A Landlord’s guide to the Rental Reform Act

With the upcoming Renters Rights Bill proposed by the Government soon to finally come in to law, many of us in the industry are still trying to work out how some of the practical parts of the ?policy will actually ‘work’.

If you’re not familiar with the proposed changes, here’s a brief outline of what is planned (taken from Gov.uk website):

• Abolish section 21 evictions
• Ensure possession grounds are fair to both parties
• Provide stronger protections against backdoor eviction
• Introduce a new Private Rented Sector Landlord Ombudsman
• Create a Private Rented Sector Database
• Give tenants strengthened rights to request a pet in the property
• Apply the Decent Homes Standard to the private rented sector
• Apply ‘Awaab’s Law’ to the sector
• Make it illegal for landlords and agents to discriminate against prospective tenants in receipt of benefits or with children
• End the practice of rental bidding by prohibiting landlords and agents from asking for or accepting offers above the advertised rent
• Strengthen local authority enforcement
• Strengthen rent repayment orders

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Having read this proposal a number of times now and, naturally, I have concerns about the bigger picture with the Private Rental Sector being able to continue as it currently is. On the face of it to anyone without the insight I have, these changes largely all seem to make sense. It’s only when you’re in the position of being a Landlord that you could potentially take offence to some of the terminology. For example, I personally do have an issue with the term ‘unscrupulous landlords’ which seems quite a judgement on Landlords’ characters without knowing the full story. The carte blanche use ?of that term is dangerous and feeds into the rhetoric that all Landlords are not to be trusted and is not balanced; given that for every rogue Landlord there are probably an equal (if not more) rogue Tenants. The Renters Rights Bill uses this term seven times. It's suggested that bailiffs were instructed to gain possession of 40,000 properties in 2023 which is a record high. If you believe the narrative that ‘unscrupulous landlords’ are evicting their tenants from their homes, that must mean 40,000 properties came back on the market for new tenants? There are a number of reasons why I think that number is so high. We know that since interest rates went up and Section 24 was introduced, a number of landlords have exited the market so these are landlords NEEDING their properties back in order to be sold. Bailiffs are only ever instructed when tenants refuse to move out – most likely in a number of cases those tenants have been advised by Shelter, Local Authorities & Citizens Advice Bureau that they will not be given support unless they are physically homeless. Another reason that bailiffs have been instructed is simply because those tenants want to exploit the system knowing that they can have a home at someone else’s expense.

Going through each section of the proposal leads me to wonder what the primary objective of their plans are, is it just to improve standards? I see more articles about large banks and supermarket chains now entering the Build To Rent sector than ever before. I may sound cynical but, do they know something I don’t?

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Scrapping Section 21 is all well and good, for the most part landlords couldn’t care less about this. The issue seems to be the court process in actually gaining possession being an absolutely nightmare for Landlords. Section 21 is largely only ever used for two reasons. 1) the landlord is selling or wants to move back in and 2) because the tenants have proved problematic. So, scrapping Section 21 is fine but processes need to be put in place to protect the property owner from being involved in a lengthy and expensive process to get the keys back.

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In equal measure, most Landlords would be fine with the idea of a dedicated Ombudsman to help mediate issues. But, being the cynic that I am, let’s assume that tenants will have free access to this but landlords will need to pay a fee of some sort to be enrolled – otherwise known as tax . I will be interested in finding out how this will be implemented. Introducing a mediation service could potentially reduce the number of legal proceedings freeing up the court’s time and saving both parties a lot of stress and expense. What we do need to remember is that the pilot mediation service that was run between February and October 2021 was deemed a failure due to lack of uptake with only 22 referrals out of a possible 3,000 cases over the nine-month period.

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I’m not a fan of the idea that we need a database for landlords to declare all their property investments though. This to me is putting us on a register for everyone to have an insight into our private financial affairs which suggests that we’re trying to hide something when in fact that information should only be between us and HMRC. I do, however, accept that by doing this will ensure every Landlord keeps up with their obligations to ensure Gas Safety Tests, Electrical Inspection Condition Reports etc are ALWAYS carried out when required. This is a minimum expectation we should all have as Landlords.

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In a previous blog, I wrote about why some Landlords need an agent and I think now is the time that the majority of Landlords need to start thinking seriously about this. With so much regulatory and policy change, a landlord who has managed their own properties for a number of years will struggle to navigate through this change. In the past we’ve had relatively simple and practical changes such as introducing Landlord Licences, mandatory EICR surveys, Deposit Protection etc. The issue landlords are going to face is getting their property back in the case of rent arrears and problematic tenants. When these situations arise, it will be of paramount importance that landlords will have to document everything in a very clear way so as not to jeopardise any claim they may have.

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Finding a good agent isn’t all that difficult, it just takes a bit of time and research. I always get shocked when someone tells me they’ve had a bad experience with their agent but most of the time it’s easy to pick out the reasons. Primarily, landlords think because an agent has a prominent presence on their High Street that their skill set lies with Property Management which is the total opposite of selling homes. Also, and more pertinently, they didn’t ask the right questions before they signed the contract.

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• Do you add a commission on top of maintenance costs?
• What are the charges for renewals, tenancy agreements, deposit protection etc
• Do you have an out of hours service for emergency maintenance issues?
• Is there someone from the agency that will go out to tackle minor jobs to save the cost of having tradespeople attend unnecessarily?
• How many times a year do you carry out a property inspection?
• Do you offer a rent guarantee insurance policy?
• Will you have a dedicated property manager or are enquiries facilitated through a large call centre?

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There are more questions but you get the point. Knowledge is key and you should know everything about being a landlord before you expect someone else to take on the responsibility. Even though you’d be paying them for that service, the contract is ultimately between the landlord and the tenant, the agent isn’t party to that agreement other than being the landlord’s representative.

These changes mean adaptation for the majority of Landlords. We are presented with challenges and we find the solutions – unfortunately for many, the solution will be to sell their property investments but for many others it means introducing new processes or adapting the current processes that they have in place.