An 82 page “White Paper” document was released last week (16th June) with regard to the long awaited ‘Renters Reform Bill’ which was first mentioned in the Government manifesto 2019.
A cynical person might say that this announcement has come through an unexpectedly little early to take our minds away from the ‘Party Party’ issue the government are trying to get out of the news!
To be honest there are few surprises, however the media have jumped all over it, not surprisingly sounding the death knell of the public rental sector (PRS). This, of course, makes fantastic headlines and click bait, but may not reflect reality!
There is a huge amount of detail in the 82 pages and things will no doubt change as discussion take place over the next few months.
There are 4.4m households in the PRS and in the last nine months we have seen the biggest increase in rental values ever. Why?
1. Tenants are staying at properties longer as they can see moving will only incur a huge increase in the rent they pay.
2. More mature landlords are deciding to leave the sector as they take out the capital asset of the property. Matched with accidental Landlords now deciding it is a good time to leave. This has not yet been balanced out by younger landlords joining the market – they are there.
Read on to see what we can glean from a very quick read through.
Convert assured and assured shorthold tenancies into periodic tenancies – what does this mean to you?
This is the biggest issue – they are suggesting no more fixed term tenancies, suggesting tenants do not need to make any commitment beyond their two months notice period. Clearly some detail to be clarified and, hopefully, resolved. It could also be read that tenants can leave poor quality housing without remaining liable for the rent or move more easily when their circumstances change. As ever the devil is going to be in the detail.
As part of the change, tenants would be required to give two months’ notice – at the moment, a tenant on a periodic tenancy only has to give one months’ notice.
There will be six months’ notice before new tenancies move to this, then at least 12 months before existing tenancies are converted to periodic.
Abolish Section 21 and introduce new possession grounds for landlords
No surprise here – this has been on the cards for several years, which is why we have been strongly recommending landlords get legal expenses and rent protection insurance.
Essentially a landlord will only be able to end a tenancy if they want to sell the property, or have a close family member move in. They will strengthen the ability to end the tenancy for patterns of late rent, plus keep all the existing grounds.
Extend the Decent Homes Standard to the sector
Hammer to crack a nut from my perspective as we only work with landlords that supply safe and decent homes. i.e. if you work with us this should not be an issue.
Create a new private renters’ ombudsman to settle disputes informally
This will be mandatory for all landlords, regardless of whether they use a letting agent. The aim appears to be to target those landlords who fail to do works or don’t allow their agent to do works. As our landlords are sensible – nothing to worry about – although it would be good to know the costs!
Introduce a new ‘Property Portal’ to support landlords and improve enforcement
This will be not only information for landlords, but a requirement to upload details of their property along with key documents (we assume safety certificates, EPCs etc). This would be publicly available so tenants and councils can check. Again, details on cost would be helpful!
Councils can use this to target properties and improve enforcement. Councils already have the power to put improvement orders on a property. Cynically it’s a great soundbite, but if the Housing Health and Safety Rating System (HHSRS) bought out in 2004 isn’t working, not sure how this will change the landscape.
Abolish arbitrary rent review clauses (while retaining the ability to increase rents annually)
Restricting rent reviews to once per annum, and no ‘always increase’ clauses. Again, great sound bite but we can’t see any detriment to what we do already.
Outlaw blanket bans on renting to families with children or tenants on benefits
This is an interesting one. We take the view that putting a family of four into a two-bedroom property could lead to overcrowding, so it is not a route that we would naturally take you down. I think the wording ‘blanket ban’ is the one that needs explaining. Also, you and I are dictated by the rules on our mortgages which in most cases say that you cannot rent to a person on benefits.
Incentivise landlords to accept tenants with pets
This has been all over the news that as landlords we must accept pets. Not the case. The wording is landlords “do not unreasonably withhold consent when a tenant requests to have a pet in their home, with the tenant able to challenge a decision “
We assume that if your lease dictates that there cannot be a pet, this would be a reasonable grounds to refuse.
The devil will be in the detail – what happens if someone wants an unsuitable pet for the property? Most of you offer the option of having a suitably sized pet. We also want to know about compensation – will we still be able to ask for a relatively small increase in the monthly rental to cover the risk?
As you know I am a firm believer that your customer / tenant should be able to have a pet if it is suitable for the property. In 17 years of running a business as an agent we have had a tiny handful of issues where we have had to deal with poor ownership of a pet. So, sorry if you disagree, but I can’t see the issue as long as the property is suitable for the pet in question. But it’s definitely a vote winner so be prepared for the landscape to change.
Reform and speed up the court process.
Amazing – the government have actually committed to this principle. I think they do understand that unless there is a way that landlords can repossess a property in a timely fashion, the abolition of Section 21 notices without a workable alternative is likely to cause the PRS market to contract.
There are 4.5m homes in the rental sector now. Where will those people live if the supply dries up from the PRS? Any contraction will lead to higher costs for tenants left in it. Home ownership isn’t the issue – there are not enough homes to go around, and new homes are not being built fast enough.
What is happening now?
A white paper is really the framework of what needs to be discussed by ministers over the next few months. The actual bill is expected to land later this year, and will doubtless take months to become law, and there is also likely to be an implementation period.
Therefore rental bodies such as TLIC, NLRA , Propertymark and British Landlords Association will be speaking to Ministers to help shape the future legislation. Once the final bill is produced we can better assess the wider implications of the plans on you and your business.
We will obviously contribute to these discussions and keep you posted of any developments.
If you would like to be involved, then you need to write now to your MP asking for clarity on any issue that concerns you.