Thursday saw the publication of the English Devolution and Community Empowerment Bill. The Bill supports the Government's Plan for Change which is targeted at supporting local communities by devolving power away from central government.

It contains several measures that will impact on the real estate sector principally by making more powers available to purchase assets of community value (ACV) and reforming upwards only rent review provisions (UORR) in commercial leases.

On Friday, the Government published its response to its consultation on permitted insurance fees for landlords, freeholders and property managing agents. It said its intention is to improve the current situation to ensure that insurance-related costs paid by leaseholders are fair and transparent.

ACV

The Government is of the view the current regime, introduced in 2012, does not offer sufficient protection from development to community spaces such as pubs and community centres.

It proposes to address this in a few ways: giving communities the first opportunity to buy an ACV, extending the moratorium, extending the statutory definition of "ACV" and giving the ability to community groups to challenge a decision made by a local authority about what constitutes an ACV. Perhaps most significantly the Bill introduces a new class of ACV: Sporting Asset of Community Value (SACV).

The Bill contains a "Community Right to Buy" which will enable such groups the "first opportunity" to purchase the asset.

The price of the asset will be negotiated between the parties or set by an independent valuer by reference to market value.

The moratorium on sale, currently six months, will be extended to 12 months under the new proposals although asset owners will be able to ask local authorities to review the progress that is being made by the community groups 6 months into the process.

The definition of "ACV" will be widened to encompass assets that have historical significance or that are of economic significance to a community.

Community groups will also be given powers to apply to challenge the decision of a local authority not to list an asset.

New guidance on these measures is expected.

SACV

A SACV will be new class of ACV that seeks to protect community sports grounds from redevelopment. The Government proposals highlight that local sports grounds are particularly vulnerable to redevelopment and so need additional protection by enhancing the powers available to local communities.

It will do this by automatically designating all eligible sports grounds and supporting infrastructure (e.g. car parks) as SACVs which will benefit from an enhanced indefinite review period.

UORR

The Government is of the view that UORR provisions are creating market inefficiency and disinhibiting SMEs from entering local markets to the detriment of local communities.

It is of the view that self-regulation is not working and consequently will ban UORR in new commercial leases. It is intended the ban will apply to commercial leases both inside and outside of the Landlord and Tenant Act 1954.

It will also apply to most sectors (with some exceptions e.g. agricultural tenancies).

If UORR machinery is included in a commercial lease once the ban is in force it will simply not be enforceable. Although the new rent will be fixed by reference to the machinery in the lease (e.g. RPI or OMV) the new rental value can move in either direction or remain static.

Response to the consultation on permitted insurance fees for landlords

Freeholders and landlords of multi occupancy residential buildings typically receive commissions for arranging building insurance which are often included in leaseholders' service charges.

A report by the Financial Conduct Authority, issued in 2022, highlighted a 40% rise in remuneration for brokers from 2019 to 2022, raising concerns about the value of the service provided by freeholders, landlords or property management agents in return for the commission.

The Leasehold and Freehold Reform Act 2024 (2024 Act) aims to enhance leaseholder rights and protections, increase transparency and give them greater powers over their homes. These powers sit alongside the Government's goal to move away from leasehold to commonhold homes in future. Under the 2024 Act, there are protections which would prohibit landlords or their managing agents from charging any costs outside of a "permitted insurance payment" which are to be brought into effect by secondary legislation following consultation.

The public consultation by the Ministry of Housing Communities and Local Government on the permitted insurance fee policy ran from Dec 2024 to Feb 2025 and included questions around the way in which remuneration arrangements currently operate, feedback on the proposals for the permitted insurance fee and how costs may be calculated, as well as potential criteria which could be applied to the permitted insurance fee and timing for implementation.

Over 800 responses were received to the consultation from a broad range of stakeholders with mixed views. Leaseholders consider that the current system lacks transparency, whilst landlords and managing agents have expressed concerns around the potential lack of flexibility in the proposals.

The Government has confirmed in its response to the consultation, issued on 11 July, that its intention is to:

• Improve the current situation and ensuring insurance-related costs paid by leaseholders are fair and transparent

• Consider the responses to this consultation, and the detailed issues raised, to refine the policy to consider and implement the required secondary legislation

Next steps

We anticipate that the English Devolution and Community Empowerment Bill will take some time to travel through Parliament. The provisions relating to UORR and ACV constitute only a small part of the Bill. The ban on UORR was introduced without industry consultation and, given the impact on investment and the sector generally, is likely to be met with resistance. We expect much parliamentary debate. Next up will be an announcement for the date of the second reading of the Bill.

The response to the consultation on permitted insurance fees for landlords anticipates a refinement of Government policy. We will keep you updated on this and the progress of any secondary legislation through parliament.