King's Speech And The Living Sector ' What's New?

• Published date: 13 November 2023
• Subject Matter: Real Estate and Construction, Estate Management, Real Estate, Landlord & Tenant - Leases
• Law Firm: Gowling WLG
• Author: Dominic Morris and Şenay Nihat

This week, the Government set out an ambitious legislative package through the King's Speech. Here, we consider the two key messages relating to the living sector: leasehold reform and the Renters (Reform) Bill. In relation to territorial application, the proposals are said to affect both England and Wales; given the residential landlord and tenant law in Wales already diverges in significant respects to the English equivalent, we await further detail to understand the precise application.

In due course, we expect further details to be provided, including draft legislation in the form of a Leasehold and Freehold Bill (the Renters (Reform) Bill having already landed some months ago); we will provide further analysis at that stage.

Changes to leasehold

The Government will put forward the Leasehold and Freehold Bill, which will contain several long-promised reforms to the leasehold sector in England and Wales, including:

• Banning new leasehold houses - every new house in England and Wales will be freehold from the outset. The creation of leasehold houses will only be allowed in 'exceptional circumstances' - it is, therefore, an open question whether retirement communities will be considered such 'exceptional circumstances', as leasehold tenured houses are central to their operating model.

Operators in this area should also consider the related issue of estate rent charges, and the proposed reform in this area. Alongside proposals to reform estate rent charges (which are charges levied to ensure freehold houses contribute to communal service charges), the Competition and Markets Authority has an ongoing review in this area. As such, its recent working paper on the private management of public amenities on housing estates contains a number of suggestions including reform of the remedies for non-payment of rent charges, greater transparency in estate management charges (at the point of sale of a new build and subsequently), and empowering households to review and change estate management companies, and contest charges.

• Making it easier to exercise right to manage or collectively enfranchise mixed use properties - currently management can only be taken away from the freeholder via the 'right to manage' if no more than 25% of the floor space is commercial Equally, residents in mixed-use buildings can only exercise their collective enfranchisement rights to buy the freehold if the commercial floor space is not more than 25% of the building. The Bill will...