Housing white paper - To build or not to build?
Author: David Perry and Michael Callaghan
Applies to: England and Wales
In this article we consider the measures laid out in the government's white paper that will assist and, possibly, in some cases discourage, both developers and investors involved in the housing market.
The government's white paper on 'fixing our broken housing market' sets out a series of measures designed to reduce the obstacles to house building and help local authorities, developers and SME builders build the homes Britain needs.
Easements and covenants
Six years ago the Law Commission published a report setting out proposals for the reform of easements and covenants. The proposals were designed to simplify a complex and obscure area of law and to make it easier for developers (including house builders) to set up and manage estates. The white paper confirms that the Law Commission's proposals will be included in a draft bill to be published for consultation. If the contents of the draft bill follow the original recommendations, it will make life easier for developers, lawyers and homeowners.
Improving the Land Registry
The government also set out plans to modernise the Land Registry to become a digital and data-driven registration business within the public sector, committed to becoming the world's leading land registry for speed, simplicity and an open approach to data.
After two failed attempts to privatise the Land Registry, it is encouraging to note that it will be kept within the public sector. The key point to note is the emphasis on speed, simplicity and an open approach to data. Addressing the very long delays in dealing with anything but the simplest of Land Registry applications is important. It can be a critical bottleneck in the conveyancing process that is long overdue reform but will require significant money to be invested in people and IT to bring about robust change.
The open approach to data and transparency is interesting. At the moment, the Land Registry only records who the legal owner of land is, not who controls that ownership. The government will therefore consult on how registered titles can better reflect wider interests in land with the intention of providing a 'clear line of sight' across a piece of land setting out who owns, controls or has an interest in it. This mirrors existing rules for foreign companies owning land requiring them to set out who controls the company. While greater transparency is to be welcomed, it will make the conveyancing process more complex as there will be more information to consider and report on.
Finally, in relation to the Land Registry, the white paper confirms the Land Registry's aim to achieve comprehensive registration by 2030: that is, title to all land will be registered. This will require legislative changes because, at the moment, unless ownership in land changes, there is no requirement to register it.
Landlord and tenant law
The white paper includes a number of proposals in relation to leases designed promote fairness and transparency for the growing number of tenants, including banning the practice of tenants having to pay letting fees to the landlord's agent. The government will consult on a range of other measures designed to prevent abuses of the landlord and tenant system. One area highlighted in the white paper is the payment of ground rents with short review periods and the potential for them to increase significantly throughout the lease period. Those who invest by purchasing rents may be concerned about the returns that they will receive on their investment.
The government has also confirmed that the right to buy will be extended to tenants of housing associations. This is a two edged sword. While this promotes home ownership, it could lead to a dwindling in the stock of available affordable housing if the rate at which tenants exercise the right exceeds the rate at which housing associations can acquire new homes for affordable housing. Also, this will create a further disincentive for private sector investment in social housing. The complexity of landlord and tenant law and social housing rules already makes investments tricky to structure. If there is a fear that the investor will be investing in a dwindling asset, this may discourage an important source of funding for housing associations.
This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.