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Home / News and Insights / Insights / Landlord and tenant leasehold changes

Frustration with the English system of landlord and tenant law has been growing over recent years, and government has promised a number of reforms.

This article outlines what is known about the proposed reforms, and comments on progress to date.

‘Decent homes standard’

The government will legislate to require homes in the private rental sector to be free from certain health and safety hazards, such as fall risks, fire risks, or carbon monoxide poisoning and for landlords to be obliged to ensure that such homes do not fall into disrepair. This will certainly impose more cost for landlords over and above their existing obligations.

Pets

Landlords will not be permitted to unreasonably withhold consent when a tenant asks for permission to have a pet. However landlords will be able to require tenants to insure against any damage the pet causes. The Tenant Fees Act 2019 will be amended to include pet insurance as a permitted payment (to cover any resultant damage to the property).

Energy efficiency

Approximately 25% of all the UK’s carbon dioxide emissions come from residential property. Currently properties may not be let on assured shorthold tenancies unless certain energy efficiency standards are met or making relevant improvements would not be cost effective. Standards were last raised in 2020 and the government is consulting on raising them again with effect from 2025 for new tenancies.

We think many landlords do not appreciate the considerable cost likely to be required to meet these standards; however there is no sign that government plans to provide financial assistance in upgrading properties.

Enfranchisement and lease extension

In many cases, tenants have rights to acquire from their landlords the freehold of their flats or houses provided the landlord is paid a fair price and their professional fees. In addition, leases may be extended, again for a fair price and fees. The relevant legislation is well understood, but the process is complex and potentially slow, there are many disputes, especially over price, and the professional fees can be out of proportion to the price paid by the tenant.

The Law Commission has recommended:

  • amending legislation so that more properties qualify for enfranchisement and lease extension;
  • tenants are entitled to 990 year lease extensions, rather than 90 years as now;
  • changes to procedure to make the process simpler (we don’t think this will work out well);
  • changes to make the costs cheaper by reducing the premium payable. These proposals deprive landlords of their property without full compensation so we think landlords will challenge the proposals as being a breach of their human rights.

We are promised that legislation will be brought to parliament by the end of this year.

Ground rent scandal

Over recent years, some developers of new build flats have included provisions that ‘ground rent’ payable by tenants doubles frequently, sometimes as often as every 10 years. The result is that rents such as £200 a year become much more significant sums very quickly. The cost of purchasing the freehold from the landlord under the enfranchisement legislation becomes prohibitive as the ground rent payable increases. Once rents increase above a certain level, the landlord gains draconian rights to end the lease if rent is not paid. Lenders are cautious about accepting such leases as security for loans.

Under the Leasehold Reform (Ground Rent) Act 2022, ground rent under any long residential lease granted after the Act came into force (subject to limited exceptions) is effectively zero. The Act came into force on 30 June 2022.

However, leases with escalating rents granted before the Act came into force remain legally effective. Some developers are working to remove these clauses from existing leases but so far as we know there are no government proposals to mitigate the effects of existing escalating rents.

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