The Secretary of State for Housing, Communities and Local Government, James Brokenshire MP, has announced that landlords will be legally required to be part of a redress scheme, or face a £5,000 fine.
The new Housing Complaints Resolution Service will be a
single housing complaints service for all residents, including private tenants
and homeowners.
The Government believes that it will make it easier for
people to claim compensation when it is owed. It intends to work with key
stakeholders to establish this, forming a redress reform working group.
At present, landlords in the private rental sector are not
obliged to register with a complaints system.
However, under the plans announced yesterday (24th
January 2019), it will become a legal requirement for private landlords to join
a redress scheme, or they could face a fine of up to £5,000 for failing to do
so.
The Residential Landlords Association (RLA) has outlined a
number of concerns about the plans.
The organisation’s Policy Director, David Smith, says that
the evidence that the Government has doesn’t support the need for the changes,
and it appears that little thought has been given about how all of the new
legislation will fit together and be enforced.
Landlords to be Legally Required to be part of a Redress Scheme
The RLA is also worried about the cost element.
Dr. Smith says: “It will be
yet another cost and yet another layer of complexity, possibly with relatively
little end product.
“We also need clarification on what the
situation will be for landlords who use letting agents. Agents already have to
be a member of a redress scheme – so landlords using them would be paying
twice.”
No clear date has been set for the
introduction of the new rules.
Announcing the plans, Brokenshire said: “The
proposals I have announced today will help ensure all residents are able to
access help when they need it, so disputes can be resolved faster, and people
can get compensation where it’s owed.”
The new measures form part of the Government’s response to the consultation Strengthening Consumer Redress in the
Housing Market. In this, the Government has outlined that, in the
long-term, it has the “ambition” that there should be
a single code of practice on complaint handling in the housing industry.
Since 1st October 2014, it has
been a requirement for all letting and property management agents in England to
be a part of a redress scheme.
Paul Shamplina, the Founder of Landlord
Action, gives his thoughts on the announcement: “For
the first time ever, private landlords will be legally required to join a
housing redress scheme. Personally, I think this is a really positive step, not
only in boosting protection for millions of renters across the country, but
also for recognising landlord-ing as the professional business that it should
be.
“It will encourage landlords to focus on customer service and building
relationships, as well as the quality of their properties, help to
professionalise the industry, and provide a level playing field for landlords
and tenants.”
We will keep you up to date on further plans to implement the new rules.
By Marc Trup, the Founder and CEO of Arthur Online
From
the effects of Stamp
Duty and mortgage
tax relief, to the decrease in available rental homes, landlords in the UK dealt
with various economic, regulatory and tax changes in 2018.
The
year certainly brought some positive outcomes for landlords, with financial information group Moneyfacts reporting a
five-year record low in the cost of buy-to-let deals in the final quarter of
2018 (despite a hike
to the Bank of England base rate in August).
It’s unclear as to what exactly 2019 shall bring. However, by looking at
the current political environment, as well as the regulatory changes set to be
introduced, 2019 appears to have a lot in store for UK landlords.
As Brexit fast approaches, the potential for house prices to fall is an
important concern for landlords. While those with well-established,
well-capitalised portfolios will likely remain unaffected, landlords who are
much more reliant on loans could struggle. There is potential that Brexit may
see those such landlords have their income suddenly decrease, which could
result in landlords cutting their losses and
selling off any properties. Having said that, only time will tell just how exactly
Brexit will impact the UK property market.
The Tenant Fees
Bill, which has recently passed through the House of Commons, is likely to
become law in June 2019 (subject to Parliamentary time). This Bill was
introduced after reports of excessive overcharging by landlords to tenants and
is expected to save tenants on average around £250 per month, by removing letting agent charges. For landlords,
the Bill could make it much more expensive to use a letting agent, leaving some
landlords no choice but to self-manage. Obviously, this isn’t an option
for those who have made investments
in areas far from where they live, for example, those London landlords who
recently made an investment in northern hotspots such as Manchester and
Liverpool. 2019 could, therefore, see UK landlords choosing to make more
investments close to home, to help with the process of self-managing.
What’s in Store for Landlords in 2019?
Several regulations with aims to offer increased
protection for UK landlords and tenants will be introduced in 2019. From April,
property
managers will be obliged to register with a CMPS (Client Money Protection
Scheme), protecting money if a letting or property agent
goes into administration. This aims
to prevent money from being stolen or misused, including money relating to
deposits, maintenance or rent. Letting agents who fail to sign up will face fines
of up to £30,000. The Government is also offering protection for landlords
and tenants through its new rogue
landlord database. Although this was launched in 2018, it’s only in 2019
that this scheme is expected to start receiving entries. This will provide
information available to the UK public, including details of which landlords
have been convicted of letting substandard properties or flouting their legal
obligations.
Protection for
tenants will also come in the form of the Homes
(Fitness for Human Habitation) Bill, expected to come into force on March
20th of this year. This will impact English landlords, who will have
to ensure their properties are completely fit for human habitation throughout
the duration of a tenancy. Tenants will have the right to take full legal
action against landlords who fail to comply with the standards set out under
the Housing Health and Safety Rating System. For landlords, the introduction of
the Bill could mean higher costs if their property is not in an adequate state,
for example, those who need to upgrade the energy efficiency of their property
this year.
With the political
and economic uncertainty of 2019, alongside several new regulations on track to
be introduced, UK landlords have a lot in store for 2019. To help landlords
focus on making the necessary adjustments in their portfolio, there is a range
of property management software out there that can really help save both time
and money. Keeping track of rent payments, changeover dates, outstanding
property improvements and a heavy workload during peak times becomes a breeze
when you have everything in one place and online. Different access levels for
relevant information are available to student renters, contractors, your
accountant and anyone else necessary to ensure the smooth running of your
property rental business.
With new cloud-based technology, you can manage your
investments from anwhere in the world, broadening the areas you may consider
for investment, and opening the best opportunities from around the world.
Systems
such as Arthur Online are entirely customisable. You can use them to remain in
a central managerial position, while not actually being on the ground, as
things like tenant check-in/out can be handled by local agents. You can arrange
viewings, sign documents and assign workorders to contractors all through
dedicated apps.
This new generation of prop tech is making the property sector more connected, ultimately helping investors manage and grow their portfolios efficiently and hassle-free, and giving them access to the most profitable opportunities.
Marc Trup is the Founder and CEO of Arthur Online
After selling his business to BUPA in 1998, Marc started investing in rental properties in London. Over the next 15 years, Marc grew his portfolio to over 85 properties. While successful, self-managing his portfolio became increasingly difficult. With technological advances and greater connectivity, he assumed there was software available that would allow him to manage his business from his smartphone, while sipping espresso at the local coffee shop. Following a long search, he found that nothing quite cut the mustard. So, being an entrepreneur, he started Arthur Online to make not only his life easier, but also that of other property managers.
Arthur Online is a cloud-based platform that enables property managers to respond instantly and solve problems fast from anywhere in the world, be it with tenants, contractors, property owners or letting agents. Since launching in 2015, it has helped thousands of property managers like Marc run their portfolios in the cheapest, most efficient way possible by using the full potential of new technology and cloud computing. Start your free trial today by going to: Rental property management software
The Tenant Fees Bill has now completed its passage through
the House of Commons, after it was approved
in the House of Lords last week.
Provided the Bill receives royal assent in the coming weeks,
it will become law in England from 1st June 2019.
MPs discussed Lords amendments to the Bill in Parliament
yesterday (23rd January 2019).
The Bill aims to:
make renting fairer and more affordable for tenants
by reducing costs at the outset of a tenancy
improve transparency and competition in the
private rental sector
ban lettings fees paid by tenants in England
improve fairness, competition and affordability
in the lettings sector
The Shadow Housing Minister, Melanie Onn MP, believes that
the measures in the Bill are “on the whole” positive for private tenants.
On her amendment that reduces the security deposit cap to
“three weeks’ rent for all”, Onn told the Commons: “This Bill doesn’t reach its
full potential in protecting tenants from unscrupulous landlords who want to
charge unfair fees”, even with the Government having proposed a reduction of
the cap from six to five weeks’ rent.
Conservative MP Bob Blackman explains that he was chairing
the Housing, Communities and Local Government Committee during pre-legislative
scrutiny of the Bill, adding that he is “absolutely delighted” that the
Government has endorsed all of its recommendations.
This includes the reduction from six to five weeks’ on the
deposit cap, which “strikes a balance” between tenants’ and landlords’
interests.
No one on the Committee promoted less than four weeks, he
stated, despite the Shadow Housing Minister pushing for this.
He believes that tenants would end up “far worse off” as a
result of this change, as landlords would be likely to inflate rents to make up
the difference.
SNP MP Angela Crawley welcomes the Tenant Fees Bill, despite
it not applying to Scotland.
She noted that the Scottish Government abolished tenant fees
in 2011 and has seen “the positive effects of this”.
The Tenant Fees Bill has Completed its Passage through the Commons
Crawley added that holding deposits are now also illegal in
Scotland, calling for this to be rolled out to the rest of the UK.
The Government’s decision to accept a Lords amendment
calling for the deposit cap to be reduced to five weeks’ rent is “very
welcome”, she insisted, concluding that the Bill will be “a great help” to
those within the private rental sector.
Kevin Hollinrake, a Conservative MP, declared his interest
as a landlord and former estate agent, saying that he has concerns about the
reduction of deposit lengths to five weeks’ rent, as, if it doesn’t work for
landlords, they will “exit the market”, which will make life more difficult for
tenants in the long-run.
At the moment, there is flexibility, he said, so it’s really
important that this change is made under review.
The Lords “meant well” in some of their amendments, he
added, but might have unintended consequences.
David Cox, the Chief Executive of ARLA
Propertymark (the Association of Residential Letting Agents), comments on the
completion: “The tenant fees ban is
now an inevitability, and agents need to start preparing for a post-tenant fees
world. Following its passage in the House of Lords last week, this afternoon,
the Tenant Fees Bill passed its final hurdle in the House of Commons. The Bill
will now receive royal assent in the coming few weeks, before being passed into
law and implemented on 1st June 2019.”
A housing court could be essential to the property redress
system, believes Neil Cobbold, the COO of PayProp UK.
As the Government prepares to end its call for evidence on
the need for a dedicated housing court today (22nd January 2019), a
range of industry experts have had their say on the proposal.
The call
for evidence was launched in November last year, and has been seeking views
on whether a specialist housing court would benefit landlords, tenants and the
industry as a whole.
The proposed court would deal with property-related
disputes, including those regarding property repossessions and substandard
rental housing.
It would replace the current system, which requires
consumers to pursue their cases through the county courts, magistrates’ courts,
High Court or First-tier Tribunal.
Property possession
for landlords
One of the key criticisms of the existing system is that it
can be difficult for landlords to regain possession of their properties if
tenants are failing to pay the rent.
Landlord trade bodies have suggested that this is a barrier
to landlords offering long-term tenancies – something that the Government is
keen to introduce as a three-year minimum industry standard.
Official figures estimate that the average time taken
between a private landlord’s county court claim to possession by a bailiff is
over 16 weeks.
“A
dedicated housing court could make it easier and quicker for landlords to
regain possession of a property via the legal system,” says Cobbold. “What’s
more, a simplified system could also make the process easier for landlords to
navigate without costly professional legal support.”
Challenging rogue landlords
Another aim
of the call for evidence is to determine whether a housing court would make it
easier for tenants to seek justice against landlords providing substandard
accommodation.
Cobbold
explains: “Many
renters may not be fully aware of the current course of action they need to
take to pursue a dispute with their landlord through the courts.
“A
housing court could be more accessible and provide people with a single route
for redress. The Government has previously pledged to ensure all landlords are part of an approved redress
scheme.”
He adds: “While
this legislation is yet to be introduced, a housing court could provide tenants
with greater protection and opportunity to challenge potentially criminal
landlords.”
Effective redress
A dedicated
housing court could provide a range of benefits for letting agents, if disputes
between landlords and tenants are resolved quicker.
It could
also tie in effectively with the Government’s ongoing plans to introduce a
single housing ombudsman for the sector.
Cobbold
concludes: “A less complicated redress system, which is solely designed to
deal with housing disputes, is in the interests of everyone in the industry.
“We
now await the results of the call for evidence, and the subsequent Government
suggestions and analysis.”
Landlords across the country are being warned about failing
to comply with both selective and statutory licensing schemes.
There is growing concern in Reading that thousands of
landlords could soon face enforcement action if they do not sign up to a new
statutory licence, with the deadline less than two weeks away.
Under the new rules, mandatory HMO licensing has been
extended to almost all HMOs that are occupied by five or more people, where
there is sharing of some facilities. It is expected to affect more than 160,000
properties.
The licensing scheme was previously restricted to properties
that were three or more storeys high.
The change means that councils can now take further action
to clamp down on the small minority of landlords that let substandard or
overcrowded homes.
However, Reading Borough Council is concerned that many
landlords in the area are ignoring the new rules, with the deadline to apply
for a licence fast approaching.
The Council believes that just 135 of an estimated 3,000
landlords in Reading have signed up to the new licences.
Councillor John Ennis says: “Anecdotal evidence suggests that some landlords are reducing
the number of tenants in their property to avoid licensing.”
Reading
Borough Council rejected the Government’s decision to not allow a grace period,
giving landlords until 31st January 2019 to submit their
applications. Any landlord that fails to apply by the end of the month will be
subject to enforcement action.
At the same
time, Barnet Council is planning to introduce a stricter licensing scheme
designed to crack down on rogue landlords across the north London borough.
The Council
wants to replicate selective licensing schemes that are in force in other
areas, with prosecution or a civil penalty of up to £30,000 for those that fail
to comply with the scheme’s conditions.
Just over a
quarter (26%) of households in the borough were private tenants in 2016, which
is up from 17% in 2001. This is why Barnet is far more focused on stamping out
substandard housing and improving conditions in the borough.
Speaking at a meeting of
the Housing Committee last week, Chairman Councillor Gabriel Rozenberg, said: “In Barnet today,
the Conservatives are standing up for private renters. This new agenda
comprises stricter licensing controls and proposals for tougher enforcement. We
are putting tenants at the heart of our borough.”
It is
understood that the Council will hire additional members of staff to
investigate the viability of selective licensing in the borough, as well as
conduct extra housing enforcement and HMO licensing activities.
Landlords,
remember to check whether the areas that your properties are in are subject to
licensing schemes.
The Tenant Fees
Bill will come into force on 1st June 2019 for all tenancies
signed on or after that date, Lord Bourne of Aberystwyth announced at the third
reading of the Bill in the House of Lords yesterday.
The third and final stage of the Bill’s passage through Parliament comes after controversial amendments in the report stage, which lowered the cap on security deposits from six weeks to five weeks’ rent on properties earning an annual rent of less than £50,000. This will likely affect some tenants’ abilities to find a home, especially if they have pets or poor credit history, warns the National Landlords Association (NLA).
In regard to contractual damages, Lord Bourne also provided
further reassurance to the House, arguing that there is plenty of case law in
place that already deals with damages, which will ensure that they are not used
as a back door to default fees.
The
Ministry of Housing, Communities and Local Government states: “We believe these amendments strike a fair balance
between improving affordability for tenants, whilst ensuring that landlords and
agents have the financial security they need.”
Tenant Fees Bill to Come into Force on 1st June 2019
Key points of the Bill include:
Default fees will be limited to charges for replacement
keys or a respective security device and late rent payments only
Holding deposits will be capped at no more than one
week’s rent, applying to a maximum of one property only
The Consumer Rights Act 2015 will be amended to specify
that the letting agent transparency requirements should apply to property
portals, such as Rightmove and Zoopla
Local authorities will be able to retain the money raised
through financial penalties, with this money reserved for future local housing
enforcement
Alongside rent and deposits, landlords and letting agents
will only be permitted to charge tenants fees associated with:
A change or early termination of a tenancy, when requested by the tenant
Utilities, communication services and Council Tax
Payments arising from a default by the tenant, such as replacing lost keys
Now that the Bill has left the House of Lords, it will
return to the House of Commons, after which it will receive royal assent and
become law.
David Cox, the Chief Executive of ARLA Propertymark (the
Association of Residential Letting Agents), comments on the news: “With the Tenant Fees Bill completing its
passage through the House of Lords this afternoon, it appears the tenant fees
ban will come into force on 1st June 2019; subject to Parliamentary
scrutiny in the House of Commons.
“This now gives agents the legal certainty they need to prepare for a post-tenant fees ban world. To learn about the intricacies of the legislation, we encourage agents to come to our regional meetings over the next few weeks and, of course, our annual conference, where ARLA Propertymark will be doing everything it can to help agents plan and prepare for the introduction of the Bill.”
Jon Notley, the CEO of Zero Deposit, also says: “The passing of the Tenant Fees Bill is a watershed moment in the UK’s rental economy, but one that brings with it a sense of both optimism and caution. On the one hand, we welcome any proposed changes to legislation that enable tenants to move more freely – improving rental affordability is both clear and necessary, while the new regulations should improve practices and standards across the board.
“However, it is vital these changes do not overexpose landlords to risk or unnecessarily burden agencies with time-consuming admin that could be better invested elsewhere. The barometer of the success of this Bill will be a rental market that works for everyone.”
