The King’s Speech signals interesting times for leasehold practitioners

On 17 July 2024, King Charles III laid out the Labour government’s legislative agenda for this session of parliament. Included in the announcements were widely foreshadowed reforms to the private rented and leasehold sectors. The speech itself, as is to be expected given the scope of such a speech, contained only a few lines on housing reform: “Legislation will be introduced to give greater rights and protections to people renting their homes, including ending no-fault evictions and reforming grounds for possession.” In addition, the King announced that draft legislation will be published on leasehold and commonhold reform. What’s in store? More detail is provided in the explanatory notes published by the government. These notes set out that the government plans to introduce legislation “abolishing” section 21 of the Housing Act 1988 as well as “strengthening tenants’ rights and protections”, including by empowering tenants to challenge rent increases and introducing new laws to end rental bidding wars. There will also be a right to request a pet (which could not be unreasonably refused) and further measures to ensure the quality of homes in the private rented sector, including application of a decent homes standard and the application of “Awaab’s law” to the private sector (this refers to a piece of secondary legislation that sets timescales for the removal of certain hazards from homes in the social rented sector). There will also be a housing ombudsman for the private sector which, it is hoped, will reduce cases going to court. Question marks Other than the widely trailed, and long expected, repeal of section 21, much of the detail remains to be seen. Readers will be aware that (periodic) assured tenants (including shortholds) already have a limited (if rarely used) rent control mechanism in sections 13-14 of the Housing Act 1988. It may be that the repeal of section 21 would lead to greater use of this mechanism in any event. At the moment, this mechanism only limits the rent to the market rent for the property – it stops landlords increasing the rent above the market rate but provides no real protection from increases in the market rate. It remains to be seen if this will be the level of control proposed by the government. Similarly, the Housing Ombudsman is an excellent tool in the social sector when well-resourced landlords fall short of their responsibilities, but it largely operates on the basis that social landlords will heed its determinations – its powers of coercion or compensation are limited, it cannot, for example, order injunctions or award significant damages for, say, disrepair. To significantly reduce the housing cases before the County Court, an ombudsman will require significant powers. Major reform on the horizon? While the proposals on leasehold reform are presented as a draft bill, the notes accompanying the speech set out a set of proposals that will catch the eye of practitioners. First, the government commits to bringing the Leasehold and Freehold Reform Act 2024 fully into force. The notes envisage implementing the Law Commission’s recommendations on enfranchisement and right to manage (in short, making both cheaper and easier) and there is also a plan to “reinvigorate” commonhold, although in this respect the most significant proposal may be to make commonhold the default form of tenure by banning new leasehold flats. There are also plans to reform existing ground rents (although the notes only refer to preventing “unregulated and unaffordable costs”, so it is unclear if conventional fixed or escalating ground rents – set by leases up to 999 years long – are being referred to) and to abolish forfeiture, although the latter may only be in a residential, rather than a commercial, context as the notes refer only to loss of a home. Forfeiture has long been controversial, particularly in the case of long leases of flats where a substantial premium has been paid for the lease, and plans to abolish it have a long history. It is unclear whether the draft bill will offer landlords an alternative security for performance of tenants’ covenants (or introduce one for RTM or lessee-owned management companies or, for that matter, in the case of commonhold). The absence of such security is a long running difficulty for lessee self-management. Beyond the broad commitments made, the substance of many of these reforms will depend on the mechanisms chosen to give them effect; practitioners will await further developments with interest. Richard Granby is a barrister at Tanfield Chambers Photo © Paul Marriott/Shutterstock