As the new year approaches, significant legislative changes are on the horizon for the property sector which will impact millions of homeowners and tenants nationwide.
In October, Chancellor Rachel Reeves unveiled a raft of major alterations to the property sector during Labour’s inaugural Budget. Alongside announcements on taxes, wages, pensions, benefits and living costs, the UK’s first female Chancellor tackled the property market with modifications to renting, leasehold, stamp duty and new homes.
The Renters’ Rights Bill, anticipated to take effect in 2025, promises the most significant shake-up of tenancy laws in decades, introducing rules safeguarding renters’ rights. The bill fulfils Labour’s manifesto pledge to revolutionise the private renting experience for both England’s 11 million private renters and 2.3 million landlords.
It aims to provide renters with enhanced security and stability, enabling them to remain in their homes longer and reducing the risk of homelessness. Here are some of the primary changes set to be introduced: Abolish no fault evictions, reports the Manchester Evening News.
The government is planning to abolish Section 21 ‘no fault’ evictions from the Housing Act 1988. This means landlords will no longer have the power to evict tenants without a valid reason, as defined by law.
Under the proposed legislation, tenants will be protected from eviction for the first year of their tenancy, provided they adhere to their tenancy agreement. After this period, if the landlord wishes to sell or move into the property, they must provide the tenant with four months’ notice.
The bill also aims to empower private rented sector tenants to challenge unreasonable rent increases, preventing landlords from using rent hikes as a covert method of eviction, while ensuring rents can reflect market rates. In the future, landlords will only be able to raise rents once a year to the market rate – the price that would be achieved if the property was newly advertised to let.
To do this, they will need to serve a simple ‘section 13′ notice, outlining the new rent and giving at least two months’ notice before it takes effect. If a tenant believes the proposed rent increase exceeds the market rate, they can challenge this at the First-tier Tribunal, who will determine what the market rent should be.
The Labour party is set to introduce the Renters’ Rights Bill, aiming to put an end to the cutthroat bidding wars that have been pitting renters against each other. The bill will enforce a level playing field for tenants by requiring landlords and letting agents to publish a set asking rent and banning them from accepting offers above this price.
Additionally, the bill will empower renters with the right to keep pets in their homes, allowing them to challenge any unreasonable refusals by landlords, who may ask for pet damage insurance as a condition.
In another move towards housing reform, the government has announced the Leasehold and Freehold Reform Act 2024. This act is designed to dismantle the outdated “feudal” leasehold system, which often leaves leaseholders facing unexpected and exorbitant costs from freeholders, such as service charges and ground rent.
With approximately five million leasehold properties in England, predominantly flats or apartments, this reform could significantly impact leaseholders who currently only own the right to occupy their property for a fixed term, while the land or building remains under the ownership of a freeholder.
The Government has acknowledged certain charges are essential for funding crucial services, such as the upkeep of communal areas in flats. However, they’ve pointed out that “some bad actors have taken advantage of leaseholders, charging excessive, opaque and escalating costs”.
To combat this, a series of rule changes set to roll out in 2025 aim to offer better protection for leaseholders. Starting January, the ‘two-year rule’ will be scrapped, allowing leaseholders to seek enfranchisement—purchasing their freehold or extending their lease—without waiting two years post-purchase.
Come spring, new ‘Right to Manage’ measures will empower more homeowners in mixed-use buildings to assume control from their freeholders, with leaseholders no longer bearing the brunt of their freeholder’s legal costs in most instances. Later in the year, the Government plans to introduce the draft Leasehold and Commonhold Reform Bill, signalling a shift from the leasehold system to a commonhold system, which is touted to be a “more modern” and “fit-for-purpose” alternative.
Under commonhold, each flat or apartment would be an individual freehold property, while a commonhold association—comprised of the flat owners—would manage shared spaces.
New rules are set to shake up the property sector in 2025, including changes to stamp duty – an upfront cost buyers face when purchasing a property. The Autumn Budget saw the Chancellor announce a stamp duty increase for second-home buyers and landlords, with the additional rate rising from 3 percent to 5 percent from October 31 for properties priced between £40,000 and £250,000.
First-time buyers, however, will remain exempt from paying stamp duty on properties up to £425,000 until March 31, 2025. For properties over this price, a 5 percent stamp duty tax will apply up to the value of £625,000.
From April 1, 2025, the stamp duty threshold for first-time buyers will drop to £300,000. This means any first-time buyer purchasing a home from this date will be subject to a 5 percent stamp duty tax on properties priced between £300,001 to £500,000. If the property is priced over £500,000, the tax relief cannot be claimed.
