Eight legal topics the property sector should follow in 2024

Last year brought challenging global macroeconomic conditions and a raft of new regulation and policy for the real estate industry. But 2023 year closed with a quicker-than-anticipated tailing off of inflation and the tantalising promise of a pivot on interest rates in 2024.

There are numerous reasons to feel positive about the real estate market in 2024. Occupational demand and rental growth remain strong across many sectors, debt finance continues to be available, both from institutional lenders and a growing pool of alternative lenders, and construction costs are falling.

This year presents abundant opportunities and challenges for the real estate industry. Here are eight legal topics to be aware of in 2024 and how you can prepare.

1. Get involved in the Law Commission Consultation on the Landlord and Tenant Act 1954

Following an unusually busy year for landlord and tenant law reform, the Law Commission is promising a review of Part 2 of the Landlord and Tenant Act 1954 for some needed modernisation for today’s commercial leasehold market.

The review will cover statutory security of tenure, the contracting out process and statutory lease renewals. It has the potential to bring fundamental change for the commercial property industry.

2. Monitor the progress of the Government’s consultation on restricting ground rents for existing long leaseholds

The Government has closed its consultation on its five proposed methods of overriding leases and capping their ground rents.

If the measures are brought in, we will wave goodbye to another freedom of contract and the legitimate income streams (with zero compensation) for many real estate investors, including pension funds, institutional investors and charities.

3. Future-proof your building

The real estate sector is understandably confused about whether we are heading for net zero or not zero. After the government’s recent "U-turn" on the UK’s net zero commitments, we don’t know what trajectory to expect for minimum energy efficiency requirements for commercial property.

Regardless of the uncertainty about the future statutory framework, property owners and occupiers would be wise to consider the energy efficiency of their buildings, because of the impact on a building’s performance and operating costs and on its market value, rental value and rental viability.

If energy efficiency improvements are necessary or desirable, they should consider seeking advice on the costs, responsibility and timescales for these works.

4. Get to grips with the Government’s drive for transparency in the property industry

In 2022, legislation was introduced to combat global economic crime by increasing transparency in the ownership of overseas entities that hold UK property.

UK corporates and overseas entities which hold UK real estate are affected. The Government’s drive towards transparency has continued with the subsequent introduction of further legislation, as well as pending statutory powers for the Land Registry or other designated public body to gather information about interests and dealings in land.

The Government’s new consultation means a further push is afoot for more transparency of information on trust-owned land.

Given the civil and criminal sanctions under the relevant legislation, property owners need to get to grips with the new legislative framework and take advice where appropriate.

5. If you’re a retail investor, find out if high street rental auctions could apply to you

This year will presumably hail new statutory powers for local authorities to conduct rental auctions of vacant premises in town centres.

Given how under-resourced the local authorities are, will any actually use the rental auction powers when they have them, particularly against commercially motivated property owners who have been unable to find acceptable tenants in the market?

Investors with long-vacant premises in town centres may want to consider the looming local authority powers and obtain some preliminary advice pending the implementation of these provisions.

6. Ensure you are creating Biodiversity Net Gain

 In 2024 we will also see the delayed introduction of the mandatory 10 per cent Biodiversity Net Gain requirement for most planning consents. The requirement will apply from 12 February 2024 for major developments, from April 2024 for small sites and from late November 2025 for nationally significant infrastructure projects.

The aim is to ensure that development results in more or better-quality natural habitat than there was before development. To obtain planning consent, developers will need to submit plans showing how they will achieve the required 10 per cent BNG, whether on-site, off-site or through buying statutory credits, as a last resort.

Review the master Government webpage for BNG guidance and the relevant legislation.

7. Consider the Impact of the Updated National Planning Policy Framework on Your Development Plans

The updated National Planning Policy Framework, published on 19 December last year, includes reforms to housing delivery requirements and agricultural land considerations.

An estimated 40 per cent of local planning authorities will no longer be required to demonstrate a five-year housing land supply and, therefore, will not have to consider the presumption in favour of sustainable development when deciding planning applications. These authorities are now more sheltered from unplanned or speculative development.

The changes also require local authorities to consider the availability of agricultural land used for food production when allocating sites for development. Where the significant development of agricultural land is necessary, areas of poorer quality land should be preferred to higher quality land.

8. Consider whether to accelerate any planning applications given the impending London Mayoral election and subsequent general election

The next London Mayoral election will be held on 2 May 2024, and Michael Gove has announced the creation of a panel of expert advisers to advise on how to ensure London is delivering the houses needed. A report will be prepared in 2024 on how the London Plan could be improved to facilitate the delivery of new homes on brownfield sites.

National change may be afoot depending on the outcome of the general election taking place in the latter half of this year as Labour are indicating swathes of planning reform.

This article was originally published by CoStar, click here to read.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, February 2024