Details: Published: 01 July 2022; Hits: 938

The ‘fairer private rented sector’ white paper has finally been released! Commonly known as the renter’s reform bill, it has laid out the plan as to how the government hope to drastically reshape the private rented sector. The reforms supposed main aim is to make renting a fairer experience for both landlords and tenants, yet it has received criticism from both sides, by either not going far enough, or going way too far in the opposite direction. The main attention-grabbing elements that have been used by the media at large are, the end of section 21 notices, or so called ‘no-fault evictions’, and the long-awaited, legislation to not unreasonably withhold consent to allow pets in lets. However, this bill includes much more than that. Read on to find out…

Abolish Section 21

The main headline often seen about the Fairer Private Rented Sector bill is the abolishment of section 21 notices. Under the reforms the elimination of section 21’s will mean a tenancy can only end if a tenant gives notice, or a landlord uses one of the valid section 8 grounds – more on that later! Currently a landlord can evict a tenant with 2 months’ notice, using a section 21, commonly referred to as a ‘no fault eviction’.

“The current tenancy system doesn’t always provide the security that those renting privately need or the flexibility to respond to changes in circumstances”[1]

Section 21 notices can be problematic when they are being used by rogue landlords. For example, rather than deal with a maintenance complaint made by a tenant, a rogue landlord could serve a section 21 notice and the tenant effectively has no course of action to challenge this, leaving them with the only option as to find new accommodation. It is understood that this can be an expensive process for the tenant, not only in terms of money, but in time, and emotionally as well. Few would disagree that the system needed to be tweaked, and we sort of saw how this would play out during covid. The courts very early on during the first lockdown said they would not see any section 21 notice eviction claims, and therefore the sector adapted to this. Both tenants and landlords increased the use of mediation services and negotiated, so both parties were (generally), left feeling, if not happy, but content. However, the new system has swung the power dynamic, so it essentially only favours the tenant. They can control when they leave, and the only remedy a landlord has is a lengthy court proceeding to get rid of a rogue tenant – which if we look back to my earlier comment, it is understood can be an expensive process not only in terms of money, but in time, and emotionally as well.

Single System of Periodic Tenancies

Under the current system tenancies usually start as either a 6, or 12-month fixed term where both landlord and tenants are committed to this agreed period. During this fixed term landlords cannot use a section 21 notice to evict a tenant, and tenants can only leave with the agreement of the landlord. At the end of this fixed term, tenancies will automatically become periodic unless a new fixed term is agreed, or one of the parties gives the other sufficient notice to end the tenancy. Periodic tenancies continue indefinitely on a rolling (usually monthly) basis, until either party gives notice.

Under the new bill there will be a single system of periodic tenancies. This will be introduced in two phases, with dates yet to be confirmed, depending on how quickly the bill reaches royal assent. Tenants will need to give 2-months’ notice to end a tenancy, and landlords can only serve notice under specific grounds. Written tenancy agreements will now be mandatory, although special terms can still be included. However, all tenancy agreements must stipulate that a tenant must allow access for repairs, and a landlord can get an injunction if a tenant refuses access for necessary repairs. Rent review clauses have also been abolished, and the notice period for rent increases has been raised to 2 months. Rent increases are still only allowed once per year.

“With a single tenancy structure, both parties will better understand their rights and responsibilities”[2]

Creating a single periodic system does make things easier for all parties involved. There are less complicated contract types, switches, and notices that need to be understood and dealt with, which can only be seen as a good thing. However, our current system offers choice to all parties involved, whilst the new system, of what is effectively indefinite tenancies, will provide greater security and flexibility for tenants, but this is at the cost of landlords having any flexibility, except in the few circumstances which we will look at next.

Grounds for Eviction under Section 8

When using a section 8 notice there are currently 8 mandatory grounds, (meaning a court must grant possessions), and 9 discretionary grounds, (meaning a court can decide whether to grant possession), all with differing notice periods. If a landlord wants to repossess a property using one or more of the section 8 grounds, they must first correctly serve all tenants with the notice in the prescribed format, and then apply for a court order once the notice period of the ground has expired, and assuming an agreement with the tenants has not been met. In order to use a section 8 notice, copies of the ‘How to Rent’ guide, deposit protection information, the properties EPC, and the gas safety certificate (where applicable) need to have been given. The new system is looking to introduce new grounds, make many of the existing grounds mandatory, change several of the notice periods, and only the deposit protection information will need to have been served in order to use a section 8 notice.

“We will reform grounds of possession so that they are comprehensive, fair and efficient, striking a balance between protecting tenants’ security and landlords’ right to manage their property”[3]

New grounds are being introduced for landlords who wish to sell their property, and for landlords, or their close family members, who wish to move into the property. Neither of these grounds can be used in the first 6 months of a tenancy, and both require a 2 month notice period. If these grounds are used, a landlord will not be allowed to remarket the property to let, for at least 3 months.

In cases of criminal or serious anti-social behaviour the notice period of the current grounds will be lowered to 2 weeks, and in the most serious cases the landlord is able to start court proceedings immediately upon giving the notice.

New specialist grounds for the agricultural sector, and those who provide supported and temporary accommodation are also being introduced. The current grounds 3 and 4, allowing for mandatory repossession in cases of certain holiday and student lets (except for specifically designed student accommodation) are being abolished.

Serious repeated arrears grounds are being changed so that an eviction will be mandatory where a tenant has been in at least 2 months rent arrears, three times, in the previous 3 years, regardless of the amount of arrears the tenant is in at the time of the court hearing. The notice period for this ground is being increased to 4 weeks and will not apply to rent arrears that are caused through the timing of welfare payments. The revision of this ground does close the classic loophole of tenants paying rent so that they are a penny below the repossession threshold of two months’ rent arrears at the time of the court hearing, meaning the ground cannot be applied. It also does not allow for landlords to evict tenants due to one-off financial circumstances, such as a tenant suddenly being made redundant. Both positive steps. However, what it does mean is that the landlord has to go without 2 months’ rent, plus a month’s rent arrears to cover the notice period of the ground, and the cost of taking that tenant to court three times, before an eviction can become mandatory. This could leave a landlord in 9 months’ rent arrears, and that’s only under the condition that they are seen in court immediately following the end of the notice period, which is virtually impossible. This is a scenario that few landlords would be able to sustain. If anything, this has made it more difficult for landlords to evict tenants who are in rent arrears.

Section 8 grounds being reformed so that landlords can only be granted possession for a valid reason seems very fair, and in essence is ideal. However, using section 8 notices have long been unnecessarily complicated and ineffective in allowing landlords to quickly regain possession when reasonably needed. The need to apply for a court order, in a court system that is currently experiencing an enormous backlog, with high-priority cases sometimes not being seen for years, simply means the system is not working.

Court Reform

In a 2018 government response of the need for a specified housing court [4], it was found that the two main areas of dissatisfaction landlords faced with the courts were timeliness, and the complexity of the system. To counter these measures, the government are looking to digitise the process, review and improve bailiff capacity, and prioritise certain cases in a streamlined manner.

First off, digitising the system. Some would say this change is massively overdue already, but the hope is that this digitisation can offer better guidance to users which will reduce the number of common user errors, and therefore speed up the process. This digitisation will be part of the HM Courts and Tribunals Service (HMCTS) Reform Programme, which is expected to be completed by 2023.

Next the HMCTS has said they have reduced the number of administrative tasks bailiffs need to carry out and increased the ways a Defendant can make payments to bailiffs, in order to hopefully free up some resources and largely focus bailiffs time on the enforcement of possession orders.

Finally, they will be trialling a new system in the First-tier Tribunal to streamline cases deemed to be ‘urgent’ such as those that include antisocial behaviour (ASB) violations. They also want to create a single judicial forum for cases such as those that involve ASB, which would usually be split between the civil court and a property tribunal.

“The costs of introducing a new housing court would outweigh the benefits”[5]

Along with these measures the government should soon be publishing the results of its 9-month Rental Mediation Pilot Scheme, which allowed tenants and landlords to access free and independent mediation in the possession process. They are hoping the results will help them decide how to strengthen and embed mediation services, to help sustain tenancies.

This part of the bill has been widely criticised in the sector for not going far enough. A specialised housing court was the hope that many landlords had clung to after the initial reports that section 21’s were going to be scrapped. This court would have meant landlords would swiftly be able to evict rogue tenants under reasonable and fair grounds, and tenants would be able to take quick action against any landlord that was not fulfilling their duty, all overseen by a judge that was specialised in these sorts of cases. And whilst the government has announced many trials, pilot schemes and consultations, actual evidence that these measures will actually be put into practice would have been reassuring, considering the court backlog, and the upcoming changes leaving landlords with a long and costly court process to evict rogue tenants.

Property Ombudsman

Since 2014 it has been a legal requirement for all letting agents and property managers to be part of a government approved redress scheme, otherwise known as a property Ombudsman. The point of an Ombudsman is to protect consumer rights by providing fair, impartial, and binding resolutions without needing to go to court. This results in decisions being made more quickly, cheaply and without the adversarial nature of the courts system.

“We will introduce a single government-approved Ombudsman covering all private landlords who rent out property in England”[6]

This new bill will require all private landlords to be part of the property redress scheme, regardless of whether they use an agent or not. This will mean all tenants will have access to the Ombudsman services, allowing them to pursue redress for free, which will hopefully encourage tenants to feel more confident in making complaints where necessary. The Ombudsman will have powers to enforce landlords to take remedial actions, issue apologies, provide information and pay compensations of up to £25,000, ensuring landlords become more accountable for their conduct and responsibilities. Failure to comply with the redress schemes binding decision for serial or serious offenders could result in a Banning Order.

This is a logical, fair, and necessary part of the bill, which will bring the property sector in line with other consumer industries such as financial, legal and energy. There will obviously be a cost involved for each landlord to join the scheme, which will have a bigger effect on, for example, an accidental landlord of a 1-bedroom flat in rural town, than a career landlord with multiple properties in a big city. It also poses the questions if a property is owned by joint landlords, if all of them will have to be part of the scheme, or if only one will suffice. But until these details are announced, the effect this will have on the sector, we envisage, will only be a positive one.

Property Portal & Enhanced Enforcement

The government has proposed the idea of a digital Property Portal that landlords will legally have to register their property on. The portal will act as an information hub for tenants, landlords, and local authorities. It will highlight any substandard properties, to allow tenants to make a more informed decision before agreeing to a tenancy, and providing a database for local authorities to more easily track down any properties exhibiting serious issues. For landlords, the portal will be a ‘one-stop-shop’ for guidance on their ever-changing responsibilities.

Many landlords, especially single-property, and first-time landlords, find the current legislation around their responsibilities overwhelming and complex. This legislation is then also constantly being updated and these updates are not well communicated, usually with minimal notice, leaving many good landlords unintentionally failing to comply in some areas. This portal will therefore help landlords better understand existing requirements, any future updates that are implemented, and address the small minority of criminal landlords, who drag the reputation of the entire sector down.

The Property Portal will increase local authorities’ ability to administer actions against criminal landlords and will potentially incorporate the existing Database of Rogue Landlords and Property Agents. Currently, local councils are only required to add a landlord or agent to the Database when a Banning Order has been issued. If a serious offence is committed but doesn’t qualify for a Banning Order, or an individual has received 2 or more Civil Penalty Notices in a 12-month period, it is up to the discretion of the Council whether to add them to the Database or not.

“All offence within scope for entry in the Database are, by their nature, serious.”[7]

The new white paper proposes that all councils will need to enter any eligible offences, that will then be made publicly available, and is exploring the possibility of widening the current threshold of violations. It will also increase local authorities’ investigative and punitive power, allowing them to require financial information, administer fines, and potentially inspect properties.

It has been widely speculated that the so-called Property Portal is in essence just a landlord register. This idea has been countered saying that the Portal focuses on the property, and its condition, rather than the landlord. However, if this is the case, if a criminal landlord sells an unfit property, will this not deter any potential new buy-to-let owners, who would have had every intention of improving the standard of the property? They would now be discouraged as the property has a red stamp against its name, which would lead to many homes with the potential to be decent, needlessly being removed from the rental market, because of this reason.

Decent Home Standards

For the first time a legally binding Decent Homes Standard (DHS) will be applied to the private rented sector. But what does ‘decent’ actually mean? According to the bill, to be decent, a home needs to:

Be free from the most serious health and safety hazards
Have adequate kitchens and bathrooms, correctly located and not too old
Have decent noise insulation
Be warm and dry, not too cold in the winter, not too hot in the summer, and free from damp and mould
Have clean, appropriate, and useable facilities

Local councils will be given tools to enforce these new standards, and once these measures are implemented the government is aiming to halve the number of poor-quality housing by 2030, meaning tenants health and well-being will improve.

To implement these standards the bill sets out that firstly, a review of the Housing Health and Safety Rating System, which is used to review how serious conditions are in a property, is currently underway. Additionally pilot schemes will be run in a few selected areas, to explore different ways to quickly execute the DHS. Finally, the cost of setting up a system of regular checks of a property’s condition by an independent regulator will be assessed.

“Everyone deserves to live in a safe and decent home”. [8]

Ensuring decent homes is paramount, and whilst the majority of the sector does provide safe and proper housing, there is a proportion that does not. However, these reforms cannot be too quickly enforced. The DHS were launched back in 2000 with the aim to improve social housing, and still apply to this day. What they found was many providers could not afford the improvements set out by the DHS, and government funding was allocated. However, there has been no mention of a financial package that will be made available to help landlords meet these standards, and at a time of austerity, along with the expensive plans for landlords to have to raise their EPC score, implementing the DHS too quickly could leave many landlords leaving the market, causing rents to raise as a result.

Tenants’ Rights

All tenants should have the right to feel like the property they are renting is their home. However, under the current system there are barriers that leave certain tenants with limited options. The new reforms will make it illegal for landlords or agents to place blanket bans on renting to those in receipt of benefits, or families with children, and alternatively make it common practice for landlords to make informed decisions based on individuals’ circumstances. Other potentially vulnerable groups, such as those who have been incarcerated, may also be included. To aid landlords with this, the bill suggests improvements to the welfare support system, looking to reintroduce direct payments to landlord through Universal Credit for those who may struggle managing their rental payments.

Many tenants face a financial barrier, when they need to pay a new security deposit, whilst the old deposit remains held under their current home. This can lead to some tenants remaining in sub-standard accommodation because they simply cannot afford to move. To counter this the Bill has pledged to monitor market-led solutions, review their impact, and maybe implement them if they’re found to be effective.

“We also encourage landlords to allow reasonable requests by tenants to redecorate, hang pictures or change appliances – provided they return the property to its original state when they leave”. [9]

Now on to the topic that made every headline when this white paper was announced - pets. As pet owners ourselves, we understand that a pet is a valued member of the family and encourage our landlords to feel the same. However, The English Private Landlord Survey in 2021[10] found that a whopping 45% of landlords were unwilling to let to tenants with pets. In some circumstances, such as shared housing, this is understandable, but when pet owners make up a large percentage of the renting population, this leaves them fighting over a small number of available properties. This bill looks to legislate that consent is not unreasonably withheld when tenants request to have a pet in their home and gives the tenant a right to challenge a decision if consent is withheld. To aid landlords with this, the Tenant Fees Act 2019 will be amended so that pet insurance becomes a permitted payment. This means landlords can require a tenant to take out pet insurance so that is any damage to their property occurs, the insurance may cover this.

Whilst we’re all for more pets in lets, the pet insurance permitted payment could encounter some issues. If it becomes a requirement from some landlords to need a tenant to have pet insurance, what is going to stop a tenant taking out a policy as proof, and then cancelling it 14 days later? In essence it is a good idea, however those loopholes may need to be shut before it comes into practise.

The government have stated as part of their whitepaper that:

“Misue of the system or any attempt to find loopholes will not be tolerated”[11]

We just hope that this rule will apply to tenants, just as much as it will apply to landlords and agents.

Implementation

The question now is, "when is this likely to take effect?" The government have said they plan to bring the reforms in, in 2 stages. The first implementation date will see the reforms be applied to all new tenancies, and then all existing tenancies will transition to the changes on the second implementation date. The industry should be given at least 6-months’ notice of the first implementation date, and there will be at least 12-months between the first and second implementation dates. So, we are probably look at the changes being at least 1 year off at the time of writing, as the bill still has to go through many stages before it reaches royal assent and eventually becomes law. In this time tweaks and changes can be made.

What is missed out of much of the white paper is the letting and property managers perspective. As professionals, who work in this field day-in-day-out, we offer a unique point of view as we see how the system works for both landlords and tenants. We have seen how the current system can be ‘misused’ to treat tenants unfairly and we would support reforms that actually made the system fair for both tenants and landlords. However, these reforms will not make the system anymore fair, it will only out-weigh the balance to now favour the tenants. There needs to be a structure in place to support landlords’ rights, as without them, the system will collapse. The majority of the proposals in the white paper are good, however changes need to be made to the ideas to not only make them good but make them applicable in the real world. –scrapping sections 21s, mandating written tenancy agreements, removing blanket bans, and applying a decent homes standard – Hopefully, the government will listen to the advice of property professionals and implement the necessary changes to make the reforms fairer for both sides, which will reshape, and improve our sector.

We believe the core problem with the current system is not inequality, in general the system is fair when it is implemented correctly, the problem lies with the lack of enforcement of the legislation by the authorities. If rogue landlords were more routinely sanctioned, and this was more closely monitored, then that would effectively wipe the criminality out of the sector. Additionally, before this white paper was released, many of were expecting the Regulation of Property Agents (ROPA) proposal to be included. This would mandate that anyone letting or managing property, would need to be appropriately qualified to do so. This professionalisation of the sector would again virtually eradicate rogue landlords, however all that was hinted at in the white paper about ROPA was the following vague statement:

“We also remain committed to raising professionalism and standards among letting agents and property agents more widely, protecting consumers while defending the reputation of good agents. Good agents play an important role in supporting landlords and tenants to understand and comply with their responsibilities. We therefore welcome the industry’s ongoing work to raise professionalism and standards across the sector, including steps to develop codes of practice. Alongside the Database of Rogue Landlords and Property Agents, and stronger enforcement tools for local councils, this is an important development towards making sure all consumers are treated fairly and all agents work to the same high standards. We will continue to work with the industry to expand best practice”.[12]

As what never appears in the headlines are the stories about the good landlords, who make up the majority, who care about their tenants and work hard to follow the ever-changing legislation that surrounds the sector. This bill feels like it has been designed to stop criminal landlords (which 100% should be done!), but not at the cost of punishing good, law-abiding landlords. And we need the good landlords to make the system work. The worry of many, is that these changes will push landlords to sell up and leave, and with less options, this will mean it will be even more difficult for tenants to find accommodation in an already competitive landscape, causing rents to rise, and leaving more and more tenants vulnerable.

A Link to the White Paper can be found here.

[1] “A fairer private rented sector”, Gov.co.uk, Page 29.

[2] “A fairer private rented sector”, Gov.co.uk, Page 31.

[3] “A fairer private rented sector”, Gov.co.uk, Page 33.

[4] 2018 call for evidence on the Case for a Housing Court: Government response, 2022.

[5] “A fairer private rented sector”, Gov.co.uk, Page 41.

[6] “A fairer private rented sector”, Gov.co.uk, Page 39.

[7] “A fairer private rented sector”, Gov.co.uk, Page 50.

[8] “A fairer private rented sector”, Gov.co.uk, Page 23.

[9] “A fairer private rented sector”, Gov.co.uk, Page 57.

[10] English Private Landlord Survey 2021

[11] “A fairer private rented sector”, Gov.co.uk, Page 32.