What will the policies of the new Labour Government mean for property litigators?

Katie Gray discusses what the new Government’s plans and policies will mean for property litigators.

Implications for property litigators

On 5 July 2024, the new Labour Government was elected on a manifesto to change Britain, and their plans for doing so were laid out in the King’s Speech just two weeks later.

Abolition of “no fault” evictions

The abolition of “no fault” evictions under section 21 of the Housing Act 1988 has been in the news since the idea was introduced in the 2019 Conservative Party manifesto. Proposed reforms were set out in the private rented sector White Paper published in June 2022 and the Renters Reform Bill was introduced to Parliament on 17 May 2023. However, the proposed ban on “no fault” evictions was indefinitely delayed in October 2023 pending reforms of the court system, amid concerns raised about backlogs and delays hearing Part 55 possession claims.

The new Labour Government committed in the King’s Speech to abolish the section 21 “no fault” ground for obtaining possession of residential properties let under assured shorthold tenancies. There are also proposals to strengthen the bargaining position of assured shorthold tenants by allowing tenants to challenge rent increases and to keep a pet, which the landlord will not be able to unreasonably refuse

Extension of Awaab’s law to the private rented sector

Those who deal with social housing will already be aware of Awaab’s law, the legislation contained in the Social Housing (Regulation) Act 2023 following the findings of the inquest into the death of two-year-old Awaab Ishak in Rochdale in 2020. The coroner found that Awaab died from a respiratory condition caused by exposure to black mould in his social home. Awaab’s law requires social landlords, by way of an implied term, to deal with hazards (such as damp and mould) within certain time limits. The new Government proposes to extend these housing standards to the private rented sector. As the requirements currently stand, social landlords are required to investigate issues within two weeks and to carry out repairs shortly thereafter, with emergency works to be carried out within twenty-four hours. The extension of these requirements to the private rented sector is therefore a significant step.

Introduction of a new housing ombudsman service

The introduction of a new housing ombudsman for the private rented sector may provide a convenient forum for repair disputes to be dealt with in a timely and pragmatic manner but the ombudsman will need to have teeth, in the form of powers to enforce compliance, if it is to be effective.

Leasehold and Freehold Reform Act 2024

As regards longer leases, the previous Government had already made headway with leasehold reform when the Leasehold and Freehold Reform Act 2024 received royal assent on 24 May 2024. The Labour Government has committed to “act quickly to provide homeowners with greater rights, powers and protections over their homes by implementing the provisions of the Leasehold and Freehold Reform Act 2024…”. The 2024 Act is another way in which leaseholder rights will be strengthened, by, amongst other things, making it more straightforward to acquire the freehold of a block of flats or to extend a residential lease

Commonhold

Further, the King’s Speech announced the new Government’s plans for a draft Leasehold and Commonhold Reform Bill, which will “reinvigorate commonhold tenure”. Commonhold ownership, which gives “unit owners” a right to become a member of a commonhold association, which owns and manages the common parts of the building or estate, has been around since 2002. However, despite wide use of commonhold systems in Australia and North America, it never caught on in the United Kingdom. Only around 20 commonhold ownership structures currently exist here. The new Government plans to address this by restricting the sale of new leasehold flats so that commonhold becomes the default.

Forfeiture reform

Interestingly, the Government, through the proposed Leasehold and Commonhold Reform Bill, intends to remove the threat of forfeiture as a means of ensuring compliance with a lease agreement (though likely only in a residential, and not commercial, context). Forfeiture is an ancient and draconian remedy, and in some cases has seen highly valuable property assets returned to the ownership of a landlord for a relatively low value breach of the lease by the tenant.

In the residential context, just as with “no fault” evictions, previous Governments have eroded the right to forfeit by, for example, requiring landlords to obtain a determination that the tenant is in breach before serving a notice under section 146 of the Law of Property Act 1925 and preventing forfeiture for service charge arrears without a prior determination of liability to pay. It seems that the new Government will instead abolish the right to forfeit a residential lease altogether. This will have a significant impact on the landlord and tenant relationship. Landlords often rely on the threat of forfeiture in recovering legal costs that they are otherwise unable to recover in costs-free jurisdictions, such as the small claims track and the First-tier Tribunal. They may no longer be able to do so. Further, if compliance with the terms of a lease cannot be enforced by the threat of forfeiture, then other types of claims (for injunctive relief, for example) may become more commonplace.

Future legislation

Detailed comment on the nature and effect of these proposed changes will have to await publication of the draft bills and further announcements, though given the Government’s large majority in the House of Commons, reform may be expected relatively swiftly. For now, property litigators and their clients should be aware that change is on the horizon and prepare accordingly.

This article was first published by Practical Law here.