As we look further ahead into 2022, although we are beginning to see the impact of Covid slowly receding, many will be daunted by the prospect of increasing strain on household incomes and escalating inflation, as well as wider concerns voiced by industry on the supply of goods.
Across the property management sector, the first months of 2022 have already heralded significant change; from the revised proposals on remediation costs in the Building Safety Bill, to the progression of leasehold reform with the Royal Assent of the Leasehold Reform (Ground Rents) Bill. Established legal precedents have also be upturned, with the Settlers Court decision establishing that right to manage does not extend to management functions shared with a wider estate. It would seem that 2022 will continue to provide challenges for landlords and managing agents, leaseholders and developers- we highlight some of the key topics and matters to watch below…
Building Safety
The media have widely covered the updates to the building safety programme announced so far this year. In January the Secretary of State for Housing Michael Gove made an announcement in the Commons setting out the Government’s new plan to protect leaseholders and make industry pay for cladding issues. These proposals aim to make Developers and companies pay to fix the cladding crisis and a guarantee which promises that no leaseholder living in their own flat will have to pay to fix unsafe cladding. Industry has been given two months to agree to a financial contributions scheme to fund the new plan that will replace the previous proposed loan scheme for leaseholders in medium-rise flats.
At the time of writing, it is interesting to see that major developers are beginning to challenge the ultimatum. The HBF has openly sought legal advice over the government’s threat, early February saw Redrow chief executive Matthew Pratt branding Gove’s threats as “unrealistic” and “inequitable” and, according to the Times, Persimmon is understood to have sought legal advice from a prominent QC over the government’s threat to stop house builders from trading if they don’t pay into a “voluntary” fire safety repair fund, with a letter to government allegedly stating that these sanctions will be unlawful, primarily because “the secretary of state is threatening to penalise the developers for declining to do what they have no legal obligation to do.”
Mid-February has seen the introduction of further amendments, including a proposal that where building owners do not have the resources to pay, leaseholders will be protected by a cap. The cap will be set at similar levels to ‘Florrie’s Law’ which applies to some repairs to social housing: £10,000 for homes outside London and £15,000 for homes in the capital. Of additional note, any costs paid out by leaseholders over the past five years will count towards the cap. These and further amendments will be debated in the House of Lords during the Committee Stage of the Building Safety Bill which begins at the end of February.
Leasehold Reform
Late February (22nd) will also see the CMA consultation into Law Commission recommendations to broaden access to enfranchisement (buying the freehold) and the ‘right to manage’ a building, conclude. The consultation has sought views on a number of reforms to the leasehold and commonhold system, including non-residential limits for collective enfranchisement, the non-residential limit for right to manage claims and non-residential limit for individual freehold acquisitions. Coming months will undoubtedly bring considerable debate on the proposals from a broad spectrum of respondents.
The final calendar quarter of the year will likely bring the enactment of the Leasehold Reform (Ground Rent) Bill, which received Royal Assent in early February.
With regard to the implementation of the new legislation, Lord Greenhalgh, the Minister of State (Minister for Building Safety and Fire) and the member of the Lords driving the bill forward, commented that “the commencement date for this bill being within six-months of Royal Assent”. Therefore, although it will be prudent to consider the potential implications in advance of the changes, it remains questionable as to whether there will be any immediate short-term action required before the Bill is fully enacted. However, we would highlight that during debate, Lord Greenhalgh added that the first steps would involve industry wide communication, stating that “After Royal Assent, we will write to solicitors, legal executives, licensed conveyancers and relevant professional bodies, detailing the new peppercorn restrictions”.
It is also noteworthy that while this first phase of legislation, focusing on new leases, is progressing, the schedule for the anticipated second Bill, concerning existing leaseholders rights, remains uncertain – with Lord Greenhalgh further adding “my expectations are that leasehold reform will be front and centre around his [Michael Gove, secretary of state for housing] ambition for a wider reform of housing.”
Evidently, these proposals signify the ongoing drive to resolve the challenges facing the leasehold property sector. All proposals will doubtless be subject to the closest scrutiny and critical comment throughout the year, and likely to address recurring concerns on feasibility, proportionality, sustainability and delivery. As always, we will watch closely and continue to comment.
Should you wish to discuss this article and the subjects of building safety and leasehold reform further, please contact us.
