The UK’s property sector is set to undergo some key legislative changes this year, some of which will affect home owners and renters. Many of the changes were announced in the Autumn Budget.
Home Owners
Stamp Duty Land Tax (SDLT) changes come into effect from 1st April 2025. First time buyers will no longer benefit from the £425,000 exemption threshold from this date, when it will be reduced to £300,000. SDLT will be charged at 5% of properties priced between £300,001 and £500,000. A first home costing more than £500,000 is not eligible for the tax relief.
Leasehold and Freehold Reform Act 2024
The leasehold system which currently sees leaseholders imposed with sometimes unexpected and unaffordable costs by the freeholder for service charges and ground rent, for instance, will be amended. Around five million leasehold properties exist in England, which give the leaseholder the right to occupy their property for the period detailed on the lease. The land on which the property sits remains the property of the freeholder.
The government says that “some bad actors have taken advantage of leaseholders, charging excessive, opaque and escalating costs”, and will introduce new rules in 2025. Among them, the ‘two year rule’ will be removed from January. This rules requires leaseholders to wait two years after purchase before they can buy their freehold or extend their lease (known as ‘enfranchisement’).
A new ‘right to manage’ measure will come in during the spring to allow home owners in mixed-use buildings to take over management of the building from the freeholder. In most cases, leaseholders will also no longer be required to pay their freeholder’s costs.
A new draft Leasehold and Commonhold Reform Bill is expected later this year, which plans to transition away from the leasehold system altogether, and move to the commonhold system. Commonhold has been in existence for over twenty years, although it has not been widely adopted by business-savvy developers. Under the system, flats and apartments are freehold properties, while common areas are managed by a commonhold association, which is owned by the freeholders of the flats.
Renters
The Renters’ Rights Bill will bring changes to tenancy laws and enforce rules put in place to protect the rights of the country’s renters. There are around 11 million private renters and 2.3 million landlords in England. The bill aims to give renters more security and stability, by removing Section 21 ‘no fault’ evictions from the Housing Act 1988, so that landlords will no longer able to force a tenant out without a valid reason, as defined in law. Tenants will be protected from evictions for the first twelve months of their tenancy, provided they keep to the rules of their tenancy agreement. After that, the landlord will need to give the tenant four months’ notice if they want to sell up or move into the property themselves.
Landlords will not be able to force tenants out by applying unreasonable rent increases, which can only be increased once a year and must reflect market rates. Two months’ notice of increases must been given and a Section 13 notice served. The tenant can challenge increases at tribunal, which will determine the correct market rent.
Tenants will also be able to challenge a landlord’s decision to refuse a pet, but the landlord will be able to require pet damage insurance.