Member Article

Keeping up to date with the shifting property landscape is never easy. So, what do property professionals need to keep in mind for 2022?

Developers

Building Safety Bill

Residential developers will need to pay close attention to the progress of the Building Safety Bill through parliament. This will introduce fundamental changes to the design, approval, construction and occupation of taller residential buildings so that fire safety forms a key thread through the lifecycle of the building. Recent government announcements have said that the provisions of the Bill will be extended to make developers liable in respect of defects in the construction of existing buildings built within the last 30 years. The Bill will therefore have a retrospective as well as a prospective effect.

Cladding remediation costs

Although the government has previously introduced measures to protect residential tenants in buildings of 18m or more in height, residential tenants in buildings between 11m and 18m in height have not, until now, been protected. The government has announced that developers should now engage with the government to establish a £4 billion fund to meet the costs of remediating intermediate height buildings. It has threatened further legal measures if developers do not do so.

Residential developer property tax

The new Residential Property Developer Tax will apply from 1 April 2022. The tax will apply to companies with residential development profits exceeding £25 million per year. The £25 million allowance can be allocated by a group between its companies. Profits in excess of this allowance will be taxed at a rate of 4%.

Land control register

In 2020, the government issued a consultation on proposals to create a public register of land agreements that give developers control over the future development of land. The outcome of the consultation is still awaited. This may resurface in 2022.

Landlord and tenant

Coronavirus rent arrears

The Commercial Rent (Coronavirus) Bill will become law before 25 March this year. The Bill will ringfence rent arrears due from tenants who were subject to mandatory closure requirements during the COVID-19 pandemic. Whilst subject to the ringfencing provisions, landlords will continue to be subject to the moratorium on exercising legal remedies to recover unpaid rent and the moratorium will be extended to recovering rent from rent deposits or by court proceedings issued after 10 November 2021.

The Bill introduces mandatory provisions for arbitration to settle how much, if any, rent should be paid for the closure period and when it should be paid. Either the landlord or the tenant can request arbitration. If neither party applies for arbitration within six months of the Bill becoming law, the rent arrears will stop being ringfenced and will be subject to normal recovery procedures if not paid by the tenant. Existing rent arrears agreements between landlords and tenants will not be capable of being re-opened under the new provisions.

Use Classes Order

In January this year, the Court of Appeal rejected an appeal by Rights: Community Action on the validity of the changes introduced by the government to the Use Classes Order in September 2020.  There has been no indication of a further appeal to the Supreme Court. Because of the ongoing uncertainty, many commercial lettings landlords have continued to refer to permitted uses by reference to the old Class A and Class B uses for retail, hospitality and office lettings. We might now see a broader move to refer to Class E of the revised Use Classes Order.

Landlord and tenant law consultation

Last year, the government promised to launch a consultation on commercial landlord and tenant law.  The initial date for the launch of the consultation was put back to the autumn of 2021, but did not appear. No further date has been announced for the consultation, but it may be launched this year. If so, it is expected to herald a significant shake-up in commercial landlord and tenant law.

Investment

National Security and Investment Act 2021

The National Security and Investment Act 2021 came into force on 4 January 2021. The provisions in the Act are wide enough to catch some property transactions where the property is used for or is in the vicinity of other land used for defined sensitive purposes. Most real estate transactions will not be subject to the provisions of the Act but, where land is used or adjacent to land used for sensitive purposes, the possibility remains that the Secretary of State could call in a transaction for review.

Mandatory requirements to obtain advance clearance before completing a transaction will not apply to pure asset transactions, but may apply where the transaction is structured as a share acquisition where the buyer acquires the shares in a target company that owns property used for a sensitive purpose. Failure to obtain clearance where it is required voids the transaction.

Registration of trusts

In October 2021, the rules requiring trusts to register with the Trust Registration Service (TRS) were extended. Many trusts were already required to be registered with the TRS so will be unaffected by the changes. However, trusts that were not previously required to be registered, but which are now within the new provisions, will have until 1 September 2022 to register. Following the changes, the trusts that need to register are, broadly:

• all UK express trusts, unless they are specifically excluded and
• non-UK express trusts that acquire land or property in the UK or who have at least one trustee resident in the UK and enter into a ‘business relationship’ within the UK.

If a trust needs a unique taxpayer reference for self-assessment purposes, it must still register with the TRS to get this, even if it’s highlighted in the exclusion list. Property owners that hold property on trust will need to consider whether they are now subject to the registration requirements.

Overseas owners – register of beneficial interests

The requirement for overseas owners of UK property to provide details of beneficial ownership on a publicly accessible register has been in the pipeline for many years. There has been no progress on the introduction of these provisions since 2020 but they remain active. The government has re-affirmed its intention to implement the provisions when parliamentary time allows.

Residential

Ground rents

The Leasehold Reform (Ground Rent) Bill has almost completed its passage through parliament and will be enacted this year. The provisions will prevent landlords charging ground rents in long leases (those granted for a term of more than 21 years) granted at a premium. The provisions will apply to houses, flats and retirement properties. There will be exceptions for shared-ownership leases, regulated equity release products, sharia-compliant financing, statutory lease extensions, some home-business leases and community housing. Voluntary lease extensions will be caught, but the prohibition on charging a ground rent will only ‘bite’ at the expiry date of the original term. The provisions in relation to retirement housing cannot come into force before 1 April 2023. The provisions in the Bill will not apply retrospectively and leases completed after the Bill becomes law will not be subject to its terms if completed pursuant to an agreement entered into before that date.

Reform of residential leasehold law and commonhold

The government has launched a further consultation on changes to the regimes for enfranchisement, the right to manage and commonhold which closes on 22 February 2022. It is not known when bills will be introduced to implement changes to these areas of law. We know that the government wants to put the ground rent bill into law before it puts forward further legislative changes.

Enfranchisement and the right to manage are higher on the legislative agenda than commonhold.

A commonhold council was established in 2021 to promote the introduction of commonhold and to make further recommendations for its introduction, which is likely to delay the introduction of commonhold legislation.

Leases of houses

Little has been said about the government’s publicised proposals to ban the grant of long leases of houses. It is possible that legislation to implement this will be introduced this year.

 

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