Government Announces Changes to Residential Property Transactions

This weekend, the Ministry of Housing, Communities and Local Government unveiled a plan to revolutionise the home buying and selling process in England and Wales. 

The announcement promises to make transactions quicker and more cost-effective by leveraging digital technologies and enhancing data transparency. Key initiatives include the introduction of digital identity verification services and the modernisation of property data sharing. These reforms aim to reduce delays, lower costs, and provide greater certainty for buyers and sellers, marking a significant step towards a more efficient and accessible property market. 

Alongside this, it was announced that parts of the Leasehold and Freehold Reform Act relating to Right to Manage claims will come into force on 3rd March. 

A Fully Digitalized Home Buying and Selling Process 

The launch of a new 12-week project will identify, plan, and agree on rules around the data used in the sector. At present, there is no centralised system or agreed storage methods, and no means to verify information passed between the parties during a transaction. On a basic level, you see this when different language is used; for example, is it a seller or a vendor? Is it the price or the sale price? Accordingly, each party (the conveyancer, the estate agent, the lender, and the mortgage broker) starts collecting data individually. This is inefficient and a source of frustration for clients who must repeat the process of providing data multiple times during the transaction. In February last year, the Property Data Trust Framework was launched, providing a standardised set of data, and the Government may look at this as a template. When the data is consistent, it allows for greater integration of different platforms across various parts of the sector, for example, the case management systems between a conveyancer and an estate agent, allowing greater transparency between the parties. 

The initiative may also look to speed up the Land Registry project to digitalize local authority information, which in theory should speed up local authority search results. 

Helen Hutchison, Partner in Irwin Mitchell’s Residential Property team shared her opinion on the announcement; “changes to the current process which would speed up transaction times would be welcome by the profession and consumers alike, however the lack of detail in respect of the proposals being made, means that we cannot consider how such changes can be implemented or indeed, what impact they have on timescales and costs. Hopefully, there will be further announcements in the future which outline the plans in more detail and to allow the industry to consider implementation.” 

Leasehold Reforms 

Alongside this announcement, regulations were laid to bring in further provisions of the Leasehold and Freehold Reform Act 2024. Last month, regulations brought in the removal of the two-year rule, which allowed leaseholders to claim a lease extension or purchase the freehold of their leasehold house without waiting for the two-year qualifying period. Now, a series of provisions relating to Right to Manage claims will come into force on 3rd March 2025. 

The Right to Manage claim, introduced by the Commonhold and Leasehold Reform Act 2002, allows leaseholders to collectively form a company (“RTM Company”) and take over the management of the block. Currently, a Right to Manage claim is only available to blocks where non-residential property does not exceed 25 percent of the internal floor area. The claim requires no payment to the landlord, but currently, the leaseholders must cover the landlord’s costs. 

The new provisions will increase the limit on non-residential property to 50 percent, consequently making the right available to a greater number of leaseholders. There are also provisions relating to costs, removing the RTM Company’s liability to cover the landlord’s costs, except in circumstances when they act unreasonably or withdraw from the claim. There is also a right to challenge the costs claimed by the landlord in providing information. This change may mean that landlords are less inclined to challenge Right to Manage claims. 

However, while these changes are positive for leaseholders, and many will now be considering making a claim, it is worth noting that Right to Manage, although providing an avenue for dealing with difficult landlords, is not necessarily a solution to high service charges. The RTM Company will be under obligations to comply with the requirements of the leases, such as insuring and maintaining the block. Furthermore, difficulties arise when active residents, who may initially be involved in the claim, sell up and new residents are not as interested in block management. On occasion, this has resulted in the RTM Company being wound up, incurring costs for leaseholders, difficulty in refinancing, and delays to conveyancing transactions. 

Conclusion 

Many seasoned professionals who have lived through various government promises to revolutionise the conveyancing process may be sceptical about this announcement. There is a lack of detail which may invite criticism, and there are problems within the conveyancing process—delays at the Land Registry, the requirements of the Building Safety Act, staff retention, and burnout, to name a few—which cannot be remedied by simply data sharing. However, we must recognise that not all these problems can be solved immediately, and incremental improvements are improvements nonetheless. 

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