What the New Labour Government Means for Landlords, Property Investors and Titlesplitters

Key Considerations for Landlords

This blog will discuss the most pertinent things that you need to think about as a landlord, as somebody who rents property in the UK and potentially makes your income from renting property, or has a plan to. Like many things, we fear that it will be bad news, but there’s always amazingly good news as well, and we can still work within the bounds of the new Labour government. Firstly, let’s talk about rent.

Rent and Rent Caps

Now, if you’re a landlord who’s been sat on very low rents for many years – for example, rent freezes were put in place in Scotland recently – we’re hoping that there won’t be a rent freeze under a Labour government. There certainly could be rent caps and they have been mooted. If you haven’t put your rent up by a small amount each cycle and your tenants are not on any market rents, that’s something you need to consider within your portfolio.

Section 21 and Tenant Evictions

The next important aspect is section 21. Section 21 has been mooted as being null for a while now. The reason that the Conservatives have not done it yet is because the court system in the United Kingdom at the moment is not fit for purpose. So that means if you issued a section 8, which is still going to be available to you in the future, you would not be able to evict a tenant through the court system because it takes too long.

We’re hoping that Labour will do something about that – they have said that they’re going to implement section 21 within three months. So if they do implement section 21 within three months, then that could be problematic for us if the court system is not fit for purpose. However, you will still be able to evict anti-social tenants. For tenants who don’t pay the rent, if you want to refurbish the property back to brick, or you want to sell the property, you will still be able to evict tenants. The complete list is more extensive, but that’s just an example.

Leasehold Reform and Title Splitting

The next key thing for Title Splitters and people who own leaseholds and blocks of apartments who are looking to Title Split them. The great news is the existing Title Split is still going to exist under the Labour government for property investors and that is because of the finance system. If you want to know more about Title Splitting, please have a look at our extensive resources online or download our free video Introduction to Title Splitting .

Under the current system, there is something called leasehold reform . Some of the changes in that reform are that 990-year leases are going to be the minimum, ground rent is not 100% into law yet, but I think the Labour government will make ground rents very nominal or a peppercorn, and for new flats, they’re already in law as a peppercorn.?

A significant change is coming with leasehold, something we’ve anticipated for years and trained our clients at Title Split to understand: commonhold. It’s part of the Labour manifesto, and here’s an explanation of the difference between leasehold and commonhold.

Leasehold vs. Commonhold

In leasehold, we have the land that the house sits on, which could be the house that you live in. Many of those properties are freehold. In relation to blocks of apartments, the land that it sits on, the airspace above it and the shared areas within the building currently are freehold. The flats and individual apartments are leasehold when different people own them. Leasehold used to be 99 to 125 years, but the new law says it’s going to be 990 years.

Understanding Commonhold

In commonhold, individual apartments are now called freehold. If you own apartments today, they will become freehold under the commonhold law that will soon come into effect in the UK. Shared areas will still exist because they are necessary. Who will repair the roof? Who will maintain the hallway? Who will paint the hall, stairs, and landing? Who will care for the gardens? These areas, previously called the freehold, will be known as commonhold and will be part of a commonhold association. The association will have directors, and both the former leaseholders and new freeholders will have an interest in the commonhold.

What This Means for Title Splitting

The system will be very similar to those in many other parts of the world, where it might be called something different, but the concept of Title Splitting will remain the same. What this all means is we will now Title Split the freehold apartments from the commonhold of the shared areas. For more information on this, how it will affect you and much more, download our explanation of Title Split to find out more.