Rent & Leasehold Reforms for 2023

Rent & Leasehold Reforms for 2023

As 2022 closes what an action-packed year of change, we have seen in the leasehold sector. The biggest of these is perhaps the abolishment of landlords'>ground rents for new leases to create a level playing field for commonhold. House builders have work now that how to either reprice land or charge more as the trading of landlords'>ground rents at sometimes as much as 25 times their face value falls away.

The year saw the entry of Michael Gove as the UK's Housing Minister, whom most of us know and respect as a man on a mission. The UK's leasehold sector is expecting substantial leasehold reforms from Gove in 2023. The 2022 Building Safety Act was a remarkable development that will influence the leasehold industry. It covers property management's health, safety, and fire safety aspects.

The Building Safety Act 2022

The Building Safety Act 2022 came into effect on June 28, 2022, affecting responsibility for managing building safety and funding repairs to eliminate fire safety defects. It protects leaseholders from paying for repairs to implement fire safety standards in high-rise buildings. Several protective measures of the Act provide substantial relief to leaseholders as it places the onus to pay for fire safety works and cladding on others.

landlords'>Ground rents on new apartments abolished

The abolishment of landlords'>ground rents for newly built properties came into force on June 30, 2022, bringing good cheer to persons prospective buyers. In 2023 many existing leaseholders expect simplification of lease extensions through cheaper means and more certainty in the valuation methodology with leaseholders temporarily suspending lease extension plans.

2023 changes to EPC regulations for commercial properties

Commercial landlords must prepare their buildings to achieve a minimum band E Energy Efficiency certificate before April 1, 2023. The date will mark the beginning of the next round of EPC regulations, which can result in fines of up to 150,000 for non-compliance. The minimum level of energy efficiency according to the Minimum Energy Efficiency Standard (MEES) regulations makes it illegal to rent non-compliant properties. The new EPC regulations will affect several commercial landlords who continue to let non-compliant buildings from April 1, 2023, and beyond.

2023 changes to EPC regulations for residential properties

Higher energy efficiency benefits landlords and tenants as the more energy efficient a property is, the lower the energy costs. For residential properties, landlords are bracing themselves for a rise from the Minimum Energy Efficiency Standard of E today to C. The present statistics show that over 55 percent of landlords will have to implement changes after implementing new MEES changes in 2023 and thereafter.

What Landlords can expect in 2023.

There seems no possibility that the demand for homes to rent will drop in the New Year. Inflation, the cost-of-living crisis, and rising mortgage rates are forcing most first-time buyers to put their plans to become homeowners on hold. So, good news for landlords, who will benefit from shorter void periods and higher rents.

Decent Homes Standard

Rental reforms, such as the Decent Homes Standard for privately rented homes are likely to be introduced. Landlords will hope for clarity about the timeline and details of implementation.

Perhaps England will follow Wales on December 1, 2022, bringing The Renting Homes (Wales) Act 2016 into force, and includes 29 parameters determining the property's fitness, such as:

Routine electrical safety testing

Installation of smoke and CO alarms.

Maintaining gas, electricity, and water supply in working condition

Keep the property's structure and exterior in proper condition

The changes Wales has adopted aim to provide safer homes and protect tenants from eviction and the law also provides that Landlords can repossess abandoned properties.

Scrapping Section 21 evictions

This still appears to very much be on the cards as the government has not backed down in proposals to scrap Section 21 and aims to prioritize scrapping them.

Will England will follow Wales on December 1, 2022, bringing The Renting Homes (Wales) Act 2016 into force and leading to a No-Fault notice, which requires Landlords to allow six months for tenants to move out as opposed to the current two months under a Section 21 Notice. As a Landlord cannot issue a No-Fault Notice until six months from the start of the occupation contract, effectively by implication tenants will get the security of 12 months from the beginning of a tenancy.

Student demand will continue to rise

In University towns, the HMO sector promises higher profits, with sustainable demand from university students and a lack of housing supply. Landlords may consider diversifying their portfolios by acquiring HMO properties.

Landlord Licencing

The trend of Landlord Licensing schemes appears to gather momentum, as more licensing schemes will take shape in 2023, clearly a revenue generator.

short-term-lets-register-in-england'>Short lets

Will the government give in to pressure to halt the exponential rise in short-term-lets-register-in-england'>short lets? Certainly, the government continues to explore ways to regulate short-term rental properties. The shocking facts are that the UK's number of holiday homes grew by over 100 percent between 2018 and 2022. The noise from the wave of criticism that short-term rentals affect the long-term housing sector by reducing the supply of long-term homes for rent, thereby driving up rents.

Expect consultations about regularising short-term rentals in 2023.

The Assured Shorthold Tenancy

Whilst this has been around since the 15th of January 1989 (introduced by The Housing Act 1988) just might disappear. Perhaps England will follow Wales on December 1, 2022, bringing The Renting Homes (Wales) Act 2016 into force. The law replaces tenancy agreements with occupation contracts from December 1, 2022, and there can be legal consequences, including the inability to serve notice, if the landlord cannot provide an occupation contract. England is also lagging behind Scotland and has already replaced the Assured Short hold Tenancy with Private Residential Tenancy.

A change of heart to encourage PRS landlords?

Doubtful. Having hit landlords who hold properties in personal names by removing the ability to deduct mortgage interest from loans, in 2023 landlords who have moved rental properties into limited companies will pay higher taxes from April when corporation tax will rise to 25%.

Introduction of the Renters Reform Act? The Renters Reform Bill, described by the UK government as the biggest shake-up of the private rented sector in 30 years, is slowly moving to become law. Unbelievably it was first recommended in April 2019. It also encompasses The Decent Homes Standard.

Eviction and Gaining Possession

The Renters Reform Bill promises to improve the grounds for possession to make them fair and efficient and to deal with repeated arrears seriously in some circumstances making eviction mandatory regardless of the arrears balance at that time.

New Property Portal for Landlords and Tenants

The Renters Reform Act may see the government launch a new Property Portal to provide tenants, landlords, and local councils with easy access to relevant information. There is also a suggestion to incorporate some of the functionality of the Database of Rogue Landlords. All eligible landlord offenses will be shared and made public.

For a more detailed read on the Renters Reform Bill see

https://ringley.co.uk/blogs/how-the-new-renters-reform-bill-will-benefit-both-tenants-and-landlords

Besides, short-term rentals expect more regulations of the conventional lettings market, or at least more proposals and consultations.

In conclusion

There will be several new leasehold reforms in 2023. These may include extensive availability of the Right to Enfranchise, relaxation of the Right to Manage eligibility, and enhancement of statutory lease extensions. However, the Building Safety Act and EPC regulations will impact the leasehold market.

Our role

The Ringley Group supports both landlords in investing and tenants throughout both England and Wales. We welcome more structure and less need to revert to caselaw and the courts to solve matters between landlord and tenants. The pandemic proved that by and large landlords are want to support tenants in their homes - that said unless the government stops its taxation witch-hunt against private landlords, the rental stock will diminish and invariably a supply shortage will cause rents to rise. So with greater clarity between landlords and tenants sorted (in Wales at least), what is needed now is real attention to the impact that the section 24 tax regime has had on the supply of properties.

Read more about section 24 and its progressive impact on private rental sector landlords at

https://ringley.co.uk/blogs/liz-truss-combine-section-24-tax-on-landlords-with-rising-interest-rates-and-even-before-fuel-issues-you-have-a-cost-of-living-crisis