The Government’s new Section 21reform could put private tenants in a “weaker position” in the long run, according to a Partner from property law firm Collyer Bristow.
On Monday (15thApril 2019), the Government announced radical Section 21 reform, which will create open-ended tenancies in the private rental sector and restrict a landlord’s ability to evict their tenants.
The Section 21 reform to so-called no fault evictions under the Housing Act 1988, together with recent changes to taxation on buy-to-let landlordsand the upcoming ban on lettings fees, could make investing increasingly difficult for private landlords, and may dissuade institutional landlords from making further investments, Collyer Bristow believes.
Paul Henson, a Partner in the Real Estate Litigation team at Collyer Bristow, says: “The Government has a Dickensian view of private landlords offering substandard homes for extortionate rents. Whilst the market is far from perfect, this view is outdated. Private landlords want tenants in their homes, and most tenancies are, in fact, ended by the tenants themselves.
“The demand for rented homes continues to grow, particularly in London and the South East. The market is attracting considerable investment from financial institutions with smart and professional build to rent offers. This professionalisation of the rental market is needed and desirable.”
He continues: “Government reform must focus both on the needs of the tenant and the landlord. Any reform that makes the market less desirable for private and institutional landlords could leave tenants in a much weaker position in the longer run.
“We wait to see the full detail of the Government’s reforms and particularly the suggested amendments to Section 8 (fault based) procedures, and how they intend to expedite the court possession process.”
Landlords, do you agree that Section 21 reform could leave your tenants in a weaker position in the long-term?
Today, the Government announced its plans to abolish Section 21 notices in the private rental sector, in an effort to create open-ended tenancies for all tenants.
A consultation will be launched shortly, with Section 8 evictions also due for reform.
Section 21 notices are used in a low number of cases, where the landlord has a genuine reason for needing their property back, such as selling or needing to undertake major works.
Dan Wilson Craw, the Director of Generation Rent, welcomes the announcement: “It’s fantastic news for private renters, and absolutely right that the Government will abolish Section 21 no fault evictions and introduce open-ended tenancies for private renters in England. That will mean tenants who respect their tenancy agreement can stay as long as they want without being locked in.
“Landlords have been able to evict tenants from their homes without giving any reason. This allows some to intimidate tenants into keeping quiet about disrepair or poor practice. One in five households now rent from a private landlord, but insecure tenancies mean they cannot put down roots. Section 21 is a leading cause of homelessness, with flexibility for landlords paid for out of public funds and human misery.”
He insists: “Ending Section 21 means that private renter families and older tenants will have greater financial security, and are better able to thrive in their homes and communities. We look forward to working with the Government to get the detail of a new open-ended tenancy right.
“We’re so proud of the thousands of renters who’ve led this campaign, signing petitions, contacting their MPs and councillors, and sharing their own stories of Section 21 evictions and its harmful impact. The 11m private renters in England are a growing political force and, together, we can win changes that will transform private renting into a tenure that is fit for purpose in the 21stcentury.”
However, David Smith, the Policy Director of the Residential Landlords Association (RLA), has a different point of view: “Whilst the RLA recognises the pressure being placed on Government for change, there are serious dangers of getting such reforms wrong.
“With the demand for private rented homes continuing to increase, we need the majority of good landlords to have confidence to invest in new homes. This means ensuring they can swiftly repossess properties for legitimate reasons, such as rent arrears, tenant anti-social behaviour or wanting to sell them. This needs to happen before any moves are made to end Section 21.”
He adds: “For all the talk of greater security for tenants, that will be nothing if the homes to rent are not there in the first place. We call on the Government to act with caution.”
The Government’s own data shows that the average tenant lives in their rental home for more than four years and, in 90% of cases, the tenant ends the tenancy, rather than the landlord.
The RLA warns that, at a time when the demand for rental properties is outstripping supply, especially among vulnerable tenants, the Government risks exacerbating the problem if it does not ensure that landlords have complete confidence that they can repossess properties swiftly, for legitimate reasons.
With Government statistics showing that it takes over five months from a landlord applying to the court for a property to be repossessed to actually gaining possession, the RLA argues that it is vital that a reformed and improved court system is able to establish itself and the grounds to repossess properties are improved before making changes to Section 21. This would follow the course set in Scotland.
Research by Manchester Metropolitan University, on behalf of the RLA, has found that, in a large majority of cases where tenants are evicted under Section 21 notices, there is a clear reason. Half of the notices are used when tenants are in rent arrears, are committing anti-social behaviour or damage to the property. Other common reasons include the landlord needing to take back possession of a property for sale or refurbishment.
The report’s authors argue that this “raises questions” about whether the use of Section 21 notices can properly be described as no fault evictions, as some call them.
The RLA will shortly be consulting with the landlord community, to establish what measures would be needed to ensure that it has confidence in the system, before efforts are made to end Section 21 notices.
David Cox, the Chief Executive of ARLA Propertymark (the Association of Residential Letting Agents), has similar concerns: “Today’s news could be devastating for the private rented sector and landlords operating within it. The effects of the tenant fees banhave not yet been felt, and now the Government is introducing more new legislation, which could deter landlords from operating in the market.
“Although in the majority of cases there is no need for Section 21 to be used, there are times when a landlord has no choice but to take action and evict tenants from a property. Until we have greater clarity on the changes planned for Section 8, today’s news will only increase pressure on the sector and discourage new landlords from investing in buy-to-let properties. This comes at a time when demand is dramatically outpacing supply and rent costs are rising.”
ARLA Propertymark will be working with the Government to ensure that it fully understands the consequences of any changes and that all changes are based on evidence, so that landlords have the ability to regain their properties if needed.
Alexandra Morris, the Managing Director of MakeUrMove, shares details on what landlords and tenants need to know about the Fitness for Human Habitation Act 101.
Last month, the Government introduced the Fitness for Human Habitation Act. This law, which is also known as the Homes Act, essentially ensures that all rental properties are deemed safe.
While the majority of landlords will only rent out properties that are safe, the new law protects tenants should their landlord fail to keep them safe.
Who does the act apply to?
The Fitness for Human Habitation Act is applicable to all social or private rental properties. This means landlords are responsible for adhering to the Act, and tenants can take action using the Act if their landlord doesn’t keep to the new laws.
Tenants who signed a tenancy agreement from 20thMarch 2019 will be able to use the Fitness for Human Habitation Act straight away, if they feel their rental property is not safe.
However, tenants who signed a tenancy agreement before 20thMarch 2019 won’t be able to use the Fitness for Human Habitation Act. If you have a secure or assured tenancy, statutory tenancy or a private periodic tenancy, you will be able to use the Act from 20thMarch 2020. However, if the tenancy is a fixed term contract that began before 20thMarch 2019, then tenants will have to wait until the end of the tenancy.
That’s not to say that any problems tenants – who signed their tenancy before 20th March this year – face with their rental property cannot be dealt with, as you can still complain to your letting agent or local council about taking action.
Exceptions to the rule
While tenants are entitled to a home that’s safe and fit for habitation, there are some exceptions where your landlord wouldn’t be responsible.
One instance is if the tenant is responsible for the reason why a property is no longer fit for habitation. This could be due to damage caused by the tenant or through illegal activity. Where this is the case, the tenant will actually be the one responsible for putting the problem right.
When it comes to possessions, the landlord is only responsible for possessions that are included in the inventory at the start of the tenancy, and not the tenant’s own possessions.
Landlords may also need to seek permission from all parties before taking action on making a rental property fit for habitation. For example, in the case of flats, landlords will have to get permission from the building owners, and even the council, before they can make certain changes to a property.
Lastly, landlords are not held accountable for acts of God, such as fires, storms and floods, as these are beyond a landlord’s control.
The words “Property Management 101” on a yellow legal pad
What is considered a problem under the Fitness for Human Habitation Act?
There are several aspects which could make a property no longer fit for human habitation.
These include if a building is structurally unstable, or problems such as damp, lack of ventilation, carbon monoxide, overcrowding, and problems with drainage, and the supply of hot and cold water.
This list isn’t exhaustive by any means, and tenants should check if a potential problem is listed in the Fitness for Human Habitation Actor in the tenancy agreement.
There are also a number of places for tenants to get more help, including Citizens Advice, Shelter, the local council, or check Generation Rent’s website for local tenants’ rights groups.
What to do if you think your rental property is unfit for habitation
If you find any of the problems listed here within your rental property, the first step is to notify your landlord. Once your landlord is aware of the problem, you should allow a reasonable length of time for them to rectify the problem, which is dependent on the scale of the problem.
However, if your landlord fails to fix the problem in a reasonable length of time or at all, then you can use the Fitness for Human Habitation Act.
Using the Fitness for Human Habitation Act
Before using the Fitness for Human Habitation Act, tenants should contact their landlord a second time to notify them of the problem. This is because, if it is taken to court, tenants have to show they tried to sort the problem with their landlord.
In this second piece of contact, tenants need to highlight the problem, when they first reported it to the landlord, and any consequential problems that have resulted due to the rental property not being fit for habitation. If your landlord still fails to put the problem right, then the next step is court.
If a case gets taken to court, then evidence will be required. This includes copies of contact made between the tenant and landlord, or even a letting agent and local council regarding the problem.
Tenants will also need photographic evidence, a doctor’s note if it has had an impact on their health, receipts of anything that has had to be replaced, a copy of the tenancy agreement, or proof that rent is being paid to the landlord.
Winning or losing the court case
If a landlord is found to have not provided their tenant with a home fit for habitation, the courts will either enforce the landlord to undertake the work to make the rental property habitable or make the landlord pay compensation to the tenants.
The compensation amount will be based on the length of time the rental property was deemed unfit for human habitation, the seriousness of the problem and the impact this has had on the tenant.
If a tenant loses their case, then they will have to pay the legal costs associated with taking the case to court.
It’s worth reiterating that, if a tenant is concerned the property they’re renting is not fit for habitation, they can also consult with the local council, as they can take action on a tenant’s behalf for free.
Landlords, if you want to ensure your rental property meets the Fit for Human Habitation Act, make sure you have read the Government’s How to rent guide.
The tenant fees ban is due for introduction in Wales in September, subject to the new law receiving royal assent.
The ban on charging fees by landlords and letting agents to tenants in Wales will be introduced on 1stSeptember 2019.
From this date, landlords and agents will no longer be able to charge tenants fees to set up, renew or continue a standard occupation contract, except those explicitly permitted by the new law.
Many landlords may not yet be familiar with standard occupation contracts, but they will replaced Assured Shorthold Tenancies(ASTs) in Wales when the Renting Homes (Wales) Act 2016 is introduced – possibly later this year.
The law will make it illegal for landlords and agents to charge anything other than permitted payments, which include: rent, security deposits, holding deposits, utilities, communication services, Council Tax, Green Deal charges, and default fees.
Under the tenant fees ban, holding deposits will be restricted to one week’s rent, with provisions to ensure their prompt repayment.
The law in Wales greatly reflects the Tenant Fees Billbeing introduced in England on 1stJune 2019.
David Cox, the Chief Executive of ARLA Propertymark (the Association of Residential Letting Agents), comments: “The tenant fees ban is now an inevitability in Wales, and agents need to start preparing for a post-tenant fees world.
“The bill will receive royal assent in the coming few weeks, before being passed into law and implemented on 1st September 2019.”
Landlords and letting agents, if you let properties in Wales, you must be aware of the upcoming tenant fees ban and its implications on your lettings businesses.
It is wise to start preparing for how you might be affected now and put processes in place for the future, when you can’t charge fees to tenants.
The National Landlords Association (NLA) is reminding potential tenants to be vigilant when looking for a new place to live, to help avoid rental fraud.
Several people who have been the target of rental fraud have contacted the organisation. Such scams trick potential tenants into paying an advance fee to rent a property – fraudsters have even used NLA branding and fake letters from NLA local representatives to add legitimacy to the scam and lure their victims into a false sense of security.
Scammers often target those who are coming to the UK from abroad and are securing property online. Typically, once money has been sent, the fake landlord becomes uncontactable, leaving the tenant defrauded.
The NLA is reissuing guidance about avoiding online rental fraud, which was drafted in conjunction with the NUS and National Crime Agency:
Do not send money upfront to anyone advertising online – make sure that they are genuine first and view the property if you can
Beware if you are asked to wire any money via a money transfer service – criminals can use details from the receipt to withdraw money from another location
Use Government-approved deposit protection schemes
Contact the organisations that the landlord claims to be associated with in order to verify their status
Overseas applicants needing to secure accommodation before arriving in the UK should seek the help of their new employer or university
Get paperwork and proof – ask for a copy of the tenancy agreement or safety certificates to confirm that the landlord has a genuine legal connection with the property
Remember, if the offer seems too good to be true, then it probably is
Richard Lambert, the CEO of the NLA, says: “Rental fraud is one of the uglier aspects of private renting. Tenants, no matter where they are from, should not send payment to advertisers before they are certain it is genuine, and should contact their university, who will have a list of reputable landlords and letting agents.
“If you receive official correspondence from a landlord and are worried it might be a scam, often a good clue is that it will be written in poor English. Tenants should also remember they can check if a landlord is an NLA member or accredited by visiting www.landlords.org.uk/member-verification”
He advises: “Any tenant that falls victim to such a scam should contact the relevant authorities in their own country and alert the police in the UK via www.actionfraud.police.uk.”
New energy efficiency rules for landlords of rental properties in England and Wales come into force today (Monday 1stApril 2019) – and it’s no April fool!
The changes detail the costs that landlords legally face in improving any of their properties that have an Energy Performance Certificate (EPC) rating below E.
The Statutory Instrument to introduce the new rules was made somewhat quietly on 15th March 2019. It will have gone unnoticed for many landlords and letting agents, as the industry focuses on the legal requirement also coming into force today for agents to have Client Money Protection (CMP), ahead of the tenant fees ban.
However, the Energy Efficiency (Private Rented Property) (England and Wales) (Amendment) Regulations 2019 do put important new responsibilities onto landlords from today.
The new regulations focus on the Minimum Energy Efficiency Standards (MEES) for letting domestic property. This requirement has been in force for a year now, on new or renewed tenancy agreements.
The amendment made on 15thMarch introduces a new self-funding element for residential landlords, which takes effect if landlords are unable to access third party funding to improve any rental properties with F or G ratings.
The self-funding element is capped at £3,500 including VAT per property. It means that a landlord without funding must spend up to this amount sufficient to improve the property to a minimum E rating. A landlord with third party funding may have the full costs covered. If there is no funding, the £3,500 maximum goes on both purchasing and installation.
Another possibility is that the landlord tops up third party funding, to total £3,500 maximum.
The landlord can choose to make any improvements that they wish, including those made in an EPC report, “so long as they are confident that the measure(s) will improve their sub-standard property to a minimum of EPC E”.
If the landlord decides to make improvements that are not “relevant energy efficiency improvements” and the property is still below an E rating, then the landlord will have to make further changes.
A landlord who has made all of the “relevant energy efficiency improvements”, but the property is still below an E, will be able to apply for an exemption.
Possible third party funding sources are: a Green Deal finance plan, local authorities, or an Energy Company Obligation.
From 1stApril 2020, the minimum E rating will also apply to properties that have been let since before April 2018.
New Government guidance states: “Landlords are encouraged to take action as soon as possible to ensure that their properties reach EPC E by the deadline of April 1, 2020.”
The guidance also gives examples of how landlords can pick-and-mix energy improvements.
For example, recommended measures might be to improve loft insulation, install floor insulation, low energy lighting, internal or external wall installation, and solar panels. This would cost over £15,000. However, the landlord is only required to choose the measures that total less than the cap.
Local authorities have been tasked with enforcing the MEES, which only apply to private rental housing, not the social rental sector.
