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What does 2024 Hold for Commercial Real Estate?

It is generally expected that there is lots to be optimistic about in terms of the 2024 commercial real estate market. In it’s UK Real Estate Market Outlook 2024, Savills notes that whilst the economy remains challenging the inflation rate is expected to continue its downward trajectory in 2024, with base rates expected to follow suit in the latter half of the year. However, 2024 will also bring us a general election which is likely to be a major focal point for the year. The good news is this could potentially lead to a Spring Budget which introduces some beneficial tax changes as the Conservatives attempt to increase their ratings.

Against the economic backdrop for 2024, there are some key legislative changes expected in the commercial real estate arena. Here are some of those which we expect will have the most far-reaching impact.

  1. Review of the Landlord and Tenant Act 1954

In 2023, the Law Commission announced that it would be reviewing the legislation contained in Part 2 of the Landlord and Tenant Act 1954. It is looking, in particular, at the areas concerning security of tenure, notices and renewal lease terms.

The legal framework regarding security of tenure and renewal lease terms is nearly 70 years old and it has been 20 years since any significant updates were made to this. Given how the business property market has changed in that time, and also considering the impacts of the rise of the internet in the last 20 years, the 2008 crash and the Covid-19 pandemic, this project aims to create a legal framework that will meet the needs of modern business leases and be beneficial to both Landlord and Tenants.  

This review is in its pre-consultation phase. It is expected that a consultation paper will be published within the first few months of 2024.

  1. Building Safety Act 2022

Following the Grenfell Tower tragedy The Building and Safety Act 2022 has been one of the biggest legislative changes in the construction arena for some time. The Act is being brought into force gradually, and it is expected that 2024 will see further implementations of this legislation. It is possible we will see the following this year:

  • The introduction of a mandatory 15-year construction warranty on new homes;
  • The establishment of a New Homes Ombudsman to assist buyers in solving disputes with developers regarding construction issues;
  • Legislative changes to imply terms into residential leases relating to building safety; and
  • Measures to improve the safety of higher-risk buildings (at least 18 metres in height (or has at least seven stories) and containing at least two residential units).
  1. Levelling-up and Regeneration Act 2023

The Levelling-up and Regeneration Act was passed on 26 October 2023. We now await regulations which will set out the detail concerning two key areas:

  • Compulsory rental auctions of empty high street premises; and
  • Obligations to provide detailed transactional information about interests and dealings in land to the Chief Land Registrar (in relation to beneficial ownership, contractual control or national security).

There will also be an extension to the time limit for enforcement action to be taken under planning laws for England (but not Wales). The enforcement action time limit will be raised from its current 4 years for breaches in relation to building operations and change of use to a single dwelling to 10 years bringing it in line with other planning breaches.

  1. Environment Act 2021 – Biodiversity Net Gain

Biodiversity net gain laws will require developers to leave any natural habitat in a better state than before development. In January 2024 the rules will become mandatory for large development sites. For smaller sites this will take effect in April 2024.

  1. Charities Act 2002

Reforms to dealing with charity land contained in the Charities Act 2022 are expected to be implemented in early 2024. These include changes to the information that must be included in statements and certificates for charity land disposals and mortgages.

 

These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.

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