'Rental Reform' - What is it? What Does it Mean for Landlords, Tenants and the Rental Sector?
Trade bodies have vigorously lobbied government during the two and a half year process leading to the delivery of the Fairer Private Rented Sector White Paper. It’s fair to say these bodies were underwhelmed by its contents and questioned whether 'fair' is an accurate description of it's contents. What do you think?
The Government has released what it calls the 'Fairer Private Rented Sector' White Paper. At this point, it is not law, it is designed to form the basis of a Bill to create it's reforms into law.
The Main Points
- The reforms will ban Section 21 evictions and extend the Decent Homes Standard to the sector.
- It will also end what it calls “arbitrary rent review clauses, give tenants stronger powers to challenge poor practice, unjustified rent increases and enable them to be repaid rent for non-decent homes.”
- It will be illegal for landlords or agents to have blanket bans on renting to families with children or those in receipt of benefits.
- It will make it easier for tenants to have pets, a right which the landlord must consider and cannot unreasonably refuse.
- All tenants are to be moved onto a single system of periodic tenancies, which in the government’s words mean “they can leave poor quality housing without remaining liable for the rent or move more easily when their circumstances change.”
- A tenancy will only end if a tenant ends or a landlord has a valid reason, defined in law.
- There will be a doubling of notice periods for rent increases and tenants will have stronger powers to challenge them if they are unjustified.
- The government says it is also “giving councils stronger powers to tackle the worst offenders, backed by enforcement pilots, and increasing fines for serious offences.”
- There will also be a new Private Renters’ Ombudsman to enable disputes between private renters and landlords to be settled quickly, at low cost, and without going to court.
- What the government calls “responsible landlords” will be able to gain possession of their properties efficiently from anti-social tenants “and can sell their properties when they need to.”
- There will be a new property portal that will “provide a single front door to help landlords to understand, and comply with, their responsibilities as well as giving councils and tenants the information they need to tackle rogue operators.
The Government says: “These reforms will help to ease the cost of living pressures renters are facing, saving families from unnecessarily moving from one privately rented home to another hundreds of pounds in moving costs. We have already taken significant action over the past decade to improve private renting, including reducing the proportion of non-decent private rented homes from 37% to 21%, capping tenancy deposits and banning tenancy fees for tenancy agreements signed after 1 June 2019, and introducing pandemic emergency measures to ban bailiff evictions".
“While the majority of private rented homes are of good quality, offering safe, comfortable accommodation for families, the conditions of more than half a million properties – or 12% of households - pose an imminent risk to tenants’ health and safety, meaning around 1.6 million people are living in dangerously low-quality homes, driving up costs for our health service. The sector offers the most expensive, least secure, and lowest quality housing to millions of renters, including 1.3 million households with children and 382,000 households over 65. Rents are also rising at their fastest level for five years. This can damage life chances and hold back some of the most deprived parts of the country.”
Housing Secretary Michael Gove says: “For too long many private renters have been at the mercy of unscrupulous landlords who fail to repair homes and let families live in damp, unsafe and cold properties, with the threat of unfair ‘no fault’ evictions orders hanging over them. Our New Deal for renters will help to end this injustice by improving the rights and conditions for millions of renters as we level up across the country and deliver on the people’s priorities.”
Rent Reforms - Tenants
Looking at the above list of reforms that are covered by this White Paper, on the face of it, it looks like the changes are going to benefit tenants enormously:
- The removal of Section 21 ‘no-fault’ evictions;
- Extending the Decent Homes Standard to cover the private rented sector.
- Giving tenants stronger powers to challenge landlords and claim back rent where homes don’t meet the Decent Homes Standard.
- Strengthening the current bans on not renting to tenants with children or those receiving benefits under consumer protection law, by making it explicit under property law.
- Stopping landlords from refusing a tenant’s request to have a pet in the property without a good reason, but allowing them to require the tenant to get insurance to cover any damage.
- Requiring standard tenancy agreements to be a periodic tenancy with no end date.
- Allowing tenants to terminate their tenancy at any point with two months’ notice.
- Preventing landlords from ending a tenancy and evicting a tenant without going to court with a valid reason, defined in law, such as rent arrears, anti-social behaviour or needing to sell or occupy the property.
- Creating a new Private Renters’ Ombudsman to settle disputes between private renters and landlords at a lower cost than going to court.
- Requiring landlords and agents to give tenants two months’ notice of any rent increase and allowing tenants to challenge the rent increase through the Private Renters’ Ombudsman, who can decide if the rent increase is too high.
However, the one thing that will happen if these measures are introduced without proper consultation with tenants, landlords and letting agents, RENTS WILL INCREASE. This is an economic fact if landlords continue to leave the private rental sector.
Although investing in property is still a good long-term strategy, the number of property owners choosing to withdraw is growing. The majority of landlords are not, in fact, wealthy, multi-property owing rogues as portrayed by many groups. In fact, just over 40% of landlords own just one buy-to-let property and these reforms, coupled with years of tax increases and additional regulatory requirements, is simply going to force many of them to sell up.
Supply decreased, demand remains the same, rents will rise.
The private rental market is already under massive pressure as tenants outstrip rental properties and there is no incentive for any new property investment.
Rent Reforms - Landlords
Not withstanding everything that has been said above, the overwhelming issue for landlords is the abolishment of Section 21. However, landlords should not be downbeat about the scrapping of Section 21 eviction powers as proposed in the rental reform White Paper.
Paul Shamplina, founder of Landlord Action and Chief Commercial Officer for the Hamilton Fraser Group states: “Whilst this will be unnerving for some landlords, the reality is that this has been a long-time coming and I believe those landlords who are committed to buy-to-let will remain".
“The changes offer tenants greater security as part of a plan to create longer tenancies. However, implementing more mandatory grounds of possession under Section 8 should also strike a chord with tenants, demonstrating that rent arrears, criminal and anti-social behaviour will not be tolerated. Previously, landlords have used Section 21 in these cases because trying to collate witness statements from co-tenants and neighbours has been challenging and often fruitless where the ground was discretionary. Knowing this procedure is mandatory will mean a judge has to grant possession as long as the requirements are met and evidence provided.”
He adds: “I welcome the new mandatory ground for repeated serious arrears to prevent tenants paying off a small amount of arrears to stay below the eviction threshold. However, I believe falling into series arrears twice in three years should be sufficient enough for mandatory eviction rather than the proposed three cases."
“It is positive news that the changes have not been rushed in and the transition will be in two stages with at least six months' notice of the dates that they will take effect, and at least 12 months between the two dates. With concerns surrounding the cost of living, rising interest rates and impending changes to EPCs, I do think it is likely we will see an initial spike of landlords using Section 21 before the changes come in, of which the unintended consequence will be that perfectly good tenants will be evicted".
“However, much of what had been announced was expected. It will take time for landlords to adapt and understand the new rules but as with everything, the market will adjust and find its new norm.”
Rent Reforms - The Private Rental Sector
The Government Reforms CAN increase the possibility of a much more 'professional' Private Rental Sector, however, two recurring problems will rear their heads as they have done previously; lack of enforcement due to inadequate resources and funding and an overwhelmed court system despite an ongoing promise to streamline processes.
Section 21 will be abolished but there will be a strengthening of mandatory grounds for eviction under Section 8. This will result in evictions being dealt with through the courts under Section 8 with more predicted backlogs.
Also, it seems that the courts will also have to preside over certain rulings from the proposed Private Renters’ Ombudsman, which, again, will add to an already heavy court workload. There is also no clarification on who will fund this new Ombudsman - a landlord subscription or the local taxpayer maybe? Also, as the Private Renters' Ombudsman will also decide on whether rent increases are fair or not, they will undoubtedly be very busy.