Legislation changes: latest government proposals
On 27th June, the Government announced its latest plans for the housing market, following last year’s consultations on a number of different proposals. (You can read the full response on the government website)
This is the latest in a series of moves by the government to ensure ‘decent and fair housing’ for those who need it and a big area of focus this time around has been on leasehold - getting rid of unfair leasehold practices and improving the leasehold/freehold relationship.
Here is our summary of the plans that were announced:
Axing leasehold for all new-build houses
You’ve probably seen in the media reports of numerous new-build homeowners that have found themselves trapped in houses they are struggling to sell. That’s because some new homes were sold as leasehold, with the leases containing clauses that demand hikes in ground rent payments as the years go on.
To tackle this – and to help both owners of existing leasehold houses and flats, which will remain leasehold - the Government is proposing a number of changes:
- All new-build houses are to be sold as freehold in the future
- Help to Buy scheme contracts to be renegotiated with developers, to rule out the building and selling of any new leasehold homes under the scheme. The Communities Secretary has already instructed Homes England to move forward with this
- If a buyer is incorrectly sold a leasehold house, they will be able to gain the freehold at no cost, including free legals
- Ground rents for any new leases – including on flats – is to be reduced to zero
- Any freeholder found to be charging ground rent unscrupulously can be fined up to £5,000 per property
- When existing leaseholders want to sell their property, freeholders & managing agents will have 15 days to provide required information. They will not be able to charge any more than £200 for supplying this.
If these proposals become law, freeholders will no longer be able to hold leaseholders to ransom by hiking up costs or imposing unfair restrictions that make houses too expensive to own and hard or impossible to sell.
New Homes Ombudsman on the way
Currently, while estate agents have to belong to an Ombudsman, there’s no such requirement for developers. As a result, when people have problems with new build homes and don’t get anywhere dealing directly with the developers, they often don’t know where to turn to complain to get some kind of recourse.
As the Government presses on with its commitment to deliver 300,000 homes a year by 2025, it’s keen to make sure building standards remain high and homebuyers get the quality of home they expect. As such, they’re planning to establish a New Homes Ombudsman, which would:
- work with the industry, consumer groups and government to help ensure improvements and standards are delivered quickly and correctly
- protect buyers’ rights and give them a clear way to hold developers to account through a redress scheme
- require all new-build developers to belong to the scheme
This is great news for consumers, who now have the opportunity to input into the shaping of this Ombudsman. A consultation has already been launched, seeking views on mattering including: what powers the Ombudsman should have, how it should be funded and whether there should be a legal Code of Practice for developers.
Have your say: Consultation on the New Homes Ombudsman, open until 22nd August.
Deposit ‘passporting’ scheme
As it stands currently, the government believes some tenants are put under too much financial pressure when they want or need to move rented homes, because they have to find the funds for a deposit on their new property before they’ve had their previous one returned. On occasion they have to go into debt to cover the cost and some tenants can feel ‘trapped’ in a property because they simply can’t afford to move.
So, to make it easier for renters to move the government is looking at ways in which deposits could be transferred directly between landlords. Plans for what’s being called a ‘national passporting scheme’ for tenancy deposits were revealed at the Chartered Institute of Housing’s annual conference in Manchester at the end of June.
The main issue to be resolved is dilapidations, as the total amount a tenant might owe a landlord usually can’t be established until after they’ve moved out – and into a new property.
Have your say: Consultation on tenancy deposit reform, open until 5th September.
Spotlight on Wales
Two key things for landlords in Wales to know about this month:
Tenancies may become a minimum 12-month contract
At the moment, the law is in Wales is essentially the same as in England: a landlord can’t make a ‘no-fault’ eviction within the first 6 months and cannot issue a two-month notice to leave until the end of the fourth month – i.e. it’s a 6-month minimum contract.
The proposal, announced by the Welsh housing minister Julie James AM, is to:
- increase the initial period during which a landlord cannot give notice, from 4 to 6 months, and
- extend the subsequent notice period from 2 to 6 months
Effectively, this will result in tenancies becoming a 12-month minimum contract by default.
Ban on tenant fees from 1st September
The Bill on banning tenant fees gained Royal Assent in May and is due to come into force in September. This will bring Wales in line with England, meaning tenants can only be asked to pay:
- Holding deposits – capped at the equivalent of one week’s rent
- Security deposits
- Charges for defaults, breaches and replacement items (such as door keys)
- Council tax, utilities, TV licence and communication services.
Landlords won’t be able to charge tenants for things such as paperwork, viewings or tenancy renewals and it’s estimated this change will save tenants almost £200.
The government has also been given the power to limit the level of security deposits in the future.
Upcoming EPC changes in Scotland
Be aware of the upcoming change to legislation surrounding energy performance certificates: from 1st April 2020, any new tenancy will require the property to be rated at least ‘E’. So, if the EPC for your property currently has a rating of ‘F’ or ‘G’, you’ll need to make some improvements to bring it up to standard. If you’re found to be violating the new law, you could be fined up to £4,000.
Existing tenancies must be up to standard by the end of March 2022 and the Scottish Government has also set deadlines for raising the minimum requirement to a ‘D’ rating. Here’s the proposed timescale for all the changes:
- ‘E’ rating on EPC
From 1st April 2020, for a change in tenancy
By 31st March 2022, for all tenancies
- ‘D’ rating on EPC
From 1st April 2022, for a change in tenancy
By 31st March 2025, for all tenancies.
You can search for an EPC assessor via the Energy Saving Trust website or simply contact your local Your Move branch if you’d like any advice on improving your property’s rating.