-fault evictions, and “back- door” evictions, which may include landlords wishing to move themselves or family members in and landlords wishing to sell a property which Cowan says in the report “shouldn’t be a ground for ending a tenancy”;


• Measures to discourage landlords from entering the short-term and holiday let market or nightly paid temporary accommodation sector by equalising the tax treatment for all forms of private letting; and


• Policies to ensure that medium-term affordable housing returns to being the second-largest part of the housing sector, to decrease the country’s reliance on the private rental market.


Tom Darling, of the Renters’ Reform Coalition, said: “Tese appear to be a commonsense set of proposals for reforming the private rented sector. It will be critical that, if Labour is to win the general election, it gets on and delivers a package of reforms along these lines – and fast. Tat will deliver security of tenure for renters who, facing an acute and ever-growing renting crisis, have been so badly let down by the government.”


Labour urged to cap the size of rent rises in England and Wales


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