Property Litigation: key trends from 2024 and predictions for 2025
Insight
Property law reform continues at pace into 2025 with some big legislative changes inbound across the whole real estate spectrum – here’s our take.
Summary
The theme of the current legislative reform is one of increased tenant rights, whether that is to ensure the current obstacles to challenging unscrupulous landlords are removed or by providing tenants, both residential and commercial, with increased security in relation to their homes and places of work. However, a consequence of seeking to redress any perceived imbalance could very well be, in the short term at least, to increase landlord and tenant disputes, presenting significant resourcing challenges for an already creaking Court and Tribunal system.
Renters’ Rights
The Renters Rights Bill has had a turbulent journey so far. Shelved by the Conservatives, it’s now back on the legislative stocks as part of the new government’s sweeping (some might say tenant friendly) property reform agenda.
As the Bill makes its way through Parliament in 2025, there will be continued landlord concern regarding the abolition of “no fault evictions”. Removal of this right under s.21 of the Housing Act 1988 is a significant roll back of landlords’ ability to deal with their properties as they see fit. Not only will this serve to discourage prospective landlords from entering the buy to let market but will also likely lead to existing landlords selling up. For those who don’t, landlords will be required either to stick with their tenants regardless or find a ground for termination. This will undoubtably lead to an increase in the number of disputes arising, which will place a further burden on a heavily backlogged Court system.
“A deluge of section 21 claims by landlords”
In advance of the provisions of the Bill coming into force, we foresee that there will be a deluge of section 21 claims by landlords. Unfortunately, this will further jam up the Court system. It is advisable for landlords to consider any action early on if possible.
More tenant complaints?
Other interesting provisions include the proposal for a new Ombudsman for tenant complaints. This would be funded by landlords which would undoubtable lead to huge number of tenant complaints and significant questions remain as to how the Ombudsman would be resourced, regulated, operate in practice and crucially the extent of its remit.
In terms of the practical implications of the Bill, there remain many unanswered questions. Even with the Labour majority in the House of Commons, we expect to see landlords’ rights strongly represented.
Leasehold reform
The new Leasehold and Freehold Reform Act 2024 will reform the process by which leaseholders acquire their freehold or an extension of their lease – effectively making it easier and cheaper. In particular, leaseholders seeking to extend their leases will acquire a new 990 year term instead of the current 90 years for flats and 50 years for houses. The premiums payable by leaseholders, either on a lease extension or freehold acquisition, will be calculated differently, likely leading to significant reductions in the sums payable. The reforms may pose challenges for landlords in terms of managing mixed-use properties and adjusting to new valuation methods.
Landlords facing more challenges to service charges
There are also plans to increase tenants’ ability to challenge their landlords in relation to service charges or other issues arising under their leases, by the introduction of new rights for legal cost recovery. Removing financial obstacles for tenants eager to hold landlords to account is very likely to significantly increase the workload for an already overstretched First Tier Tribunal.
Judicial review claims by landlords against the government
The government has acknowledged “flaws” in the Act and there are consultations due this year on the premium valuation methodology as well as service charge regulations. However, the headline is that the Act is geared towards the enhancement of tenant rights and, predictably, judicial review claims have already been brought by landlords against the government.
Landlord & Tenant Act 1954 – wholesale change or minor tweaks?
The Law Commission recently published a Consultation Paper on the potential updating of the Landlord & Tenant Act, now over 70 years old. The Act currently gives tenants “security of tenure” ie the right to renew leases at the end of a fixed term with landlords only able to oppose renewal in certain limited circumstances. Although both parties can ‘contract out’, it depends on their respective bargaining power. The Law Commission has suggested alternative models, including scrapping security of tenure altogether, leaving it unchanged and switching to a ‘contracting-in’ arrangement.
Given the wide calls for reform, leaving the Act unchanged seems unpalatable, yet wholesale change may prove too disruptive. A more likely route is the middle ground of a contracting-in model, where the default position is that the tenant does not have the protection of security of tenure.
The review may also provide more clarity on the scope of the Act, such as whether agricultural tenancies will be encompassed by its provisions alongside other business tenancies. The Law Commission is set to make its recommendations after the end of the consultation period in early 2025. Exciting times lie ahead for a key piece of legislation with potentially very significant ramifications for the balance of power within the commercial property market.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, February 2025
Dispute resolution trends and predictions
This insight is part of our wider report – "Dispute resolution trends & predictions" – which includes comprehensive analysis from our specialists together with valuable viewpoints from our clients.
