Recent changes with an ongoing impact
Various legal and regulatory changes introduced in recent years may impact homeowners and investors in the UK on an ongoing basis. For example:
The Building Safety Act 2022
In response to the Grenfell Tower fire tragedy in 2017, the Building Safety Act 2022 was introduced to reform how buildings are constructed and managed, improving structural fire safety in England and Wales. In particular, the Building Safety Act emphasises the following:
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regulating the competence and qualifications of all those involved in constructing a building
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regulating operation and occupation of higher-risk buildings
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introducing clearer standards and guidelines for the regulation and responsibility of those involved in building work
The Building Safety Levy
In the autumn 2025, the government intends to bring the Building Safety Levy into force in England, which is included in Section 58 of the Building Safety Act. The Building Safety Levy imposes a levy on developers. It will be charged on new residential buildings with 10 or more dwellings (ie units of accommodation).
This levy ensures that the burden of funding building remediation work does not fall on taxpayers and leaseholders but on those responsible for meeting building safety standards, such as developers.
Andrew Bates, COO at Bates Electric, says, ‘This is positive news for homeowners, leaseholders, or property investors. The government emphasizes developers' liability and responsibility for building safety expenditures. Developers are the main cause of most building tragedies by neglecting adequate and appropriate building safety standards, such as adequate fire safety procedures and proper and good-quality electrical wiring, to save cost or time.’
The government aims to raise over £3 billion from the levy in the next 10 years, but there are no details yet on the levy rate to be imposed.
Council tax for HMOs
Jeffrey Zhou, CEO and Founder of Fig Loans, says, ‘A property is considered a house in multiple occupation (HMO) if at least three tenants reside in the same house, sharing a bathroom, kitchen, and other common facilities with other tenants. Amid a housing crisis, HMOs address the rising housing costs by allowing tenants to live in the same house and split costs.’
Individual tenants used to pay the council tax for HMOs through disaggregation (ie where HMOs were split into separate self-contained dwellings for council tax purposes). However, since the Council Tax Regulations 2023 were enacted on 1 December 2023, the landlord is now responsible for paying the council tax in England for HMOs rather than the tenants.
What does this mean for landlords and homeowners? For council tax purposes, each HMO will be charged as an entire property instead of a separate dwelling per tenant. Amid a housing crisis and continuous cost-of-living increases, landlords must decide whether to increase rent to cover the council tax.
David Haskins, CEO at WrongfulDeathLawyer.com, says, ‘Increasing rent to cover council tax puts HMO owners at a disadvantage over non-HMOs, impacting their profit whether they shoulder the cost or risk the loss of tenants due to increased rent. It is important for homeowners to carefully assess whether their property is an HMO, as the tiniest details, like individual kitchens and private facilities, can draw the line between an HMO and a non-HMO.’
Leasehold and Freehold Reform Act 2024
The Leasehold and Freehold Reform Act 2024 aims to improve house ownership for leaseholders in England and Wales by promoting fairness and transparency. Some of the provisions have already come into force, but the majority of the Act is waiting on an enforcement date to be set.
Some of the most notable changes in the Act include:
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easier ways for leaseholders to extend their lease or buy the property from the freeholder (ie leasehold enfranchisement)
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increasing standard lease extension to 990 years
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greater transparency of service charges to leaseholders
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easier ways for leaseholders to take over building management
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easier ways for leaseholders to exercise enfranchisement rights
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a redress scheme for leaseholders to use to help challenge underperforming freeholders when necessary
Because this Act is intended to be for the benefit of leaseholders, freeholders may face numerous challenges with their property, such as:
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the reduction of ground rent to peppercorn (or zero value) for residential leasehold properties may impact steady income by real property owners
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needing to hold greater responsibility for being transparent and detailed with service charges imposed upon leaseholders
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potentially losing control over the maintenance of properties as leaseholders can take over property management
Grant Aldrich, Founder of Preppy, says, ‘Property owners might want to examine their existing portfolio with certified professionals and the Bill’s impact on their investments.’ He adds, ‘Diversifying portfolios, focusing on short-term leases, can address the significant impact of the Bill, especially if ground rent is one of your biggest income sources in leasehold properties.’
Future Homes Standard
The Future Homes Standard (FHS) is the government’s new intervention into sustainable construction and housing practices in England, which is expected to start in 2025. This standard aims to:
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reduce carbon emissions from new homes built in 2025 by 75% to 80% compared to current building regulations
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update building regulations to set higher standards for ventilation, heating, energy, and carbon emissions
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improve building fabric, insulation, and reduce heat loss in new homes
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require new homes to use low-carbon heating and hot water heating systems
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ensure each new home has electric vehicle (EV) infrastructure or at least a cable allowance for future installation
Property owners and investors will benefit from adhering to the government’s Net Zero project, as FHS hopes to:
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significantly increase property values from low maintenance costs through energy-efficient practices
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provide opportunities for green mortgages, with financing institutions offering lower interest rates for green projects
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boost the property value of investment properties compliant with FHS
Adrian Iorga, Founder & President at Stairhopper Movers, says, ‘The impact of green homes and energy-efficient homes can be seen not only on its overall effect on the environment but its financial benefits to property owners.’ He adds, ‘Green homes significantly improve the living conditions of the homeowners or the tenants of the property through improved air quality, environmental conditions, and better natural sunlight exposure.’
With the increasing number of individuals working from home or using their homes as offices, homes that follow the Future Homes Standard will double their positive impact on reducing carbon emissions.
Fineas Tatar, co-CEO at Viva, says, ’More people are switching to full-time work-from-home arrangements or using a portion of their homes as a business office, and the positive environmental impact of these is significant – reducing commute emissions and lowering energy consumption. Pairing these with FHS-approved home construction, individuals working at home can reduce carbon emissions and work in a healthier, more productive environment than traditional office spaces.’
New stamp duty rates in 2025
Stamp Duty Land Tax (SDLT) is a tax that applies to the purchase of residential property in England and Northern Ireland and is calculated as a portion of the property's purchase price. On 1 April 2025, home buyers and property owners will see an increase and changes in the rates and thresholds of SDLT as follows:
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the minimum threshold for SDLT will return to £125,000 from £250,000. You will generally be taxed SDLT on the proportion of a property’s purchase price above £125,000 instead of £250,000
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another rate of SDLT has been added on property purchases between £125,001 and £250,000. Within this range, purchasers will pay an SDLT of 2%
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if you are a first-time buyer, the new SDLT will be imposed on purchases exceeding £300,000 instead of the current £425,000
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first-time buyers will not be able to claim relief for purchases above £500,000
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if you already a property owner are buying an another property, you will need to pay an extra 5% in SDLT in addition to standard rates
For more information on SDLT thresholds and rules, and to see the current rates, read Stamp duty on residential property.
Molly Ancel, Managing Partner at Peerpoint, says, ‘The upcoming stamp duty changes are predicted to significantly impact the home buying decision of homeowners, especially first-time buyers, due to the end of First-Time Buyer Relief. Second-time buyers will also be forced to make quick decisions due to the threshold and rate changes come April 1.’ She adds, ‘These rate changes are not new, but rather a reversal of the old rates before the temporary Stamp Duty relief in September 2022.’
Outlook for homeowners and investors
The real estate landscape in the UK is ever-changing, thanks to the government’s continuous efforts to address the housing crisis; improve benefits for homeowners, tenants, and leaseholders; and improve building and housing safety, maintenance, and sustainability.
All the upcoming legal changes in 2025 have their fair share of benefits and disadvantages for homeowners and property investors. Without the proper preparation, these changes can be challenging, if not disadvantageous. By arming yourself with information and keeping up to date with the legal landscape affecting the real estate industry, you can take the right course of action earlier and take advantage of the benefits and cost savings before these changes occur.
If you have any questions about buying and renting out investment properties in the UK, you can Ask a lawyer.
