CMS Law Looks at RESI in the Spotlight for 2021
Residential property has been in the spotlight for a couple of years now and there are a number of changes in the pipeline.
But will they ever be implemented?
Stamp Duty and Land Tax
Starting with SDLT, in 6 January 2021 the Government passed The Stamp Duty Land Tax (Administration) (Amendment) Regulations 2021, which comes into force on 1 April 2021. This will apply a 2% surcharge to purchases of residential property by non-UK residents from 1 April 2021. The new charge will simply add an additional 2% on the standard rates and will apply to all freehold and leasehold properties acquired by non-UK residents. Transitional rules will apply if contracts are exchanged before 11 March 2021 but which are not due to complete until after 1 April 2021.
What about the current SDLT holiday which is due to expire at the end of March 2021? A number of groups have lobbied the government to extend the stamp duty holiday but the request to extend has so far been rejected by the Treasury. In the last couple of days, a petition has gathered momentum and, according to the Sunday Times, the House of commons has confirmed there will be a debate about extending the stamp duty holiday to September 2021. Let’s watch this space!
Unfair Practices in the Leasehold Market
In December 2019, the Government announced it would tackle unfair practices in the residential leasehold market by introducing a ban on new long leases for houses and restricting ground rents to a peppercorn in all new residential leases (certain exceptions will apply). The Government also announced that it would implement measures to improve how leasehold properties are sold.
Whilst these measures have not yet formerly been implemented, in December 2020 five of the biggest housebuilders decided to scrap ground rents on new leases of flats.
Leasehold Reform and Commonhold
On 21 July 2020, the Law Commission published its reports on Leasehold Enfranchisement, Right to Manage (RTM) and Commonhold. The common theme in all three reports is to make statutory process simpler, quicker, cheaper, and available to a wider group of leaseholders. The recommendations will have a significant impact on how statutory claims are dealt with.
On 7 January 2021, Robert Jenrick (the Secretary of State for Housing, Communities and Local Government) made a political statement announcing that the government is planning legislation which will allow leaseholders to extend their leases to a new standard of 990 years with zero ground rent. It is to be seen how the Government decides to take forward the recommendations made by the Law Commission and when an Act of Parliament is passed to convert the recommendations into law.
The Rental Market
The Renters Reform Bill was proposed in 2019 -2020 in which the Government confirmed its intention to repeal the Section 21 process for evicting residential tenants. Section 21 of the Housing Act 1988 currently allows landlords to terminate Assured Shorthold Tenancies (ASTs) on the expiry of a fixed term tenancy (or by exercising a break clause) known as the so called “no-fault” eviction.
It was envisaged that this would come into effect late 2020/early 2021 but the Housing Minister Christopher Pincher announced that the Bill will be delayed for an indefinite period due to the impact of the pandemic.
A number of protective measures have been implemented to help the rental market via the Coronovirus Act 2020. From 29 August 2020, landlords are not entitled to start possession proceedings unless they have served a 6 months’ notice on their tenants.
Until 20 September 2020, there was a moratorium on possession proceedings (which meant landlords were not able to issue new possession claims). Landlords are now able to progress their possession claims but Courts are currently prioritising the most serious cases, such as those involving anti-social behaviour and other crimes.
The Government has extended the ban on evictions of residential tenants. Evictions in England will not be enforced until the end of 21 February 2021 (likely to be extended until March 2021).
Landlords are still required to make sure that rented properties are repaired and maintained in accordance with the terms of the tenancy. Landlords can take steps to carry out repairs and safety inspections provided these are undertaken in line with public health advice.
Tenancy deposit schemes also remain in place and must be complied with.
In order to help landlords, the mortgage holiday has been extended to 31 March 2021. Borrowers, including those with a Buy to Let mortgage, who have been impacted by Coronavirus, will be entitled to a 6-month holiday. There is also currently a moratorium on the enforcement of lender repossession (certain exclusions will apply).
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