In recent weeks I have been approached by many Walsall Landlords concerned about the impending changes proposed by the Government to reform the property rental market. In this article I will summarise the proposed changes and share my thoughts.
In June, the Government introduced a White Paper called “A Fairer Rented Private Sector”. It proposes the greatest changes to residential lettings law for 30 years. It talks about striking a balance between the need for tenants to live without fear of eviction but balanced against the need for landlords to recover possession of their properties…
The headline from the White Paper is that the Section 21 procedure, the so called “no fault eviction,” will be abolished…
No Fixed Terms
All fixed term tenancies will be abolished and it follows that break clauses will no longer be permitted. Only periodic tenancies will be allowed under the new rules. Tenants will have the ability to terminate tenancies on giving two months written notice.
There will still be a requirement to have a written tenancy but certain other practices are set to be banned. In particular there is to be a ban on preventing lettings to families with children or to those tenants who are in receipt of benefits. In addition, tenants are to be given a right to request pets – and landlords cannot unreasonably refuse this request.
The existing system for a landlord seeking a rent increase is essentially retained. A landlord starts the process by serving a notice with a proposed new rental figure. Under the new rules, the tenant now has two months to object. If that happens, the dispute is referred to the First Tier Tribunal who will then determine the new rent. It follows that automatic rent increase clauses in tenancy agreements will also be banned.
The White Paper says that the government does not support “the introduction of rent controls”. The gist of the document is that the market and the First Tier Tribunal will regulate the level of rent for each property.
Grounds for Possession – Landlord Circumstance Grounds
Amongst other grounds there will now be three mandatory grounds on which landlords can regain possession of their properties. The notice period for each of these grounds will be 2 months:
(i) when they wish to sell the property
(ii) when they or a member of their family want to move into the property
(iii) when they wish to demolish or substantially redevelop the property.
A landlord will need to produce “evidence” to satisfy one of these grounds. Further guidance is awaited as to what this required evidence will be. There is an obvious “loophole” to the selling and moving grounds whereby a landlord uses this ground to secure possession and then subsequently decides to re-let the property to another tenant. If this happens, the landlord is prevented from marketing and reletting the property for a period of 3 months following the use of this ground.
Grounds for Possession – Tenant Fault / Circumstance Grounds
When it comes to the tenant fault grounds, the standard Section 8 procedure where the landlord can obtain a possession order by establishing two months arrears both at the date of the notice and at the date of the hearing is retained.
In addition another mandatory ground has been introduced to deal with persistent rent arrears – so, where the tenant has been in at least two months arrears at least three times in the past three years, this will be another ground for possession.
The other tenant fault grounds (e.g. other breach of tenancy, anti social behaviour) under the old system have all been retained. However these grounds tend to be discretionary.
As a reminder – a mandatory ground means that the landlord just has to prove that ground to secure a possession order; a discretionary ground means that even if the landlord can prove the possession ground, the judge still retains a discretion whether to actually make a possession order. Judges frequently make suspended possession orders on discretionary grounds because the grounds tend to be less serious and they want to give tenants one last chance.
Full details of the proposed grounds for possession, their relevant notice periods and whether the ground is mandatory or discretionary can be found at the end of this article.
At the same time as the White Paper, the government has produced its response to its consultation on the creation of a specialist Housing Court. The response to the consultation is that the government does not believe that this step is necessary.
What is proposed in the response to that consultation and in the White Paper are further court reforms to speed up the existing possession procedure. Whether there are any changes which make a material difference to the speed and efficiency of the existing system remains to be seen.
In addition, under the Section 21 procedure, there was no court hearing in straightforward cases. Under the new rules, the proposal is that every possession case will be listed for a hearing. Again the impact on the court system of this proposal remains to be seen.
There will be a new Ombudsman covering all private landlords. The Ombudsman will have the power to “put things right for tenants” including compelling landlords to issue an apology, provide information, take remedial action and/or pay compensation of up to £25,000.
It is anticipated that the Ombudsman will hear complaints about the behaviour of a landlord, the standards of the property or where repairs have not been completed within a reasonable timeframe.
A new digital Property Portal will be set up to which all private landlords must join. The aim is to provide a single “front door” to help landlords understand, and demonstrate compliance with, their legal requirements. It will also assist local councils with their enforcement powers.
The Act, when passed, will set out two implementation dates. After the first implementation date, any new tenancies, which would have previously been Assured Shorthold Tenancies under the old system, will be governed by the new rules. There will then be a second implementation date after which all existing Assured Shorthold Tenancies will convert to the new rules.
The Government will give 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 which means that there will be a period of at least 18 months in which to convert existing tenancies to the new rules.
I hope the above has provided some clarity to those concerned about the upcoming market changes. Some of us who have been involved in the game for a while have been asking for reform for a long time but perhaps not exactly these! Be careful what you ask for right?! As I said to one of my clients who was considering selling his portfolio, show me a better alternative as an investment and I’ll be there before you. Change can be daunting at the best of times and these proposed changes are not trivial to say the least. However, as I said to my landlord, I don’t see anything in the above that we cannot manoeuvre or circumnavigate past. Let’s not throw the baby out with the bath water just yet!
One thing has become apparent for certain, perhaps more than ever now, is that you need a professional on your side. One that ensures the Walsall Landlord is compliant by having all bases covered. Whatever your property plans are I am always happy to hear from you. Whether you are a client of mine or not, if you need a second opinion, feel free to get in touch.
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