The UK residential property scene is still adjusting to the complex requirements set out under Building Safety Act and patiently waits for progress on long mooted leasehold reform (particularly, for London-based clients with apartments, changes to the statutory lease extension system). There are a couple of potential upcoming legislative changes that could impact individuals, family offices and trusts in Asia with existing exposure to - or plans to acquire - UK residential property. In this article, we'll briefly touch upon upcoming regulatory shifts in short term rental legislation and SDLT, and what it might mean for you.
Renters' Rights Bill
On 11 September 2024, the government published the draft Renters' Rights Bill. The bill is currently at its second reading in the House of Commons.
The bill aims to provide a number of new protections to tenants under short tenancies, including:
- The abolishment of section 21 notices – these are what are commonly called "no-fault evictions". Government figures show a 19% year on year increase in "no fault" evictions between January and March 2024 and are keen to tackle this. The bill sets out new possession grounds, such as where the landlord wishes to sell the property or occupy it themselves.
One particular area of interest is whether or not there will be special grounds for landlords of student housing to use and rely on. We suspect that the position will change and this will impact tenancies taken by overseas students.
- Strengthening tenant rights and protections – such measures will include an end to rental bidding wars stoked up by landlords and letting agents and rights to tenants to challenge rent increases put forward to force them out of their tenancy.
- Giving tenants the right to request a pet – landlords will be required to consider and not unreasonably refuse such consent. They will, however, be entitled to request that the tenant put pet insurance in place. The government is yet to issue guidance as to what might be considered a reasonable reason to refuse consent, but it may be that we need to wait until this is tested in court.
- Applying Decent Homes Standard to the private rented sector – this is to ensure safe and secure homes and to improve poor quality rental homes.
- Awaab's Law – this will extend the framework of rules relating to time frames within which landlords of social housing are obliged to deal with serious and unsafe hazards in homes. Government figures indicate that 21% of private rented sector homes are non-decent and 12% (which is approximately 580,000 properties) contain a category 1 hazard such as severe damp or mould. The government will be hoping to drive these numbers down by implementing stricter requirements on landlords.
- Creating a digital private rented sector database.
- Supporting cheaper, quicker resolution where there are disputes – the ability of the court system to deal with private tenancy-related disputes was one of the reasons that the previous government's Renter's Reform Bill did not make it through the previous parliament.
- Making it illegal for landlords to discriminate against tenants in receipt of benefits.
- Strengthening local council enforcement powers, which will include investigatory powers to make it simpler for Councils to enforce against landlords that are contravening the new rules.
Takeaway
Those with buy-to-let holdings will want to ensure that they:
- have a clear and organised oversight of their portfolios
- are able to comply with the new requirements
- are fully up-to-speed with the new grounds for recovering possession.
SDLT – overseas buyer surcharge
As it stands, overseas buyers (see below) are required to pay a 2% surcharge on SDLT for purchases of UK residential property.
Broadly, a buyer is treated as UK resident for SDLT purposes if (during the period starting on the day falling 364 days before the completion date and ending on the day falling 365 days after the completion date) the purchaser is present in the UK for 183 days or more in a continuous 365-day period. There are also rules relating to joint purchasers with a mix of UK resident and non-residents.
The current SDLT rates are set out below:
| Value of property |
SDLT rate |
Non-UK resident rate |
Additional property higher rate |
Potential total SDLT rate |
| Up to £250,000 |
Zero |
2% |
3% |
5% |
| £250,001-£925,000 |
5% |
2% |
3% |
10% |
| £925,001-£1,500,000 |
10% |
2% |
3% |
15% |
| Over £1,500,000 |
12% |
2% |
3% |
17% |
Under its manifesto, the Labour Party pledged to increase the overseas buyer surcharge by 1%, to 3%. Rumours are that this will be put forward in the October budget, but this remains to be seen.
Such changes would follow in the footsteps of similar changes in other jurisdictions. Singapore introduced a 60% overseas buyer surcharge in 2023; Vancouver has also introduced tax levies of 20% for overseas buyers.
If changes are made, they may be immediate (ie catching any transaction completing from 30 October) or transitional (eg only effecting transactions exchanged or completed (as the rules dictate) after a certain date).
Takeaway
The Chancellor has confirmed that the Autumn Budget will be delivered on 30 October 2024. SDLT payable by buyers deemed non-UK resident under SDLT rules will increase if the government goes through with its pledge to raise the rate from 2% to 3%.
The detail will matter, particularly how quickly the change (if any) comes into effect.
