What did the King’s Speech say about reform of leasehold and the private rented sector?

This morning’s King’s Speech announced 40 new Bills (including draft Bills) to be presented to Parliament.  Amongst those announced were the Renters’ Rights Bill and the Draft Leasehold and Commonhold Reform Bill.

Renters’ Rights Bill

The Labour Government appear to be picking up where the Conservative Government left off.  The Renters (Reform) Bill had reached the second reading in the House of Lords but did not make it all the way through before Parliament dissolved. That Bill proposed to ban fixed term assured shorthold tenancies (ASTs) and so-called no fault evictions enabling a landlord to serve at least two months’ notice to terminate an AST.  Instead, landlords would need to establish a ground to obtain possession.  Grounds of possession were to be expanded to include where a landlord intends to sell a property and for repeated rent arrears.

In the King’s Speech, the new Government announced that it intends to revive the Bill, with a name change to the Renters’ Rights Bill.  This will abolish “no fault evictions”, enable tenants to challenge rent increases (although such a right does currently exist), give tenants the ability to request permission to have a pet in the property, apply a Decent Homes standard to the private rented sector, create a digital private rented sector database to bring together key information for landlords, tenants and councils, create a new property ombudsman service for the private rented sector and make it illegal for landlords to discriminate against tenants in receipt of benefits or with children and strengthening local authorities’ enforcement powers.  Most if not all of these proposals were either contained in the Renters (Reform) Bill previous iteration of the Renters' Rights Bill or proposed by the Conservative Government.  However, it will be necessary to review the detail within the legislation itself when it is published.  For example, what new grounds for possession does the current Government have in mind and will these go further than the previous Government’s proposed grounds?  The Conservative Government planned to introduce the Renters (Reform) Bill after undertaking unspecified Court reforms. Bearing in mind the current delays in the Court system, there has been no mention today of reform of the Court system for seeking possession or any assessment of how the Court system may cope with increased demand by claims seeking to establish the existence of a ground for possession.  

In addition, the King’s Speech did not deal with the impact of the Renters’ Rights Bill on student accommodation which had been the subject of extensive debate following the presentation of the previous legislation to Parliament.

Draft Leasehold and Commonhold Reform Bill

The new Government have also announced draft legislation on leasehold and commonhold reform.  The Leasehold and Freehold Reform Act 2024 (LAFRA 2024) was passed during the wash up at the end of the last Parliamentary session before the General Election.  Most of the provisions require secondary legislation to bring them into force.  However, the King’s Speech confirmed that Labour intends to implement LAFRA 2024 and also to go much further than the previous Government.  It was confirmed that the new Government intends to enact the Law Commission’s recommendations on commonhold, enfranchisement, lease extensions and right to manage in the reports they published in July 2020 (to the extent these are not already dealt with in LAFRA 2024).  The Government also intends to make a major shift towards commonhold as the main method of home ownership and intends to consult on how to achieve this.  Likewise, the Government intends to place restrictions on the creation of new leasehold properties.  Commonhold was created over 20 years ago but take up has been poor with only around 20 commonhold buildings in existence compared with over 5 million leasehold residential properties.  Proposals on commonhold were notably absent from LAFRA 2024.

Further, the King’s Speech expressly states that the new Government intends to address ground rents in existing residential leases by “regulating grounds rents” and also take steps “ending the injustice of forfeiture”.  It is not clear whether the Government intends to cap ground rents, as proposed by the previous Government or how they are proposing to regulate ground rents in existing leases.  Similarly, it is not clear whether they intend to restrict forfeiture or require landlords to account for any surplus to leaseholders exercising forfeiture.  As ever the devil will be in the detail of the legislation, which is not currently available.  

Landlords, tenants and stakeholders in the residential sector will await, with interest, publication of the draft legislation to consider how it impacts their interests.  What is clear is that the current Government intends to go further on leasehold and commonhold reform whereas on the face of it the Renters’ Rights Bill will implement proposals previously made by the Conservative Government.

We are tracking developments on our Essential Residential Hub and our timelines: Evolution of the private rented sector and Changing landscapes in residential leasehold.

Please do not hesitate to contact Laura Bushaway, Samuel Lear, Natalie Deuchar or your usual Charles Russell Speechlys contact if you have any queries.