With the year still in its infancy, Lisa’s Law would like to use this article to outline some of the major upcoming changes to conveyancing in 2025. We will also take a look at how these major changes will affect buyers, sellers and conveyancing solicitors involved.
Purchase cost increases
The following three changes will not be liked by buyers, as they are likely to increase purchase costs:
Change of stamp duty and land tax (SDLT)
From 1st April 2025, the zero rate band for residential properties will drop from current £250,000 to £125,000. It means that buyers will have to pay £2,500 more SDLT on their purchases. For first time buyers, the exemption will drop from current £425,000 to £300,000, an additional SDLT payment of £6,250. Please refer to our article for more details of the changes.
It will clearly be another busy season for conveyancing solicitors until 31st March 2025, when buyers try to benefit from the current SDLT rates and press their solicitors to complete transactions prior to the changes.
Reduction in right to buy discount
In order to increase the social housing stock of local councils, the Labour government has substantially reduced the discount offered to council tenants when they exercise their right to buy the properties they have been renting. From 21st November 2024, the maximum discount has been capped at between £16,000 and £38,000, which used to be as high as £102,400 across England or £136,400 in London boroughs.
In addition, the government is also considering increasing the number of years it takes for a tenant to be eligible from 5 years to 10 years. They are also considering requesting a repayment of the discount if they sell the properties within 10 years, instead of five years.
Without a doubt, this will mean that fewer and fewer social tenants can afford such purchases.
Higher Charges for Information Services
HM Land Registry has raised its fees for information services by £4 since 9th December 2024, which appears to be a minor change, but can easily squeeze buyers’ pockets by dozens of pounds.
Delay in conveyancing process
Anyone with some conveyancing experience is likely to know how painfully slow the process can be. It can be delayed by many factors. Lenders can raise too many requirements at the last moment before lending. Search results may not be received when a deadline is approaching. More frequently, in case of leasehold transactions, when everything hangs on the provision of management pack, landlords or their management agents are nowhere to be found. Will the overall situation be improved in 2025?
To answer this question, the 5th edition of the Law Society’s property information form TA6 is set to roll out this year. The form will require sellers to provide more additional information about their properties, which include many additional questions about council tax, construction materials, erosion risk, building safety and other issues. The Law Society has claimed that it intends to use the form to make the conveyancing process more transparent. The idea is for sellers to disclose as much information about their properties as early as possible, so that buyers can decide whether to proceed with the transactions at a very early stage. It is predicted that once in use, Form TA6 should help speed up the transaction process and reduce the number of aborted cases.
In 2024, the government also passed the Freehold and Leasehold Reform Act 2024. Section 67 of the act means that landlords or their management agents must provide the relevant sales information within a specified period of time after receiving such request from leasehold sellers. Section 76 also limits the amount they can charge for providing such information. Such provisions will clearly reduce the delays which currently blockade many transactions. Unfortunately, neither section has been brought into force. It remains to be seen whether this will happen in 2025.
Tenants’ rights
There are two pieces of legislations which will affect tenants’ rights in 2025.
The Renters’ Rights Bill is likely to become law this year. At the time of writing, it has passed the first reading at the House of Lords. This bill intends to offer more protection to tenants, including abolishing the so-called no-fault section21 notice, turning all tenancies into periodic, prohibiting landlords from evicting tenants without fair grounds and improving the regulation of the private renting market by creating a private renting landlord ombudsman and increasing the local authorities’ power of enforcement. Please refer to our article for more information on the bill.
Once coming into force, the Renters’ Rights Bill or Act by then will clearly reshape the private renting market. Although there is no doubt that it will offer tenants more rights, landlords also have legitimate reasons to worry whether they will have any control over their own properties any longer. Such concern will inevitably influence potential landlords’ intention to enter the market. Combined with the effect of the additional 5% SDLT imposed on purchases of additional properties, it is likely to affect buy-to-let purchases.
In the meantime, section 27 of the Freehold and Leasehold Reform Act 2024 is expected to be brought into force this year. This will allow leaseholders to extend their leases or franchise the relevant freehold, irrespective of how long they have owned the property. This will effectively take away some concerns buyers normally have about leasehold properties.
Environment-related issues
Climate change will continue to have an impact on conveyancing in 2025. Under the Law Society’s guidance, based on property locality, peculiar physical features and client’s objectives, conveyancing solicitors are expected to advise their clients what environmental searches should be carried out and enquiries raised and the implication of an environmental risk to the use, insurability, costs and marketability of a property. Many solicitors may need to review their title to report to include or expand their report on environmental risks.
Lenders are also taking action on climate change. Halifax has recently linked its lending to property EPC rating. The higher the rating is, the more a borrower is allowed to borrow. This will inevitably increase the marketability of properties with high energy efficiency.
Our thoughts
In general, with the SDLT threshold dropping to the pre-covid £125,000 level, the majority of buyers in 2025 will see their purchase costs increased by at least £2,500. Environmental risks will further increase such costs, as it will mean more searches and more reports. Social housing tenants looking to buy their council house will see the biggest impact. With the substantial discount reduction, it is a real question whether the right to buy has any attraction at all.
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