In this article we take a look back at what has been crossing our desks in 2024 from a real estate perspective and do a bit of crystal-balling on what opportunities and challenges 2025 might bring.
Building Safety Act 2022 (“BSA”)
The standout case for us was Triathlon Homes LLP v Stratford Village Development Partnership which is the first major case to address the new rights of action under Part 5 of the BSA.
Applying only to “relevant buildings” – those which are at least 11 metres or five storeys high, with at least two dwellings and located in England, Part 5 of the BSA permits courts to issue orders making original developers and their associated entities jointly and severally liable for building safety risks if deemed “just and equitable.”
The tribunal in Triathlon Homes held that the test was heavily context specific, and it was for a tribunal to use its discretion in each case. The case also established that liability can extend to claims that originated before the BSA. Given the large sums involved in such claims – in Triathlon Homes the remediation claim was for £16m – we expect there to be a lot of work for construction litigators in the coming years as the parameters of the tribunal’s discretion is worked out in complicated disputes.
Planning
Are amendments to the National Planning Policy Framework (“NPPF”) set to become a new ritual in the festive period? Mr Gove had introduced his amendments just before Christmas 2023; fast forward to 2024 and we have a new NPPF which reverses much of Mr Gove’s ambitions.
The new Government launched a consultation on planning reform as soon as it came into office, with a view to delivering its ambitious target of 1.5 million new homes during the lifetime of the parliament. It has now introduced the revised NPPF , highlights of which include:
- Mandatory Housing Targets and Grey Belt Land Definition
Mandatory housing targets have been re-introduced and an outline definition for “grey belt” land, aimed at balancing housing delivery with quality. “grey belt” land refers to green belt land that does not significantly meet its intended purposes.
- New Housing Target Calculation
A revised standard method for calculating housing targets has been introduced. Local authorities must deliver 0.8% of their area’s housing stock annually, adjusted by affordability pressures. This results in higher targets in London, the south-east, and the east of England, while reducing targets elsewhere, maintaining a national need of approximately 370,000 homesper year.
- Flexibility in Green Belt Rules
Local authorities gain control over green belt rules, which is intended to address concerns about the feasibility of a 50% affordable housing mandate.
- Funding and Guidance for Grey Belt Reviews
Councils will receive funding to review green belt designations, ensuring high-performing land remains protected. Detailed guidance on grey belt land identification will be published in January 2025.
- Adjustments for Authorities with Old Local Plans
Authorities operating under outdated local plans must meet additional housing delivery requirements, including a 20% buffer for some from 2026. Transitional arrangements provide flexibility for authorities already advancing local plans, extending submission deadlines and adjusting housing need calculations.
Local authorities are already pushing back against, what are perceived as unrealistic demands from central government, and 2025 is shaping up for some vigorous conversations between Whitehall and townhalls. We expect there to be widespread resistance to any perceived threat to the green belt, especially in more affluent areas.
Tenancy Reform
Both sides of the House in the first and second halves of 2024, were clear that the rental market needed reform. In fact, Michael Gove’s Renters’ Reform Bill and Angela Rayner’s Renters’ Rights Bill are remarkably similar. The central plank of both is the abolition of what has been termed the ban on “no-fault evictions”, which would mean that renters would enjoy far greater security over their homes. Buttressing this is the already existing mechanism in the Housing Act 1988 that allows tenants to challenge annual rent increases by their landlord without the fear of retaliatory evictions.
The assured shorthold tenancy, which some say revitalised the private rental sector over thirty years ago, will cease to be. In effect, all tenancies will become assured tenancies, with no transition period envisaged. The Renters’ Rights Bill is currently at Report Stage in the House of Commons, and we expect it to become law in the second half of 2025.
And Commonhold makes (another) comeback
Once again, both Labour and Conservative administrations are resolute that leasehold, at least as far as residential dwellings are concerned, is “a bad idea”. The Leasehold and Freehold Reform Act 2024 (“LAFRA”), which limped past the finishing line in May 2024 awaits secondary legislation to implement most of its terms. Only the provisions which deal with enforcement of rent charges were brought into force in July 2024.
Given its shortened gestation, LAFRA is acknowledged to have significant shortcomings, including the exclusion of shared ownership from the reforms. There is likely therefore to be substantial amendment to the Act. Shared ownership is a popular housing tenure for cheaper properties and is described as a hybrid type of tenancy in which leaseholders “own half and rent half” of their property and its exclusion from LAFRA was almost certainly an oversight rather than a policy.
The government remains committed to abolishing the ‘feudal’ tenure of leasehold in the residential sector, and plans to implement the recommendations of the Law Commission in its report “Reinvigorating Commonhold” published in 2020. However, the demise of residential leasehold has long been predicted, and any substantial reform will likely be well beyond next year.
Autumn 2024 saw judicial review challenges to the abolition of “marriage value” envisioned in LAFRA. This is a concept in property law, particularly in leasehold enfranchisement and lease extensions, and describes the increase in the overall value of a property when the interests of the freeholder (landlord) and leaseholder (tenant) are merged.
The trustees of the charity that owns Harrow School have brought a challenge, as have Annington Homes plc, who are currently in dispute with the MOD on the ownership of military homes. A failed attempt was made by the government to have the cases struck out, and they will be heard in 2025.
Landlord & Tenant Act 1954 Reform
The Law Commission finally published its long-trailed consultation in November. The consultation offers four models as a future way forward:
- Current Model (Contracting-Out): business tenancies automatically include security of tenure, granting tenants the right to renew their leases upon expiration. However, landlords and tenants can mutually agree to “contract out” of these provisions, removing the automatic renewal rights.
- Mandatory Security of Tenure: This model would provide all business tenants with an automatic right to renew their leases, eliminating the option for parties to contract out.
- Abolition of Security of Tenure: The statutory right to lease renewal would be entirely removed, leaving renewal terms solely to negotiation between landlords and tenants.
- Contracting-In Model: Here, business tenancies would not automatically include security of tenure. Instead, tenants and landlords would need to expressly agree to include renewal rights in their lease agreements.
The current model extends to all types of commercial tenancies, and the Law Commission has suggested that different sectors, eg retail and hospitality may have different rules to reflect the particular nature of their industry.
The consultation ends at the end of February, and further consultation is expected after this on the more technical aspects of the reforms. This is likely to take up all of 2025, and we would not expect any legislative change until 2026 at the earliest.
MEES
Sustainability and green issues have continued to headline in 2024, and this is a topic dear to the current government’s heart. The Energy Performance of Buildings (“EPB”) regime was introduced in phases from 2007, with the goal of improving the energy efficiency of buildings, reducing their carbon emissions and lessening the impact of climate change.
With the increase of complexity in building systems, and the improvement in energy metric technology, the government wishes to reform and enhance the EPB regulations. The consultation seeks industry views on revising Energy Performance Certificates (“EPCs”)to include multiple metrics, providing a comprehensive view of a building’s energy performance, particularly:
- refining requirements for EPCs and Display Energy Certificates, including the frequency [at which they need to be reviewed and updated];
- improving data management protocols;
- strengthening quality control and revising Air Conditioning Inspection Reports.
The consultation closes at the end of February 2025, and we would expect draft legislation to be put before Parliament towards the end of 2025
Conclusion
Given the government’s sizeable majority in the House of Commons, we expect that it will have the ability to pursue many of the above reforms . However, outside of the voting lobbies, there may be more resistance, and so 2025 promises to be an interesting year for the real estate practitioner.
