Property Law in 2025

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As 2024 draws to a close it seems appropriate to look at what 2025 will bring for the property sector, and especially for property law.

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Commercial Tenancies

The Law Commission has commenced its review of commercial landlord and tenant law . The first consultation closes in February. Once that has been analysed we can expect a second more detailed consultation, probably it the late summer. If I had to guess I would say that the Commission is likely to plump for a position where security is retained but the default is for leases to be opted out and so landlords and tenants would need to agree specifically for their to be a right to renew for that to happen. The key question here will be whether, and to what extent, the current government is prepared to actually implement the Law Commission's final proposals as we have been through this review before. Ultimately that is not just a question of desire but also of ability. I suspect the government is minded to move ahead with change if it can but that will depend on what other legislation it wants to pursue in Parliament and whether there is sufficient time available. The other unknown is how much freedom the government will have to set its own agenda in 2025 as opposed to being pulled around by events.

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Long Lease

Long lease property holders will gain new rights early in 2025 as the Freehold and Leasehold Reform Act begins to be implemented. There is likely to be an initial wave of lease extensions and right to buy applications as the new rights to do so are exercised. At the same time the government is saying that it will need to revise the legislation before it can be fully implemented. There are also potential court challenges to parts of this legislation and the government will have to be mindful of how much to implement when there is a risk of the courts finding that elements are unlawful. There will be consultations on the implementation of other parts of the Act and on the further long lease bill that the government has promised. Again, the level of political will is the key question. While there is enormous pressure from leaseholders for reform there is countervailing pressure from freeholders and also the enormous inertia of coming up with a workable new structure and persuading the entire sector to buy into this and make it work. That is not just a matter of vested interests (although they undoubtedly exist) but also the innate conservatism of professional advisors who will be doubtful that a new structure will work effectively. The government will face challenges in how to progress its long lease agenda in a way that does not create legal challenges from large landowners while also avoiding being accused of backsliding by leaseholders.

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Home Ownership

House prices will, to some degree, drive everything. They are of course driven by lots of other factors which affect supply and demand. Of course house prices will rise, they pretty much always do, but the real question is by how much and how evenly distributed that rise will be.

Supply side factors are the first part of this. However, there are already stories that housebuilders will continue to build historically low levels of housing. A lot depends on the new National Planning Policy Framework (NPPF) and how effective it is in releasing land for effective development. Initially progress is likely to be slow as local authorities are quite behind in bringing their local plans up to date. In addition, local planning committees frequently refuse planning for development that clearly falls within the scope of national and even local policies in the face of local residents objections (they are elected after all!) and these then get overturned on appeal. So just having a the new NPPF will not be enough to change attitudes and this will take far longer and, no doubt, several appeals. The new Secretary of State has shown something of an appetite for calling in planning where she thinks it fits national policies and there is a possibility of local rejection. That may speed some projects through but only larger ones. Elements of the NPPF may also start to change the main sources of housing. By encouraging infill and building on pre-used land smaller housebuilders are likely to do well from the policy but the reality is that finance was more of a challenge for them than planning. There is also the point that just building houses is not the be all and end all. You also need to build the right properties at the right price in the right place. The three R's of housebuilding if you will!

Which takes me to demand side drivers for housing. Mortgage costs are everything here. Interest rates remain high and there probably needs to be a cut to under 4% before buyers will have significant confidence. Whether or not that happens and when is very hard to say in such an uncertain economic climate and it is likely to be something decided outside our national borders. The SDLT temporary threshold increase until April 2025 will drive purchasing behaviour a bit but all the evidence shows that extra purchasing before SDLT incentives is made up for by a dip once that incentive ends so there tends to be little or no net benefit.

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The PRS

Turning to the Private Rented Sector there has been a lot happening in 2024 and there will be much more in 2025.

In Wales there was a key recent decision in the High Court which illustrated the immense challenges of the sea change wrought by the Renting Homes legislation and held that a huge number of social homes were in violation of the law by the landlords not having provided tenants with valid electrical safety reports for several months when the new fitness standards first came into effect in Wales. That decision will reverberate in Wales for some time and will cause problems for landlords seeking to evict tenants in rent arrears. This kind of large decision also drives interest in looking at other parts of the same legislation and so it may be that other substantial cases will emerge from Wales during 2025 as other parts of Renting Homes are explored.

The Renters' Rights Bill is expected to get its final stage in the House of Commons in mid-January. There may be a slew of changes although they are probably technical. But we should be able to see what the government considers to be the final form of the Bill by the end of January. Then it will be a matter for the House of Lords. This is likely to be a bit of a battle. The government does not have a majority in the House of Lords and needs a significant number of Liberal Democrat and Crossbench peers to carry a vote if the Conservatives vote against. The Bill is a manifesto commitment and so is getting rid of s21 so by convention the Lords cannot really vote it down or get rid of core provisions. But there is lots of other things in there which were not core manifesto commitments and which are not entirely popular in the Lords. The government has not been willing to compromise on any element of the Bill to date but it may find itself getting a hard dose of political reality here. The Lords may demand changes to the Bill and the government will then need to decide whether to stick with its hard line and face delays in getting what it sees as a flagship Bill through or whether it will compromise in order to maintain progress. The problem for the government is that dialling back in any way will mean that they will face criticism from tenant groups who will see this as backsliding on their commitments to reform.

What the RRB will do to the PRS is unclear. There is some evidence of landlords selling but there has been a gentle loss of landlords for some time. In fact, the real issue is that landlords are not buying, there has always been a sale percentage in the sector and that has been fairly steady for some time but appetite to buy and become a landlord or to increase portfolio size has dropped and so the total number of properties in the PRs has dropped. Tenant demand remains strong though which will keep rents high, albeit there is some evidence that rents are hitting maximum tenant affordability which will constrain growth. Continued high rents will encourage landlords to stay in the sector but it will also increase demands for some form of rent control, despite this being likely to be entirely ineffective and possibly even counter-productive.

The real issues for the RRB will come later in 2025. With any new legislation there are questions to be dealt with in appeal courts. The "big bang" nature of the RRB with much of it coming into force immediately for all tenancies will mean that we will not have to wait so long for questions to be considered. There is bound to be rapid development around the possession grounds, both old and new, as well as in relation to the various new enforcement powers that local authorities have. I expect that there will be appeals being heard (if not decided) by the end of 2025.

It is important to bear in mind that what happens with the PRS will have effects elsewhere. If rents are pushed up by lack of supply or some of the new rent measures in the RRB then that will be felt in inflation figures, which will then affect interest rates. Lenders will also watch the RRB with some care and may well re-price mortgages in the buy-to-let sector to take into account the changes in risk. That will have some knock-on into all mortgage rates. Likewise if landlords sell up that will affect house prices which will, to some degree, have an effect in the market more generally.

Turning to other changes. There is likely to be more licensing of landlords as local authorities have had any limitations on their use of selective licensing schemes removed. There will still be court challenges to those schemes but they are difficult. More licensing will mean more cost to landlords and more appeals against licensing decisions. There is also discussion of the return of agent regulation in some form and new powers for local authorities to take over empty dwellings. All of these issues will lead to action in 2025 with further consultations and new legislation to explore how these proposed changes are to be implemented.

Also, on the regulatory side we have the ongoing effect of material information which will have a greater potential impact if the main portals start to mandate the data being uploaded to their systems. National Trading Standards have also been slowly pushing their enforcement activity having attempted (unsuccessfully) some direct enforcement activity in relation to the Tenant Fees Act recently.

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Courts

I have mentioned action in court in several places. This is not surprising really as that is what I do! But one of the most notable events in the courts during 2024 has been the increasing collapse of the civil courts. There are lots of examples of this and it is not just something that affects landlords but actually affects anyone that wants to have a dispute resolved in the courts or tribunals. I see little prospect of immediate improvement, or indeed much improvement at all in 2025 without some serious injection of funds. Even that will not be enough alone as there are weaknesses in systems and personnel which will take much more than a year to resolve.

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Conclusion

2024 was a pretty busy year. 2025 is going to be at least as active, if not more. There will be effects right across the property sector which touch on every element. I have tried to at least mention the sweep of the property sector but my boas towards private renting has inevitably come out. No doubt there will be people who think I have missed an area or got something wrong. But that is why we have comments! I certainly look forward to seeing what things I missed in twelve months' time.

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