Issue 153

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NEWS
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Property industry reacts to the King’s Speech
The government’s policies for the upcoming year have been unveiled during the first King’s Speech in 70 years.
Amid all the pomp and ceremony associated with this event, twenty-one bills were
included in the speech covering everything from tobacco to football. Two bills in
particular will have a direct effect on the UK property industry:
Leasehold and Freehold Bill: - which aims to reform the housing market by making it
cheaper and easier for leaseholders to purchase their freehold
Renters (Reform) Bill: - one of the most significant pieces of legislation for private
renters and landlords in the past 30 years, which aims to strengthen the security of
tenure and offer better value for tenants as well as a certainty to landlords that they
can “regain their properties when needed”
As you would expect, the property industry was quick to react. Here’s what they’re
saying:
On Leasehold reform
Timothy Douglas, Head of Policy and Campaigns at Propertymark, said:
“Many agents and leaseholders will be relieved to hear plans for new legislation to
further reform the leasehold system. However, the UK Government must ensure any
legislation to abolish leaseholds is fit for purpose.
“For example, there are no reports yet that have confirmed what impact capping
ground rents will have on service charges, and it is important to consider that every
development is individual, and some may still require aspects that justify specific
service charges.
“As every development will likely have unique characteristics by design, there may
well be a need for sensible provision and certain clauses/exemptions where an
ongoing management fee might be appropriate. There may well be communal aspects
of a development design where a management charge might still be relevant for the
upkeep of an area for example.”
Rob Poole, Director, Glide said: “Leasehold reform should be widely welcomed –
specifically because the intention is to reform rather than replace leasehold.
“There has been a lot of noise around replacing leasehold with commonhold but this
is unworkable on many levels. With commonhold for large blocks such as those that
we manage, dispute resolution is so much more complicated because of the numbers
involved, that many disputes may never be resolved. This would be compounded by
the lack of a first-tier tribunal.
“The Government has already done a lot to make things fairer for leaseholders, such
as changes to ground rents and the work with insurance commissions. This new Bill
provides an opportunity to build on that.
“Similarly estate charges should come into focus more as some cases have seen
rises in over 140% over the last four years. Homeowners have no mechanism to
challenge estate charges in the way that leaseholders can challenge service charges
at a Leasehold Valuation Tribunal. This runs the risk that estate charges could push
homeowners into poverty in future years.
“The proposed lease extension is also welcome, because short leases delay sales, cause
chains to break down and consequently contribute to the housing crisis.
“While I welcome improvement, I’m conscious that change does not necessarily
constitute improvement – it is vital that the Government considers all potential
changes very carefully and consults widely.”
Mick Platt, Director of the Residential Freehold Association, said: “Whilst we
have yet to see the details of the proposed leasehold reform Bill, the RFA welcomes
the Government’s focus on services charges and maintains more must be done to
ensure all property managers are appropriately regulated.
“The Government must ensure any legislation does not impose unwanted obligations
on residents, undermine property rights or delay the remediation of buildings.”
Mark Wilson founder member of ALEP and Managing Director of
myleasehold said:”While reform to the leasehold system is very much welcome, it
is crucial that the Government addresses potential reform with caution. Other than
the easy win of changing lease terms from 90 to 990-year term, the proposed content,
such as we are aware of to date, is random and confusing and this is exacerbated by
leasehold being an emotive issue.
“With so many moving parts and with so much regulation already in place, including
the administrative chaos of the Building Safety Act, I am concerned about the ability
to deliver any meaningful reform within the time remaining this Parliament.
Henry Moss, partner at law firm Ashurst said: “Many of the proposals are
sensible and have been well flagged, but the proposal to allow flat owners to take
over management of buildings where they are up to 50% non-residential will worry
commercial investors. An investor that has a large shopping centre or office below
flats will want to control how the commercial areas are run and will be concerned if
flat owners can take this over unilaterally.”
John Midgeley Director of ALEP and Director Partner at Seddons Solicitors
said: “The vast majority of our members – 77.37% of whom voted in favour of
leasehold reform in a recent poll, welcome simplification of the existing system.
But given leasehold’s long history and the complexity of law, it is imperative that
Parliament scrutinises fully and liaises with specialists in the field to get the detail
right.”
John Stephenson, Partner at law firm BDB Pitmans said: “The proposed
legislation will prevent residential developers from selling houses on a leasehold basis
– something most reputable developers have already stopped.
“The Government’s estimates suggest that just 1% of new houses are sold on a
leasehold basis, down from 15% in 2016, and with ground rents capped at a
peppercorn on new builds since June last year. It is a classic case of shutting the stable
door after the horse has bolted.
“The legislation is disappointing for those already owning a leasehold house. Unless
they can afford to buy the freehold and thus extinguish the ground rent – which can
be expensive – they may find themselves continuing to pay ground rent.
“That rate will be capped but the legislation is unclear at what rate and the
Government may find itself having to compensate the owners of those ground rents.
A consultation will follow shortly, but there is a very real risk legislation will fail to get
onto the statute books before the end of this government’s term. There is no shortterm
respite.
“Flat owners – who make up 70% of the new homes market – can be forgiven for
feeling short-changed. Whilst legislation will make it possible to extend their lease
from 90 years as now to 990 years and without having to wait for two years after
purchase, they will see no other changes to their leasehold arrangements and many
of the Law Commission’s recommendations, such as the abolition of marriage value,
have been shelved, perhaps on Human Rights Act grounds.
“The promises of fundamental reform to the leasehold system appears to have lost
much of its impetus, and that will disappoint all leasehold homeowners.”
On Renters (Reform) Bill
George Cohen, Associate Solicitor in the Real Estate Disputes Team at
Irwin Mitchell said: “It does now appear that the Government is committed to
passing the Renters Reform Bill before the next general election. After persistent
contradictory comments from the Department for Levelling Up, Housing and
Communities, the Government seems intent on pushing it through.
“Despite the Government’s persistence, it remains to be seen how viable it will be
to enact the legislation in the near future. As per the response to the Levelling Up,
Housing and Communities Committee’s fifth report, the Government confirmed that
it does not intend to proceed with the abolition of Section 21 until Court reforms have
taken place.
“The Government obviously thinks that it can proceed with this swiftly, but it is
difficult to see how this significant undertaking can be achieved in the foreseeable
future. That said the Renters Reform Bill could be passed before the Court reforms are
complete because most of the key changes in the Bill will only be enacted by future
regulations. The legislation could therefore be finalised and enacted, with sufficient
time to implement court reforms before the regime actually comes into force.
“In the meantime, the Government has demonstrated some flexibility with the Bill in
response to the Levelling Up, Housing and Communities Committee’s fifth report. For
example, the Government has accepted comments that the student housing market will
need to retain the expectation of short-term lets.
“The Government has not been convinced to keep fixed-term tenancies, but instead,
will include a new ground for possession to facilitate the yearly cycle of student lets. It
remains to be seen exactly how the new ground will operate, and whether it will satisfy
the concerns of those in the student housing market.”
Jonathan Daines, Founder and CEO of lettingaproperty.com said: “The Kings
Speech has done little to provide clarity on the proposed Renters (Reform) Bill, with
timescale and extent still uncertain, but did confirm the Government’s commitment to
the bill. While we fully support its underlying purpose, in ensuring tenants can enjoy a
safe and stable living environment, there’s a danger that legislating for rogue landlords
can indirectly penalise responsible landlords, like those within our own community.
“Many of these landlords are already struggling to keep pace with increasingly complex
lettings legislation. Adding further layers of compliance and administration could
Competition among sellers sees the largest pre-Christmas
fall of asking prices in five years: Rightmove
The latest data released by Rightmove has revealed that
sellers are prepared to offer considerable discounts ahead
of Christmas this year to attract a buyer.
While asking prices usually drop at this time of year, the fall recorded by Rightmove
this month is the largest November drop in five years, indicating that new sellers
are also increasingly adopting more realistic price expectations from the outset of
marketing to tempt potential buyers to act.
According to the figures, new seller asking prices fell to £362,143 - a drop of 1.7% or
-£6,088.
As we approach the end of 2023, key indicators point to a market that while
challenging, has been more positive than many predicted.
Tim Bannister Rightmove’s Director of Property Science said: “We’d expect
to see a drop in new seller asking prices in the last couple of months of the year, as
serious sellers start to separate themselves from discretionary sellers and cut through
the Christmas noise with an attractive price to secure a buyer.
“However, the larger-than-usual drop this month signals that among the usual pricing
seasonality, we are starting to see more new sellers heed their agents’ advice and
come to market with more enticing prices to stand out from their over-optimistic
competition. Buyers are still out there, but for many their affordability is much
reduced due to higher mortgage rates.
“It now looks like more sellers are understanding Rightmove’s research; that the
chances of securing a buyer are much greater if they price right the first time, rather
than over-pricing and reducing their price later.”
Despite the turbulent end to 2022, the year to date has been better than many
expected. Asking prices have eased from the unsustainably frothy heights seen during
the pandemic markets, where many sales went to best and final bids.
However, new seller asking prices are now just 3% behind May’s peak and this
relatively small fall in asking prices, coupled with stable numbers of new properties
coming to the market each month, are strong indicators that forced sales are not
widespread.
The number of sales being agreed is now 10% below the same period in 2019,
improving from being 15% below 2019’s level last month. The pandemic-driven
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place additional strain on ethical landlords, who are already committed to providing a
good experience for their tenants. It’s important to strike a balance between protecting
tenants and ensuring that responsible landlords are not unduly burdened by any new
requirements.
“The Government must refine and implement these measures effectively, considering
the practical implications for those who are already working to combat poor landlord
practices. We urge the Government to work closely with industry stakeholders to
ensure that responsible landlords – not to mention letting agents – are not unfairly
burdened by additional compliance and administrative requirements, which could
inadvertently stifle the supply of high-quality rental properties.”
Henry Moss, partner at law firm Ashurst said: “It feels like the Government
are trying to look like they are taking action while actually kicking the can. Nofault
evictions will stay in place until new court processes are in place, and there is
no deadline for upgrading homes with poor energy efficiency. This just increases
uncertainty for investors as to when and how rules will apply”
stock shortage also now appears to be over, with the number of available homes for
sale now just 1% behind this time in 2019.
While there is certainly no glut of homes for sale, buyers across Great Britain are
likely to see much more choice in their local area compared to a year ago.
However, these are averages across Great Britain, and in the current very pricesensitive
market some areas and sectors are faring better than others during this
period of pricing transition. The number of sales being agreed in the smallest homes
sector (studio, one-, and two-bed properties) is just 7% lower than 2019’s level,
compared to the largest homes sector (four-bed detached houses and all five-bed plus
properties), where agreed sales are 14% behind 2019.
Meanwhile, there are yearly price declines in the Midlands and all Southern regions,
however, the more affordable areas of Wales, Scotland and the North of England have
seen asking price rises, as the changed market conditions affect local housing markets
in different ways.
Last week, the Bank of England opted to hold the Base Rate for the second
consecutive time, which has supported buyer demand and helped to keep it in line
with 2019’s level. Now, many will be looking to the forthcoming Autumn Statement
for any policy announcements or market incentives.
One rumoured announcement is a renewal of the mortgage guarantee scheme, which
encourages lenders to offer a 95% Loan-To-Value mortgage helping those with a
smaller deposit. However, data from the Bank of England and the Financial Conduct
Authority (FCA) shows only around 5% of mortgages taken out are of this kind,
highlighting the limitations of the scheme.
Tim Bannister adds: “This year has brought many new challenges for buyers,
sellers and agents to navigate. While there have been many twists and turns, and
there are still seven weeks left of the year, the data indicates that there has been more
to be positive about in 2023 than many thought there would be at this time last
year. The upcoming Autumn Statement will now set the tone heading into 2024,
particularly if there are any major policy announcements.
He concluded: “We hope that the government has considered the impact on the
market of any new policies and that any measures introduced help as many movers
as possible. An announcement as limited as a mortgage guarantee scheme renewal
would be a missed opportunity to provide some support to movers, particularly firsttime
buyers.”
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