A Private Landlords Redress Scheme - How Will it Work?
When the first reading of the Renters (Reform) Bill was published in May, it included a clause regarding the introduction of a new redress scheme, or Ombudsman, that landlords will have to join - even if they use a letting agent. How will it work? Will it be beneficial? In this blog/video, Daren gives his thoughts on the subject...
The Renters (Reform) Bill will require all private landlords who rent out property in England to join a government approved redress scheme, regardless of whether they use an agent. This will bring parity with other housing tenures by ensuring all tenants have access to redress services in any given situation.
According to the government, this will be quicker, cheaper, less adversarial, and more proportionate than the court system.
The government intend to only approve one redress scheme, and for this to be an Ombudsman.
The new scheme will allow tenants to seek redress for free, where their landlord has failed to deal with a legitimate complaint about their tenancy, for example, the landlords behaviour, the standards of the property or where repairs have not been completed within a reasonable timescale.
The Ombudsman will have powers to put things right, including compelling landlords to issue an apology, provide information, take remedial action, and/or pay compensation of up to £25,000.
Membership of the scheme will be mandatory for private landlords and local authorities will be able to take enforcement action against those who fail to join. This will range from a civil penalty of up to £5,000, through to a £30,000 fine or criminal prosecution and the potential for a Banning Order for repeat offenders.
As with both the redress schemes currently in operation for letting agents, it will also be mandatory for landlords to comply with any decision of the Ombudsman, should the complainant accept the final determination. Failure to comply with a decision may result in a landlord being expelled from the Ombudsman until they do so. If they continue to act as a landlord, this will make them eligible for enforcement action from their local council.
So, this obviously throws up a lot of questions which I will try to answer. Much of the information comes from the government website with a few of my own thoughts and opinions thrown in too.
When will the Ombudsman be introduced?
As I've said in my blogs and videos regarding the Renters Reform Bill, it will be some time before the Bill is made law. It has to go through various stages before receiving Royal Assent and only then will it become a law.
I would anticipate that the requirement to join the scheme will be pretty much straight away.
Which organisation will take on the role of the new Ombudsman?
This is still to be determined. The government is currently exploring options on how to introduce the ombudsman, focussing on how to ensure the best value for money and high quality service for both landlords and tenants.
The two current schemes that are on offer to agents are the Property Ombudsman and the Property Redress Scheme. Whether either of these two organisations will get involved remains to be seen, however I think it would probably make sense rather than start from scratch.
How will a landlord sign up to the Ombudsman and what happens if they don’t?
As i've said, all landlords will be legally required to join with no exceptions.
The government is telling us that registration will be done either online, by telephone or through an alternative offline registration process. They are recommending that the online process will be by far the quickest and simplest.
Landlords will be asked for their name, contact information, address, and rental property details. Remember too that the Bill also includes the requirement for landlords to register themselves and any property that they rent out onto a new database, which is also mandatory and must be done before a property can be advertised for let.
I would hope that the registration to the database and the redress scheme will be simultaneous and will only need to be done once.
If a landlord breaches either membership requirement, it's a fine up to £5,000. Repeat offences, i.e I assume that if you don't sign up after a warning, the fine could be up to £30,000 and possible prosecution and a Banning Order. Therefore I would suggest signing up pretty quickly.
Will landlords have to pay to join the scheme?
Unfortunately the answer is 'Yes'.
According to the government, the fee will pay for the operation of the Ombudsman to ensure a good service is delivered. In regards to how much it is, nothing has been published yet although the government state that the fee will be proportionate and good value and will more than likely be charged per property.
Like you, I wait in anticipation of the cost, however, our management team have tentatively discussed whether we could include this cost in our management fees but we will have to wait and see.
Will landlords who use an agent to manage their property need to join?
Yes. Landlords who use a letting agent are still responsible for their own behaviour and still retain legal obligations to tenants – particularly around standards of accommodation and repairs. Tenants will be able to seek redress against a landlord when the landlord is at fault, regardless of whether a managing agent is used.
As I have said, all types of property agents are already required to be members of one of two existing redress schemes and the new Ombudsman will not include letting agents.
An obvious potential problem is glaringly obvious here. If a tenant seeks redress against a landlord and wins and the complaint is something that the agent is deemed to be responsible for by the landlord, the landlord will, and quite rightly so, seek redress or financial compensation or whatever the decision by the Ombudsman is, from the agent.
What will be the redress process for tenants?
It is normally expected that a complaint by a tenant be raised with the landlord first which give them an opportunity to rectify any issue or concern.
If the tenant is unhappy with the way the landlord has handled their complaint, they can escalate this to the Ombudsman, either online or by telephone, who will independently and impartially investigate and have the final say.
Should the Ombudsman agree with the tenant that the landlord acted unreasonably or unprofessionally in handling their complaint, the Ombudsman will be able to tell a landlord to take or cease taking an action, issue an apology or explanation, and award compensation if it is deemed appropriate. Remember, the decision is final and cannot be appealed.
Will landlords be able to complain about tenants?
No. Sorry but it's a one way street I'm afraid. An Ombudsman provides a free and impartial route for consumers to seek redress against member businesses to protect their consumer rights.
Is there any benefits of the scheme for landlords?
The straight answer, in my opinion is No.
The governments answer is that potential issues will now be resolvable fairly and impartially without the need to involve the courts.
Apparently landlords will also benefit from training, guidance, and support to help them improve their services and complaint handling.
If a landlord wanted to do that, then I would not be expecting them to employ the services of a letting agent like us who have to keep the landlord compliant by adhering to the 170 or so pieces of legislation that cover the private rental sector.
My advice...
I would suspect that once this landlord redress scheme becomes law, the majority of tenants complaints against landlords will undoubtedly be to do with repairs and maintenance issues. the simple advice is to sort out any repairs in a timely manner to avoid giving a tenant an opportunity to complain.
Understand rights of access to your property - give proper notice etc.
Keep your legal certificates up to date - gas, electricity, EPC and so on.
If you keep on top of all of that, the chances of you ever having to deal with the Ombudsman will be negligible.
If you are a self managing landlord at the moment, give us a call and let us help you keep on top of things, relieve some stress and give you more time to do the things you want.