With a number of high-profile changes to legislation in the property market already made this year and more come we examine their impact on conveyancers
The Government has made a number of high-profile changes to legislation in the property market this year that are set to impact conveyancers significantly.
Firstly, the highly criticized leasehold scandal which has developed considerably over the last 18- months culminated in some legislative approaches to help new leaseholders avoid onerous contracts. The Government are also looking to firm up the redress system for new build property owners in a bid to drive up standards within the sector. Finally, a raft of legislative changes to the buy-to-let sector have left landlords desperate to offload their investments after feeling vilified.
The Leasehold Conundrum
At the end of June, James Brokenshire, Secretary for the Ministry of Housing, Communities and Local Government (MHCLG) made a number of announcements concerning leasehold properties which could free leaseholders trapped in onerous and unfair conditions.
Looking to the future, the Government will ensure similar negative situations are minimised by safeguarding all new build houses so they will now be sold as a freehold title except in exceptional circumstances. Additionally, all pernicious ground rents imposed on new leases will be reduced to £0.
For the past five years, many developers were selling properties as ‘virtually freeholds’. Here, developers offered an extremely long lease of over 900 years for the property, making it look like a freehold. However, these properties were beholden to similar onerous conditions and doubling ground rents as those locked in a leasehold nightmare. The developers’ sales teams have also been accused of making unsubstantiated promises concerning a secure price to buy the freehold title. Now, any current leaseholder able to prove they were mis-sold their property will be entitled to gain the freehold title at no additional cost.
Changes to leaseholds could also help to improve the efficiency in the home buying and selling process. Freeholders have now been capped to a maximum of 15 working days when providing the potential buyer and legal service provider with vital information regarding the leasehold contract terms. It is thought that strict guidelines could rebuild a trust in the leasehold sector, helping to stimulate the market.
However, whilst these changes will work for those able to prove they were the victims of clever semantic mis-selling or those acquiring new leases, the announcements were unclear as to how they will help current leaseholders, many of which feel lumbered with properties they are unable to sell.
Hope for the voiceless
To help the disgruntled and voiceless feel valued, the Government are set to launch a New Homes Ombudsman and updated new home redress consultation process for all purchasers of new build property. It is hoped that the advocate for new purchasers will improve standards and increase the time it takes to mediate complaints. It will also focus on ensuring buyers are offered fair and impartial legal representation.
The relationship between conveyancers and developers was questioned during a Housing, Communities and Local Government Select Committee Report on Leasehold Reform. The report found that too many solicitors are failing to act in the best interests of the client; instead looking to preserve their own interests and continued business with developers.
Legislative changes promotes buy-to-let Exodus
Whilst leaseholders may feel pleased with new legislative changes, buy-to-let investors and landlords have been left feeling vilified in recent years.
Over the past twelve months the Government have increased stamp duty land tax on additional dwellings, The Tenants Fees Act was introduced, and landlords feared their protections were being further depleted as the Government announced the impending abolition of ‘no-fault’ Section 21 evictions.
In April, the Government confirmed their intention to rid the private rental sector of Section 21 evictions. Despite Theresa May’s claims that the move will create a safer and more stable environment for tenants, landlords were anxious about the cost and time implications of losing a system that can help in the process of evicting problem tenants.
A comprehensive survey of 6,500 landlords, carried out by the Residential Landlords Association’s (RLA), found that almost half of respondents were looking to sell at least one property from their portfolio because of the recent legislative changes.
Worried that the average of 21.6 weeks it takes to evict a tenant using Section 8 system is difficult, costly and time consuming. 2,990 (46%) landlords were determined to reduce their investments if changes to the market continue to victimize landlords.
A reducing pool of landlords and properties is leading to greater competition for housing and ultimately increasing rents. The Association of Residential Letting Agents (ARLA) report for May has highlighted an average reduction of four landlords per branch from the sector. However, this added to the three-month trend which has seen more than 10 landlords per branch leave the sector.
In turn, this has led to a reduction in available property which has fallen from 202 per branch to 201 in May.
At the same time, registered rental house hunters increased by 15% causing inevitable rent increases. In May 2018, only 29% of tenants experienced rent increases; this figure has surpassed 44% in May this year.
Blue sky ahead?
For some, legislation will help ensure their voice is heard. However, others claim that the Government have failed to address current issues that will continue to affect thousands of property owners.
Whilst legislative changes may have offered mixed success in 2019, there are signs of an improving residential market. The National Association of Estate Agents Property mark report for May suggests that house hunters per branch increased by 16% and the number of available properties per branch also increased by 17%.
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